Home prices are still rising, though not quite as fast as they have been for much of the last year or two. Prices were 18% higher in June than a year earlier, according to the Case-Shiller home price index.

Many cities have seen double-digit rent increases in the last year too. That is prompting conversations in a number of cities and states about the possibility of imposing limits on rent hikes. 

Governments tend to regulate rent increases in two main ways, if they do so at all.

“Rent control is essentially a ceiling on rent,” said Claudia Aiken of the Housing Initiative at the University of Pennsylvania. That generally means a landlord can’t raise the rent above a certain dollar amount. 

“More recently, rent control usually takes the form of something called ‘rent stabilization,’ which is a limit on the annual rent increase,” Aiken said.

So a landlord can only raise the rent maybe 2% to 4% a year. “It is fantastic for current renters that basically have this wonderful insurance against very high rent increases in the future,” said Christopher Palmer at the Massachusetts Institute of Technology’s Sloan School of Management.

One problem with rent control or stabilization is that it’s not means-tested, so “it subsidizes tenants without regard to whether tenants have the means to pay for market-rate housing on their own,” Palmer said.

Sometimes, it can also exacerbate the housing supply problem, per Sophie House of the Housing Solutions Lab at New York University, “by discouraging new construction or by leading landlords to take existing rental housing out of the market.”

It’s a tricky line for cities and states to walk, she said. “What, if anything, can be done to protect tenants from destabilizing rent hikes while doing as little as possible to discourage new rental housing?”

Setting some kind of relatively generous cap on rent increases can work well, House added — especially if it’s combined with more housing subsidies for low-income people.