In California, New York, Delaware, New Jersey, and the District of Columbia, a number of cities and counties have rent control laws. These laws serve to prevent landlords from charging excessive amounts of rent, either by raising the rent disproportionately for existing tenants, or by evicting current tenants so that they can charge higher rent to new tenants. Penalties for violating rent control ordinances can be severe, and can even include criminal punishment, so it is important to understand how these rules function if you own a rental property in an area subject to these laws.
Rent Control Ordinances
Rent control laws are passed by cities and counties, and are usually administered by a local rent control board, though the specifics of each ordinance can vary significantly. Some of the strongest rent control protections exist in large cities like New York and San Francisco. Not all properties in these jurisdictions are subject to rent control, with some of the most common exceptions being single family homes, new buildings, and smaller owner-occupied buildings. Landlords may need approval from the rent control board before raising rent or ending a tenancy. Rent control laws have become relatively unpopular in some areas, with more than 30 states having passed laws against them.
Raising the Rent for Existing Tenants
In general, rent control laws limit rent increases for existing tenants by capping them at a certain percentage per year. This percentage is often tied to the Consumer Price Index, or may be otherwise defined by the local rent control ordinance. Many places allow exceptions for other reasons, such as capital improvements, increased taxes, or other increases in the property owner’s expenses.
Raising the Rent for New Tenants
When old tenants move out of a rent controlled unit, the landlord is limited in how much they can raise the rent. The local rent control ordinance sets a base price for each unit, and this amount may be derived from a number of factors, such as what the rent was before the ordinance was passed, inflation, and the state of the local housing market. Some exceptions can apply for landlords seeking to raise the rent more than would normally be allowed under these circumstances, such as when it is justified by inflation. However, some cities do not allow any increases at all when a tenant moves out.
Security Deposits and Notice Requirements
Many rent control laws require protections in addition to those already mandated by state law regarding things like security deposits and providing notice of an increase in rent. For example, many cities require landlords to pay tenants interest on security deposits while they are in the landlord’s possession. Local rent control ordinances may also require longer notice periods to tenants before you raise the rent on their unit.
“Just Cause” Evictions
Rent control laws generally bar landlords from evicting tenants or declining to renew a tenancy simply so they can raise the rent when a new tenant moves in. Under many rent control ordinances, this limitation means that a landlord must have “just cause” to evict a tenant or end a tenancy. What will qualify as a valid reason for eviction in this context can vary by jurisdiction, but common justifications include failing to pay rent or otherwise violating the terms of the tenancy, illegal activity on the premises, or a major renovation that cannot be undertaken with tenants living in the property.
Penalties for Rent Control Violations
Tenants can often petition the local rent board and request intervention if they believe a landlord has violated rent control laws. Tenants can also sue landlords in civil court. Many jurisdictions impose steep civil and even criminal penalties for failure to comply with rent control requirements. Landlords can be subject to injunctions, money damages, attorney’s fees, and in egregious cases, jail time.