New York City offers a stark example of the problems created by rent control. The city’s framework, which allows tenants unilaterally to bequeath their rent-controlled apartments, has gutted landlords’ incentives to invest and reduced renter mobility. The result? A sharp devaluation of rent-stabilized properties, bank failures linked to these policies, and ongoing risks to the city’s housing supply.
Yet even with a broad consensus among economists on rent control’s harms, repeal remains politically infeasible. As a step in the right direction, we propose a gradual reform: let each landlord decontrol one unit per year.
The failure of rent control is not hard to understand. Common sense and basic economics dictate that capping prices while demand remains steady leads to shortages. Research confirms this. Take the twin cities of Minneapolis and St. Paul. When St. Paul implemented strict rent control, housing starts plummeted 48 percent. Meantime, Minneapolis—where rent control does not exist—got rid of its restrictive zoning laws and saw its rents stay flat, even as the national average rose.
Rent control’s biggest losers are newcomers, immigrants, and younger generations, who find themselves locked out of the market because existing tenants stay put and new housing isn’t built. Many assume rent control mainly benefits the poor, but in reality, it rewards those who inherited their apartments, regardless of income—creating a feudal system of government-enforced privilege. Even if rent control helps some current low-income tenants, its long-term effects—shrinking supply and discouraging investment—drive up rents for everyone else.
Allowing landlords to decontrol just one unit per year would gradually realign incentives for tenants, landlords, and developers while reestablishing a marketplace conducive to healthy partnerships among these three groups.
Today, New York’s rent control laws effectively force landlords to re-rent apartments indefinitely, with tenants enjoying near-absolute security of tenure. Evicting someone—regardless of whether they pay rent, damage property, or create nuisances—is nearly impossible. Our “one-unit rule” would reintroduce a measure of accountability. Tenants who fail to uphold basic community standards—by damaging shared spaces, creating fire hazards, or harassing neighbors with noise and trash—would finally face consequences. As it stands today, an owner of a small building who shares his home with an abusive tenant has no recourse. On the other hand, our rule wouldn’t give landlords the unlimited ability to raise rents, so they would be encouraged to maintain good relations with the rest of their tenants.
This reform would provide a greater relative benefit to mom-and-pop property owners, who have fewer tenants and suffer the most under rent control. Unlike large real estate firms with armies of lawyers who can combat abuses, small landlords are often left without recourse when dealing with problematic tenants. Under the current system, rent-controlled tenants face little risk when they fail to pay rent or cause disturbances, encouraging malfeasance. The one-unit rule would restore balance, empowering landlords gradually to regain control over their properties, while maintaining certain protections for most tenants.
Eventually, this policy could facilitate the phasing out of rent-stabilized properties, which currently sell at a steep discount compared with market-rate buildings. But even for those who support rent control, our proposal would encourage new construction by making long-term investment in housing stock more attractive.
Under such a policy, landlords would no longer need to go through expensive and lengthy legal proceedings to decontrol units. By capping decontrol at one unit per year, the policy would provide clear legal guidelines, reducing opportunities for litigation and corruption.
Our approach addresses the dreaded “holdout” problem, whereby a single tenant can block an entire building’s redevelopment. If a developer wants to renovate a property, an individual rent-controlled tenant can hold out for millions of dollars of payments to vacate. This can and does happen—as in the case of one hermit holdout who extorted a developer for $17 million. With our rule in place, tenants would have the incentive to be the first to vacate and get compensated reasonably, not hold out as long as possible for massive payments.
At present, landlords also have little incentive to improve outdated buildings, knowing they won’t recoup their investments. A gradual decontrol system would restore the natural housing cycle, enabling the replacement of older structures with larger, modern buildings.
Cities thrive on dynamism and on their ability to attract global talent. A housing policy that entrenches affordability for a few while foreclosing future generations will ultimately fail. A gradual, commonsense approach to rent control reform would expand supply, spur investment, facilitate mobility, and restore a fairer, more functional housing market for all.
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