As 2025 approaches, renters across the United States are bracing for significant increases in housing costs. The rental market has experienced unprecedented price hikes over the past few years, leaving many tenants struggling to keep up with the rising cost of living. A recent survey conducted by ResiClub and LendingOne reveals that 84% of landlords plan to raise rents in the coming year to offset increasing property management expenses, property taxes, and mortgage interest rates. This trend raises an important question: Can rent-controlled apartments help stabilize the rental market and protect tenants from financial hardship?
Understanding the Rent Increase Trend
Over the past five years, rental prices have surged dramatically, outpacing wage growth in many cities. Between June 2019 and June 2024, rents for units ranging from studios to two-bedroom apartments increased by an average of 21.2%. This sharp increase has put a significant strain on renters’ budgets, making it more difficult for many to afford stable housing.
Several factors have contributed to these rising rents, including:
- Inflationary Pressures: The lingering effects of inflation have driven up the costs of property maintenance, utilities, and construction materials.
- Higher Interest Rates: Many landlords are passing on the burden of rising interest rates to tenants, increasing rental costs.
- Supply and Demand Imbalances: In high-demand areas, a shortage of affordable housing has led to intense competition for available units, allowing landlords to raise rents aggressively.
- Post-Pandemic Market Shifts: During the COVID-19 pandemic, rent moratoriums and government assistance temporarily provided relief to tenants. However, with these protections expiring, landlords are looking to recoup lost income.
With rental prices soaring, many policymakers and housing advocates are turning to rent control measures as a possible solution.
Federal Proposals and Economic Perspectives on Rent Control
In response to the growing pressure on renters, the Biden administration proposed a 5% cap on annual rent increases for existing units owned by large landlords—those with more than 50 units—in July 2024. While largely symbolic, this proposal has ignited debates about its potential impact on inflation, the rental market, and economic stability.
Justin Wolfers, an economist at the University of Michigan, pointed out that rent increases are one of the biggest drivers of inflation in the U.S. economy. He stated:
“Rent is currently the biggest driver of inflation. The Fed has failed to convince landlords that the era of high inflation is over. So the White House is going to do it instead.”
This perspective highlights the interconnectedness of rental costs and broader economic stability. When rents rise unchecked, they contribute to overall inflation, making it harder for the Federal Reserve to control economic conditions.
The Role of Rent Control in Preventing Displacement
One of the most pressing concerns associated with rising rents is tenant displacement. Without rent control policies in place, many low- and middle-income tenants are forced out of their homes, particularly in cities where housing demand far exceeds supply.
A 2019 study on rent control policies in San Francisco found that rent control can help prevent the displacement of minority renters, including Black and Latino communities. The study indicated that without such protections, these populations are more likely to be priced out of their neighborhoods due to gentrification and economic pressures.
However, rent control policies are not without controversy. The Urban Institute has found that wealthier, white households often benefit disproportionately from rent control protections. Because long-term tenants in rent-controlled units see their rents stay artificially low, they may remain in place longer, limiting the availability of affordable units for new renters who need them the most.
The Challenges of Rent Control
While rent control provides short-term relief for tenants, critics argue that it can lead to long-term housing shortages by discouraging new housing development. Opponents of rent control point out several potential drawbacks:
- Reduced Incentive for Landlords to Maintain Properties: If landlords cannot raise rents to cover maintenance costs, they may be less likely to invest in property upkeep.
- Lower Housing Supply: If developers anticipate limited profitability due to rent control measures, they may be less likely to build new rental units, worsening the housing shortage.
- Black Market Rentals: In cities with strict rent control laws, some landlords find ways to circumvent regulations by offering leases under the table or prioritizing short-term rentals, further limiting availability for long-term tenants.
Housing policy experts, including Jerusalem Demsas of Vox, have argued that while rent control alone is not a cure-all solution, it should be part of a broader housing affordability strategy that includes:
- Increased construction of affordable housing units
- Incentives for landlords to participate in affordable housing programs
- Strengthened tenant protections against unjust evictions
What’s Next for Rent Control in 2025?
As rent increases continue to impact millions of Americans, the debate over rent control is likely to intensify in 2025. Some states and cities, like New York and California, already have rent stabilization laws in place, while others are considering new measures to protect tenants from rising costs.
Renters and housing advocates will be watching closely as policymakers weigh the benefits and challenges of rent control. If implemented carefully, these policies could help mitigate rising rental costs, reduce displacement, and contribute to broader economic stability.
Conclusion
Rent-controlled apartments present a potential solution to the affordability crisis gripping the U.S. rental market. However, for rent control to be truly effective, it must be implemented alongside policies that address housing supply, equitable access, and tenant protections.
As we move into 2025, the rental landscape will continue to evolve, and policymakers must find a balanced approach that protects tenants while ensuring a sustainable housing market for future generations.
Source: Black Enterprise