A look at Rent Control and Eminent Domain 

By Bob Peters || June 12, 2025

Regulatory Impacts 

It’s clear that federal, state, county, and city governments can impose taxes to pay for services. But taxes are not the only way your elected officials can affect your financial well-being. Regulations, too, play a powerful role. 

Local rules are typically created through city councils approving ordinances. State laws are passed by legislators and sent to the Governor for approval. Federal laws follow a similar path and must be signed by the President. No matter the level—local, state, or federal—governments have regulatory powers that shape economic conditions. These rules affect communities, renters, and property owners alike. 

Let’s explore a few of these impacts. 

Planning Departments and Zoning 

Cities and counties rely on planning departments and zoning laws to oversee development. These regulations are approved by city councils and enforced at the local level. 

For example, if a developer wants to build an apartment complex, they must submit plans to the city’s planning department. Those plans are reviewed and approved only if they meet the zoning and building requirements. 

Zoning laws vary widely by location—and for good reason. Cities in earthquake-prone areas may require structures that can withstand tremors. Cities outside those zones often have less strict codes. 

Some cities also influence design. Take Leavenworth, Washington, for example. Local ordinances require buildings to mimic a Bavarian village style. As a result, the town has become a tourist attraction. 

A Tale of Two Cities: Houston and San Francisco 

Houston and San Francisco are large American cities—but they take very different approaches to housing regulation and affordability. 

Before we examine their permitting policies, let’s briefly review what drives construction costs. 

What Makes Up Construction Costs?

Construction costs consist of soft costs, labor, and materials. Soft costs, which can range between 20-30% of the total project costs, include design, engineering, legal fees, permitting, insurance, and financing. 

Although insurance premiums vary by region—especially in disaster-prone areas—design, legal, and financing costs remain fairly consistent nationwide. However, regulatory policies like permitting and impact fees vary significantly by city. 

Permitting and Infrastructure Fees 

Houston is notable for having no formal zoning laws. It also imposes relatively low development fees. These charges, often called “offsite” fees, fund public infrastructure that isn’t directly tied to the development. 

Offsite fees are commonly assessed on a “per door” basis. For example, a 50-unit apartment might be charged $1,000 per unit in Houston or Austin, totaling $50,000. In contrast, San Francisco could assess up to $29,000 per door, resulting in $1.45 million in fees. 

Such higher costs force developers to raise rents. The added expense translates into higher unit prices, which hurts affordability—especially for lower-income renters. 

Rent Control vs. Free Market 

The State of Texas passed a law in 1993 (Chapter 214.902 of the Local Government Code) that prohibits rent control by local jurisdictions. California, on the other hand, passed the Tenant Protection Act of 2019 (AB 1482), which imposes statewide rent caps but allows cities to enact stricter rent controls. 

Rent control laws generally limit how much landlords can raise rents annually. These laws are often adopted to shield lower-income tenants from steep rent hikes and housing instability. 

While California restricts rent increases, Texas allows landlords to charge what the market will bear. Rent control may offer short-term relief, but over time, it can reduce investment in housing. Why? Because owners may be unable to raise rents enough to cover rising maintenance and improvement costs. 

This discourages the development of new, affordable housing units. 

Why Regulation Matters 

Housing affordability is one of the most pressing issues facing American cities. Houston, San Francisco and Seattle offer real-world examples of how regulatory decisions shape outcomes. 

This blog highlights just one way how government policy affects everyday life. However, rent control and eviction regulations is a complex topic. To explore it further, consider reading the 2018 Brookings Institution paper and the 2021 Urban Institute report on rent control. These papers have differing views …it’s complex.

Eminent Domain and the Constitution 

The Fifth Amendment to the U.S. Constitution gives all levels of government the power to take private property for public use—provided the owner is fairly compensated. 

This is known as eminent domain. It’s often used to build public infrastructure like roads, schools, rail lines, parks, or utilities—even when property owners don’t want to sell. 

I’ve personally been involved in situations where organizations I represented were required to sell property under eminent domain. It’s never ideal, but it’s a constitutional right governments hold. 

That said, there are safeguards. The government must offer a price based on a professional appraiser’s valuation. If the owner disagrees, there’s room for negotiation. Failing agreement, the owner can challenge the offer in court and request a judicial review. 

Conclusion 

Your elected government plays a powerful role in shaping the communities we live in—through taxes, zoning laws, building codes, and rent regulations. These rules influence everything from housing affordability to the look and feel of your neighborhood. 

Crafting regulations is complex. Officials must weigh economic growth, public interest, and individual rights. As a citizen, your voice matters. Don’t underestimate the impact you can have by staying informed and reaching out to your representatives.