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Rent control is part of a system of rent regulation, administered by a court or a public authority, which limits the changes that can be made in the price of renting a house or other real property. The objective of controlling the prices of rent is usually to counteract the inequality of bargaining power between landlords and tenant, as part of a minimum set of rights to make the market fair.
Controls on the price of rents is used in residential housing, agricultural tenancies, and business tenancies. It may function as a price ceiling. Rent control laws are used in approximately 40 countries, although they often vary from one country to another, and may vary from one jurisdiction to another within some countries.
In Canada there are rent regulation laws in each province. For example, in Ontario the Residential Tenancies Act 2006 requires that prices for rented properties do not rise more than 2.5 per cent each year, or a lower figure fixed by a government minister. Some provinces regulate the rate of rental increases while some only regulate the notice required to be given before a rental rate increase is given, such as Alberta.
German rent regulation, regarding prices, is found in the Civil Code (the Bürgerliches Gesetzbuch) in §§ 535 to 580a. Rental price increases are required to follow a "rental index" (Mietspiegel), which is a database of local reference rents. This collects all rents for the past four years, and landlords may only increase prices on their property in line with rents in the same locality. "Usury" rents are prohibited altogether, so that any price rises above 20 per cent over three years are unlawful. In practice, landlords have little incentive to change tenants as rental price increases beyond inflation are constrained.
Rent regulation covered the whole of the UK private sector rental market from 1915 to 1980. However, from the Housing Act 1980, it became the Conservative Party's policy to deregulate and dismantle the protections for tenants, starting with abolition of all price controls, leaving a basic regulatory framework of freedom of contract. Rent regulations survive among a small number of council houses, and often the rates set by local authorities mirror escalating prices in the non-regulated private market.
Rent regulation in the United States is an issue for each state. In 1921, the US Supreme Court case of Block v. Hirsh held by a majority that regulation of rents in the District of Columbia was constitutional, but shortly afterwards in 1924 in Chastleton Corp v. Sinclair the same law was struck down by the conservative majority of the court. After the New Deal, the Supreme Court ceased to interfere with social and economic legislation, and a growing number of states adopted rules. The application was often inconsistent. For example, in New York only some properties continue to have the protection of rent regulation, while others on the private market are left to be priced according to whatever the landlord can charge.
Price controls remain the most controversial element of a system of rent regulation. Historically, economists such as Adam Smith and David Ricardo viewed landlords as producing very little that was valuable, and so regarded "rents" as an exploitative concept. Modern rent controls were intended to protect tenants in privately owned residential properties from excessive rent increases by mandating gradual rent increases, while at the same time ensuring that landlords receive a return on their investment that is deemed fair by the controlling authority (which might, or might not be a legislature). Sometimes called rent leveling or rent stabilization, rent regulation is argued to promote social stability by slowing displacement in booming economic cycles.
It was argued by most economists, particularly from the 1960s and 1970s, that some forms of rent control creates shortages and exacerbate scarcity in the housing market. This analysis targeted nominal rent freezes, and the studies conducted were mainly focused on rental prices in Manhattan or elsewhere in the United States. These studies were criticised on the basis that poorer standards in housing conditions were also seen in states which had no rent controls, and so the evidence was inconclusive in demonstrating a causal link.
A view developed among some American economists in the 1990s that new methods of regulation, allowing for nominal rent increases in defined situations (for instance, linked to inflation or behind wage rises) were "so different, they should be evaluated largely independently of the experience with first-generation rent controls" studied in the 1970s. The view at the time was that "a well-designed rent control can be beneficial".
According to American Austrian School economist and anarcho-libertarian theorist Walter Block, and the Econ Journal Watch of the Atlas Economic Research Foundation organization of free market think tanks, continued studies by economists still show a near universal consensus on the ineffectiveness of rent control, both first generation and second generation.