If you are living on a tight budget, you should pay more attention to your monthly rent or mortgage. Your rent takes up a significant part of your budget, which can impact your savings threshold as well. If you are planning to move to an expensive city, look for a rent-controlled apartment as it will lower your costs by a huge margin. However, some landlords may demand a higher rent amount than they are allowed to. Familiarize yourself with rent-control laws in your region to avoid paying more than you are supposed to. Follow this guide to understand how exactly rent-control laws work.
What Exactly is Rent Control?
Simply put, rent control laws govern the activities carried out by landlords in terms of the rent amount demanded and inclusive tenancies. This gives every tenant a fair opportunity to rent their own place without feeling overburdened. The laws and regulations vary from state to state and some even include special rules to present an unbiased deal between the landlord and the tenants. Every unit has a fixed rent threshold that the landlord and tenants must adhere to. However, the municipality of the region can decide the margin or percentage by which the rent can increase annually.
Since some cities lack rental spaces and others are expensive, working-class people are unable to migrate, which can limit their opportunities. The stocks related to limited housing can also impact the average market prices. In some states like New York, certain housing laws also depend on the amount of time the tenant has spent living in the same apartment and the age of the building. ‘Rent control’ has been applied to the tenants living in buildings since 1971. Even though the rent is increased annually, the amount cannot surpass a “maximum base rent”. This increment is used for maintenance and service.
Laws and Factors Under Rent Control
‘Vacancy control’ is one of the most common terms used under this set of laws. According to this, the landlord cannot increase the rent threshold outlined by the rent control board of the region, specifically after the tenant moves out. The outline allowing the landlord to increase the rent (depending on the city and market value) is called ‘vacancy decontrol’. These laws are commonly followed in almost every state but are named differently. One of the most common rent-control laws in California is AB 1482, which allows only property owners to increase 5% of the annual rent amount. Cap Rate and CCR (Cash-on-cash Return) are two important factors covered under ab1482, which define a property’s potential to make a profit every year (measured in percentage). This law has some exemptions as well, some of which include transient housing and hotels. Some types of properties, like student housing, are exempted as well.
Rent-control laws are not just applicable to old units but to new construction and buildings too. Real estate developers and builders must fix a specific number of units to be rented out at less than the average market price. If the demand for the units is high, potential tenants are chosen on the basis of their income threshold. Eviction of tenants is also covered under the regulations. Even if the landlord deems fit to evict one of their tenants, they cannot do so unless they have a legitimate reason. Some of them include violation of terms mentioned in the rental contract, renting the apartment to a family member, involvement of the tenant in illegal activities, and the landlord’s desire to renovate or remodel the unit.
Inclusive Property Types and Benefits of Rent Control
Needless to say, these laws help lower and moderate-income groups in finding an apartment in big cities (which are typically expensive) and live comfortably. They are also saved from being evicted unnecessarily. Basically, it gives tenants peace of mind and helps them carry on with their daily activities. A lease should be renewed by the landlord every year, which is another form of security for tenants. As mentioned, some building types are exempted from rent control. Apart from single-family houses, buildings occupied by owners with less than four units, and some newly constructed buildings, other building types fall under rent-control laws.
When looking for an apartment during your next big move, learn everything about the laws and rent-control factors to get the best deal. Since the laws vary in every city, dig deeper and research before taking a step. You can also talk to your local broker or real estate agent to get more insights into this matter. They will also provide assistance with special notice regulations and requirements, security deposit rules (which can be stringent in some cases), and help with relocation.
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