What is Rent Control?

If you're a renter in Chicago, or a real estate investor, then you may have heard of rent control ordinances and the heated debate surrounding these policies. By simple definition, rent control is legislation that puts a limit on rental rates (the max rent that can be charged for a unit, as well as the amount that the rent can be increased per year). Currently, Chicago has a ban on rent control ordinances. To give you a brief summary, here are a few of the key talking points to consider.

From a tenant’s perspective, a few of the benefits include:

Affordability

The lower prices of rent-controlled apartments make housing affordable to moderate to low income families. This is a key benefit to tenants as workers’ wages, especially in expensive cities like Chicago, often do not keep pace with rising rents.

Prevents displacement

Many people living in rent-controlled apartments are elderly and/or on a fixed income. These families may not be able to afford market-rate housing in the same neighborhood (ever try to rent an apartment in the Pilsen or the West Loop nowaday?!).

Neighborhood vitality

Areas with a high proportion of rent-controlled units tend to have less neighbor turnover - often creating stronger-knit communities amongst its neighbors (traditionally leading to safer more thriving neighborhoods).

Economists, however, have argued that rent control is not actually as beneficial for renters as it appears.

Poor housing conditions

If landlords cannot increase rents to meet their maintenance costs, they have less capital to reinvest in their buildings, leading to worn and poorer apartment conditions. There have been instances where landlords will (illegally) withhold necessary repairs from the apartments of existing tenants to force them to move out.

Less inventory

One way landlords deal with lost income from rent-controlled apartments is to convert those units into market-rate condos, taking them out of the rental market entirely and selling the condos to the top bidder.

Disincentivizes to developers

Land developers are more likely to build condos rather than apartments if some or all of the units in the apartment building would be subject to rent control.

Higher rents overall

When landlords make less profit from rent-controlled units, they compensate by raising the rents on their market-rate units. This artificially increases the going rate for housing units, negatively impacting market-rater renters.

What do you think about this debate? Any alternative solutions we should consider that would benefit everyone? Leave a comment below and let’s chat.