Advertisement
Home & Real Estate

Is Rent Control Unfair to New Tenants?

Like most governmental price-fixing, rent control invites black-market evasion.

Q: I recently rented an apartment in a city with rent control (or "rent stabilization," as they call it). I just learned that I'm paying significantly higher rent than several neighbors are paying for identical units, just because they've lived here for many years. As best as I can tell, they are affluent professionals who earn a lot more than I do. Do you think this is fair?

Advertisement - Article continues below

No, I don't. Rent control causes all the well-known market distortions common to every kind of price control, such as artificial shortages and disincentives to investment and innovation. But rent control also causes ethical problems because the benefits it confers on some lucky longtime residents are often offset by higher rents paid by newcomers.

Your city apparently allows "vacancy decontrol," which permits a landlord to raise the rent to market level when a unit changes hands. And, like most rent-control programs, it probably exempts newer apartment houses -- those that were built after, say, the mid 1970s.

Rent control is one of many social programs designed to benefit urban residents of modest means, including the elderly poor and disabled. But most cities with rent control have no "means testing" of tenants -- an income or asset limit -- to qualify them for the annual cap on rent increases, often limited to inflation plus a percentage point or two; continued tenancy in a rent-controlled unit is sufficient.

Advertisement
Advertisement - Article continues below

Like most governmental price-fixing, rent control also invites black-market evasion. In New York City, it's well known that some highly prized apartments secretly pass from one longtime tenant to the next (usually a relative or friend, but sometimes a stranger) without changing the name on the lease, to avoid triggering vacancy decontrol. A fee called key money is paid to the original tenant for illegal assumption of the lease, and the landlord is defrauded of the higher rent due him.

Have a money-and-ethics question you'd like answered in this column? Write to editor in chief Knight Kiplinger at ethics@kiplinger.com.

Advertisement

Most Popular

2020 Stock Market Holidays and Bond Market Holidays
Markets

2020 Stock Market Holidays and Bond Market Holidays

Is the market open today? Take a look at which holidays the stock markets and bond markets take off in 2020.
July 1, 2020
What Are the Income Tax Brackets for 2020 vs. 2019?
tax brackets

What Are the Income Tax Brackets for 2020 vs. 2019?

The IRS unveiled the 2020 tax brackets, and it's never too early to start planning to minimize your future tax bill.
June 20, 2020
Chiropractor Trying to Get Business the Wrong Way – Illegally
careers

Chiropractor Trying to Get Business the Wrong Way – Illegally

A new chiropractor’s fledgling business plan to attract patients may sound reasonable at first look, but it’s actually against the law, and the same p…
June 30, 2020

Recommended

13 Tax Breaks for Homeowners and Home Buyers
income tax

13 Tax Breaks for Homeowners and Home Buyers

Owning (or buying) a home is expensive. But at least there are some tax deductions, credits, and exclusions that can help you recoup some of those cos…
June 22, 2020
12 Things Every Home Buyer Should Do
real estate

12 Things Every Home Buyer Should Do

Buying a home may be one of the biggest purchases you will ever make.
June 12, 2020
11 Things Every Home Seller Should Do
real estate

11 Things Every Home Seller Should Do

As a home seller, your goal is to sell your property quickly for the most money possible.
June 12, 2020
13 Reasons You Will Regret an RV in Retirement
retirement

13 Reasons You Will Regret an RV in Retirement

RV-loving retirees talk about the downsides of spending retirement in a motorhome, travel trailer, fifth wheel or other recreational vehicle.
June 8, 2020