The Difference Between Rent Stabilized and Rent Controlled Housing for Beginners

Rent stabilized vs. rent controlled: What’s the difference?

As a landlord or tenant, especially living in a major city such as New York City, you may have heard the terms “rent control” and “rent stabilization” used in conversation. These terms are often used interchangeably to describe rules limiting rent increases, but the two have distinct differences that are vital to understand before purchasing a property or signing a lease.

We’re here to help you learn the basics of rent controlled vs rent stabilized housing so you can stay informed about what they are, their differences, and their advantages and disadvantages.

What is Rent Control?

Rent control is a very specific, limited government program that completely caps rent prices on apartments in some areas. In these areas, tenants don’t need to worry about excessive rent spikes or notices to vacate their apartment at the end of their leases, allowing them to continue to live in their home with reduced financial uncertainty. Rent control is usually a response to housing crises (such as the effects of the 2020 pandemic), is only implemented in a few cities and states such as NYC (but is banned in 32 states), and often only applies to family members of current tenants in a rent-controlled unit.

With rent-controlled housing, the rules of a lease stay the same even if a tenant passes the unit to a different family member, and the lease can’t be terminated if a tenant wants to continue living in the apartment. These parameters, as well as other specific rules, make rent control very selective, and the practice is being completely phased out over time.

Below are the current rent control parameters in New York City:

• The building must be constructed before 1947.
• The renting family must have been occupying the home since 1971.
• Tenants have succession rights and can only pass the lease to other family members.

What is Rent Stabilization?

Rent stabilization, while similar to rent control, has its own rules and regulations that make it a unique program available in certain cities and states. Rather than a complete cap on rental rates, rent stabilization simply limits the amount that landlords can raise rent for their tenants each lease term, offering protection from excessive rent hikes. Raising rent prices for a rent stabilized apartment is legal, but must stay under a percentage specified by your city or state, so be sure to research local laws.

In some places, if tenants leave a rent stabilized apartment, the apartment may become destabilized and the landlord may be able to operate under typical rental rules. The low rates guaranteed by rent stabilization laws are less strict than those of rent controlled rental units. These flexible rules make rent stabilization more popular and more widely accepted in U.S. states and cities.

Differences Between Rent Stabilized vs. Rent Controlled

While offering similar outcomes for tenants in that they are given protection from high rent increases, rent control and rent stabilization have a few key differences that should be pointed out.

For example, rent control is much stricter in its rules since it is a much older practice (beginning in the U.S. in the 1920s), while rent stabilization offers more wiggle room for business growth and is therefore used more by landlords in their rental units.

Rent control is also being phased out from government programming, whereas rent stabilization is still actively being used by many property owners to ensure affordable housing for tenants in certain areas.

Advantages and Disadvantages of Rent Control and Rent Stabilization

Both rent control and rent stabilized housing come with similar advantages and disadvantages. Let’s take a look at some of the most common pros and cons of rent stabilized vs rent controlled apartments:

Advantages

• Rent Affordability: Rent regulated housing promotes affordable, predictable rent rates that allow tenants to feel financially stable creating long-term budgets and renting in cities that would otherwise be too expensive.
• Community building: By leasing rent regulated units, tenants are more likely to stay in one home long term. This not only means lowered vacancy rates, but means that a neighborhood community may take shape, promoting safety and stability between renters
• Protection for vulnerable groups: Many people who utilize rent regulated housing are elderly, living with a disability, or are on a fixed income. With rent controlled or rent stabilized units, these vulnerable groups are offered protection from sudden, excessive rent increases that could push tenants out of their homes.
• No gentrification: Gentrification is a common problem in most major cities in the U.S., where inexpensive urban neighborhoods are changed and made more costly by wealthy tenants who move into apartments or businesses, ultimately pushing out long-term residents who can no longer afford rent. When rent is stabilized or controlled, tenants can live without the fear of gentrification forcing them out of their homes.

Disadvantages

• Lower supply of apartments: As mentioned above, when tenants move into rent regulated apartments, they tend to stay for a long time because of the financial housing stability. This causes a lower supply of housing in the area, which can harm the real estate industry in cities with strict rent regulations.
• Less upkeep: A common stereotype in rent controlled or stabilized housing is that the units are lower quality or aren’t maintained by landlords. When landlords don’t feel there will be a profit or return after putting money into typical renovations, upgrades, or even maintenance in their apartments, they may be less likely to put in effort to maintain the quality of the housing.
• Less incentive for landlords: Along with there being less incentive for landlords to upgrade rent regulated apartments, there is also less incentive to invest or build in the first place. Landlords typically aim to charge competitive rent rates, and when the opportunity for higher profits is limited, they may look elsewhere for properties.
• Varying rules and regulations: On top of the rarity of rent controlled and rent stabilized housing, the specific rules and regulations surrounding these leases can be drastically different in different areas. The inconsistency in rules surrounding eligibility, rate increase limits, and exemptions often causes confusion for both tenants and landlords.

How Innago can Help Manage Rent Regulated Apartments

Managing apartments under rent regulation can be difficult, especially when balancing different units and buildings across your portfolio. In addition to staying up to date on rental laws in your area and understanding the maximum rates you’re allowed to charge your tenants, it’s crucial to stay organized with your tenants’ information to keep your business running smoothly.

Free property management software like Innago helps to keep all of your tenant and lease information all in one place so you can easily track rent payments, stay on top of leases and lease expirations, and manage your business costs with our accounting integration. This efficiency will save you time, energy, and money, allowing you to put more time back into your tenants and your properties.

Ready to transform your rental business and manage rent regulated apartments with ease? Sign up for Innago today to get started!

Conclusion

Rent control vs rent stabilized rental properties can seem like confusingly similar concepts, but they each have distinct characteristics that set them apart and they each come with their own advantages and disadvantages. With your new knowledge of the basics of rent control and rent stabilization, you’ll be well equipped to make the best decision for your next rental unit.

FAQs

Is rent control still available in most places?

No. Rent control is rare, heavily restricted, and being phased out in most cities and states.

Can rent-controlled units be inherited?

Yes, rent-controlled units can be inherited, but usually only by qualifying family members who have lived in the unit for a required period.

Do rent-regulated apartments reduce housing supply?

Yes, rent-regulated apartments do reduce the housing supply. Tenants often stay for years due to stable pricing, leading to more lease renewal, fewer available units, and tighter markets.

Do landlords receive any benefits from rent regulation?

Some landlords do receive benefits from rent regulation—consistent, long-term tenants can reduce vacancy costs and create more stable rental income.

Are the rules for rent regulation the same everywhere?

No. Requirements, rate limits, and exceptions for rent controlled and stabilization policies vary widely by state and city, which can create confusion for both landlords and tenants, so it’s important to research rent regulation laws in your area.