Rent Control - Does it Work?

Rent Control: A Well-Intentioned Policy That Misses the Mark

In the debate over affordable housing, few policies stir as much emotion—or controversy—as rent control. Advocates see it as a way to shield tenants from rising rents. Critics argue it does more harm than good. When you examine the economic evidence and real-

world outcomes, the conclusion becomes clear: rent control is a deeply flawed solution to a real problem.

What Is Rent Control?

Rent control is a policy that limits how much landlords can increase rent, either through caps tied to inflation or fixed annual percentages. On paper, it sounds compassionate: protect renters from displacement and make cities more affordable. But in practice, rent control reduces the supply of available housing, discourages new development, and often hurts the very people it's meant to help.

Why Rent Control Backfires

1. It Discourages New Construction

Developers are less likely to build in markets where future rent growth—and thus returns—are capped. Why take the risk of developing multifamily housing in a city where your upside is limited and your operating environment is politicized?

2. It Drives Property Owners Out of the Market

Faced with strict rent regulations, landlords may convert rental units to condos or remove them from the market altogether. Fewer units mean more scarcity, which ultimately drives prices higher for everyone else.

3. It Distorts Housing Allocation

Rent control encourages long-term tenants to stay in apartments they might otherwise outgrow or vacate. This locks up valuable housing stock and prevents more dynamic turnover, often freezing lower-cost units in place for higher-income tenants.

4. It Creates a Two-Tiered Market

Markets with rent control often develop into two separate ecosystems: regulated apartments that are underpriced and hard to find, and unregulated units with inflated prices to compensate for suppressed supply.

The California–New York Split: A Tale of Two Approaches

Historically, California and New York have been peers in over-regulating rental housing. But recently, they’ve taken different paths:

 California's Recent Steps Forward:

•  Voters rejected rent control expansion (Prop 21 and earlier Prop 10)
•  Streamlined approvals and reduced CEQA abuse to promote new development

 New York's Recent Moves Backward:

•  Passed “Good Cause Eviction” law—effectively rent control in disguise
•  Political calls for rent freezes and demonization of landlords

If you’re an open-minded apartment developer evaluating both markets today, California’s message is increasingly: We need you. New York’s? Not so much. To be fair, both are still difficult places to build housing, and cities like Los Angeles and Berkeley remain deeply anti-development. But California has shown progress by recognizing that you can’t claim to be pro-housing while simultaneously vilifying those who create and operate it.

A Misalignment of Incentives

A core problem with rent control is that it treats housing supply as fixed and ignores the private sector's role in expanding it. If developers and operators are stripped of potential upside—and burdened with unpredictable political risk—they simply stop building.

Even well-intentioned pro-development plans (like NYC’s "City oare undermined when operators believe they’ll be punished after delivery through hostile regulation or public scorn. You can't be truly pro-development unless you're also pro-operator. Policies that foster collaboration, not scapegoating, create the conditions for long-term affordability.

The Real Way Forward

Instead of imposing artificial caps, cities should focus on increasing housing supply through

zoning reform, expedited approvals, and public-private partnerships. The more units that

come online, the more pricing power shifts away from landlords and toward tenants—naturally.

Rent control is seductive in its simplicity but devastating in its consequences. It’s a policy that

tries to solve a supply problem with demand-side restrictions—and in doing so, it often makes

things worse.

At Alpha Equity Group, we believe that smart, sustainable development is the key to housing

affordability. And that requires sound economics, not political theater.