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Buy Property
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Rent Property
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Welcome to Rent control
History of Rent Controls in America
In the United States during World War I, rents were "controlled"
through the efforts of local rent anti-profiteering committees and
public pressure. Between 1919 and 1924, a number of cities and
states adopted rent and eviction control laws. Modern rent controls
were first adopted in response to WWII-era shortages, or following
Richard Nixon's 1971 wage and price controls. They remain in effect
or have been reintroduced in some cities with large tenant
populations, such as New York, San Francisco, Los Angeles,
Washington, DC, and Oakland, California. Many smaller communities
also have rent control, notably Santa Monica, Berkeley, and West
Hollywood, California[1] along with many small towns in New Jersey.
In recent years, rent control in some cities, such as Boston,
Massachusetts and Cambridge, Massachusetts, has been ended by state
referenda.
New York has had the longest experience of rent controls, since
1943, with most residents being unable to remember a time
beforehand. The period has been marked by the lack of an "adequate
supply of decent... housing". The worsening in the rental market led
to the enactment of the Rent Stabilization Law of 1969, which aimed
to help increase the number of places put up for rent. The current
system is very complicated, which is especially troublesome as most
of the protected renters are elderly, and understanding the city's
complex rent-control regulations is difficult even for experienced
lawyers.
In some regions rent control laws are more commonly adopted for
mobile home parks. Reasons given for these laws include residents
owning their homes (and renting the land), the high cost of moving
mobile homes, and the loss of home value when they are moved.
California, for example, has only 13 local apartment rent control
laws but over 100 local mobile home rent control laws. No new mobile
home parks have been built in California since 1991.
Purpose and scope
Although the political debate over rent control is far-reaching, as
described below, the purposes and provisions of such laws are
intended to be limited in scope. They define which rental units are
affected, and may have only larger or older rental complexes covered
by the law. The frequency and degree of rent increases are limited,
usually to the rate of inflation defined by the Consumer Price Index
or to a fraction thereof. (San Francisco, for example, allows annual
rent increases of 60% of the CPI, up to a maximum 7%.)
Unregulated rent increases may be allowed when a tenant moves
("vacancy decontrol"). Rent-control laws that don't include vacancy
decontrol are called strong rent-control laws. Such laws were in
effect in five California cities (West Hollywood, Santa Monica,
Berkeley, East Palo Alto and Cotati) in 1996, when AB 1164 (known as
the Costa/Hawkins Bill) made strong rent-control unenforceable in
California (except in special cases like mobile home parks).
Economic
The rental-accommodation market suffers from information asymmetries
and high transaction costs. Typically, a landlord has much more
information about a home than a prospective tenant can reasonably
detect. Moreover, once the tenant has moved in, the costs of moving
again are very high. Unscrupulous landlords can thus conceal defects
and, if the tenant complains, threaten to raise the rent at the end
of the lease. With rent control, tenants can ensure that hidden
defects at least be repaired to comply with building code
requirements, without fearing retaliatory rent increases. Rent
control may thus compensate somewhat for inefficiencies of the
housing market.
Income tax codes often provide benefits for housing, and rent
control allows tenants to share in some of those benefits. In the
United States, the Internal Revenue Code allows landlords to claim
depreciation deductions for rental property even while increasing
rents.[3] Homeowners may also deduct property taxes and mortgage
interest, and exclude capital gains, from their taxable income.
Tenants pay income tax but get none of these housing-related
deductions or exclusions. By limiting the extent to which landlords
can raise rent on purportedly depreciated property, rent control
restores balance to tax benefits that would otherwise become
concentrated solely in the hands of landlords.
Social
Rent control is considered necessary[5] to protect the public and to
prevent landlords from imposing rent increases that cause key
workers or vulnerable people to leave an area. Maintaining a supply
of affordable housing is believed to be essential to sustaining the
local society. Homeowners who support rent control point to the
neighborhood instability caused by high or frequent rent increases
and the effect on schools, youth groups, and community organizations
when tenants move more frequently.
Enforcement issues
Some landlords use extralegal means to evade rent controls and
attempt to take advantage of housing conditions. Some landlords may
step up discrimination against any group they dislike if they
believe there is a surplus of prospective tenants. Jurisdictions
that implement rent controls may have to pass laws in response such
as those forbidding landlords from compelling new tenants to hire
the landlord's moving company. In some areas with especially strict
rent controls, landlords may require "key money" (a non-refundable
deposit). Demanding key money is illegal in most of North America,
but since the landlord will invariably demand it in cash, it is very
difficult to trace and nearly impossible to prove in court. Rent
control enforcement may likewise create considerable bureaucratic
hurdles for the repair and improvement of properties, creating a
disincentive for landlords to carry out such actions.
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