Why Rent Control Makes Housing Shortages Worse—And What Actually Works
Rent control is often sold as a compassionate solution to the housing crisis: if the government simply caps how much landlords can charge, then everyone will be able to afford a place to live, right? Unfortunately, the evidence shows that rent control consistently makes housing shortages worse, not better.
Costs of Rent Control
When governments cap rents below market value, several unintended consequences follow.
Fewer rental units are built. Developers lose incentive to build when future returns are limited. After St. Paul, Minnesota, enacted a 3 percent rent cap in 2021, new multifamily building permits fell by 80 percent within just three months.¹ In Washington State, a projected analysis estimated that proposed rent control bills would result in 7,000 fewer rental units built over the next decade and a $1.1 billion drop in rental property values.²
Existing units are withdrawn from the market. In San Francisco, when rent control was expanded in 1994 to small multi-family buildings (2–4 units), the share of renters in affected buildings fell by roughly 15 percentage points, and landlords converted many units into condominiums. The city’s overall rental stock among treated properties declined by approximately 15 percent, contributing to a 5.1 percent rent increase citywide for non-controlled units.³
Vacant and underutilized apartments multiply. In New York City, where rent stabilization currently covers about 1 million units, between 20,000 and 60,000 rent-stabilized apartments remain empty.⁴ Landlords often leave such units vacant because they cannot raise rents enough to cover renovation costs, which are capped at $15,000 every 15 years per unit under current law.
The quality of housing deteriorates. A National Apartment Association survey found that 71 percent of U.S. housing providers have reduced or plan to reduce investments in rent-controlled markets, while 67 percent say they would never again invest in a rent-controlled jurisdiction.⁵ Reduced revenue leads landlords to defer maintenance and stop upgrading aging buildings.
What the Data Shows
A robust consensus among economists confirms the harmful effects of rent control.
A meta-analysis of more than 100 empirical studies found that over 80 percent show rent control reduces new housing construction by depressing returns on investment.⁶
A 2024 review of 26 effects of rent control reached near-unanimous agreement that supply reductions outpace any short-term affordability gains.⁷
U.S. wartime rent controls in the 1940s pushed a large share of multifamily rentals into owner-occupied units, permanently raising homeownership rates but worsening long-term shortages for low-income tenants.⁸
In a survey of economists, 93 percent agreed that rent control lowers both the quantity and quality of housing.⁹
What Actually Works for Affordable Housing
Real affordability arises from expanding supply and curbing inflationary pressures.
Encourage new construction. Streamlining permitting, easing zoning restrictions, and rewarding responsible landlords do far more good than price controls.
Cut government spending. When the federal government spends beyond its means, it injects excess money into circulation, devaluing the dollar and pushing up prices. Substantial cuts would help slow inflation and ease the upward pressure on rents and other commodities.
Address demand pressures. In urban regions, a significant share of housing demand comes from illegal immigration. Restoring enforcement and reducing the number of unlawful residents would ease demand without cutting supply, leading to lower rents.
The Bottom Line
Rent control may sound compassionate, but decades of evidence demonstrate that it backfires. It drives down supply, disincentivizes maintenance, and ultimately harms the tenants it intends to protect. Sustainable housing affordability depends on responsible fiscal policy, market-driven supply growth, and prudent immigration enforcement—not on price controls that distort incentives.
Sources
Daniel K. Fothergill and Jessica K. Anderson, “St. Paul’s Rent Control: The 3 Percent Ceiling’s Impact on Development.” Federal Reserve Bank of Minneapolis, February 2022.
Washington Center for Real Estate Research, Economic Impact of Proposed Rent Stabilization Policies in Washington State (University of Washington, 2023).
Rebecca Diamond, Tim McQuade, and Franklin Qian, “The Effects of Rent Control Expansion on Tenants, Landlords, and Inequality: Evidence from San Francisco.” American Economic Review 109, no. 9 (September 2019): 3365–3394.
New York City Department of Housing Preservation and Development, 2024 Housing and Vacancy Survey: Preliminary Findings (NYC HPD, June 2024).
National Apartment Association, Survey of Rent Control Effects on Housing Provider Investment (Arlington, VA: NAA, 2023).
Blair Jenkins, “Rent Control: Do Economists Agree?” Econ Journal Watch 6, no. 1 (January 2009): 73–112.
Arnott, Richard, and Stiglitz, Joseph E., “Comprehensive Review of Global Rent Regulation Policies,” Housing Economics Review, 2024.
David P. Hamilton, “Federal Rent Controls and the Transformation of U.S. Housing Markets, 1942–1950.” Journal of Economic History 59, no. 3 (1999): 620–649.
Robert H. Frank, “The Economist Consensus on Rent Control.” IGM Economic Experts Panel, University of Chicago Booth School of Business, 2012.
