FAIR is the better of two bad ideas
Chicago has arrived at an unusual moment in housing policy. Its political leaders are debating two expansive ordinances aimed at protecting tenants, yet the city remains legally forbidden from adopting the policy at the center of the national housing argument: Rent control. Mayor Brandon Johnson’s Protecting Renters Ordinance, known as PRO, and the rival Fair Accountable Illinois Rental Ordinance, or FAIR, do not formally limit rents. Illinois law will not allow that. Instead, the proposals would regulate security deposits, fees, repairs, landlord registration, lease nonrenewals, relocation payments and the conditions under which an owner may recover an apartment.
The debate is therefore about something broader than rent control. It asks whether Chicago should approximate some of its effects through tenant-protection law, or rely primarily on housing construction and the existing landlord-tenant ordinance.
Chicago has encountered rent regulation before. During World War II, federal rent ceilings applied throughout the city as Washington tried to suppress inflation and prevent wartime housing shortages from producing sudden increases. That had never worked before but maybe next time. Federal controls continued in modified form after the war and ended in 1953.
Chicago’s attempt to replace part of that federal system produced an important legal precedent. When federal officials removed hotels from rent control in 1946, the City Council adopted its own ordinance covering hotel rooms, including the city’s large inventory of residential hotels.
The Illinois Supreme Court invalidated that ordinance in Ambassador East, Inc. v. City of Chicago. The decision, issued in 1948 after rehearing, did not declare rent control inherently unconstitutional. Rather, it concluded that Chicago lacked legislative authority to regulate hotel rents after the General Assembly had specifically excluded hotels from the state’s enabling statute. The power to set private rents could not simply be inferred from the city’s general police powers.
Nearly half a century later, Springfield made the prohibition explicit. The Rent Control Preemption Act, effective August 1, 1997, prevents every Illinois municipality, including home-rule Chicago from enacting or enforcing a measure having the effect of controlling private residential or commercial rents. At that time Democrats held a majority in the House and Republicans held a majority in the Senate. Jim Edgar, a Republican, was the governor. I have criticised Edgar for being a Republicrat but that had to be his shining moment as governor.
New York has the country’s most extensive system of rent control. Rent stabilization generally covers apartments in buildings constructed between 1947 and 1974, along with some newer properties receiving tax benefits. Stabilized tenants receive renewal rights, protection against eviction except on legally recognized grounds and rent increases established by public guidelines boards. A much smaller legacy rent-control program uses maximum base rents calculated by the state.
Los Angeles regulates many apartments built on or before October 1, 1978. Its Rent Stabilization Ordinance limits increases and regulates evictions, although California law generally permits rents to reset when a tenant voluntarily vacates. For the year beginning July 1, 2025, Los Angeles permitted a 3 percent increase. Under a revised formula effective in 2026, annual increases may range from 1 percent to 4 percent, depending on inflation.
San Francisco’s ordinance dates to 1979 and generally limits increases in older units while providing eviction protections. The allowable annual increase for covered apartments from March 2026 through February 2027 is 1.6 percent. As in Los Angeles, vacancy decontrol means the regulation primarily protects an existing tenant rather than permanently fixing an apartment’s price.
Oakland operates a petition-based Rent Adjustment Program. Annual increases are linked to regional inflation, while landlords may seek additional increases for capital improvements, higher operating costs or other recognized expenses. Tenants may challenge increases or seek reductions when services deteriorate. Oakland also maintains just-cause eviction protections.
Washington, D.C., administers rent stabilization under its Rental Housing Act. Covered landlords may take general annual adjustments and may petition for certain additional increases. The District also gives special protections to qualifying elderly tenants and tenants with disabilities. St. Paul offers the closest Midwestern comparison. Voters approved a 3 percent annual rent-increase ceiling in 2021, effective in 2022. Owners may seek exceptions necessary to earn a reasonable return, and subsequent amendments exempted newly constructed rental housing.
These systems protect incumbent tenants from sudden increases. They also create trade-offs. The longer a tenant remains in a controlled apartment, the more valuable that tenancy becomes. Owners gain incentives to convert, renovate, withdraw units or pursue whatever exceptions the law permits. Newcomers may face higher market rents because the benefits concentrate on existing occupants. Regulation can preserve stability without creating another apartment.
That distinction brings Chicago back to PRO. PRO would comprehensively rewrite the city’s roughly 40-year-old Residential Landlord and Tenant Ordinance. It would cap security deposits at one month’s rent, restrict move-in fees, expand tenants’ repair-and-deduct rights, create a rental registry, strengthen remedies against retaliation and lockouts, regulate rental-pricing disclosures and establish additional enforcement machinery.
Its most controversial provisions concern just-cause nonrenewal and relocation assistance. Landlords would need a recognized reason to terminate many tenancies. In some circumstances, an owner seeking possession or offering a renewal with an increase rejected by the tenant could owe substantial relocation payments. The Chicago Association of Realtors says the proposed payments could reach 10 months’ rent or $10,000, whichever is greater, per tenant, although supporters describe such payments as protection against displacement rather than indirect rent control.
FAIR, introduced by members of the City Council’s Budget Accountability Caucus, retains much of PRO’s less controversial structure. Both proposals would cap security deposits, permit repair deductions, require disclosure of algorithmic pricing and prohibit retaliation and illegal lockouts.
FAIR removes just-cause nonrenewal, relocation payments, the proposed tenant bill of rights, a new rental-housing bureau and a city-financed right-to-counsel program. It also divides landlords into tiers, treating an owner of 12 or fewer units differently from a large corporate operator, and proposes incentives to rehabilitate vacant or code-deficient properties. Chicago thus differs fundamentally from the cities invoked by rent-control advocates. FAIR essentially is PRO lite. Both are on a slippery slope to rent control.
The third choice is to do nothing.
That would leave Chicago’s current ordinance, Fair Notice requirements and state eviction law in place. Landlords would retain the ability to decline renewal with proper notice, while tenants would retain remedies for unsafe conditions, retaliation, illegal lockouts and other violations. Doing nothing would avoid new compliance costs and litigation.
PRO attempts to give tenants the security found in New York, San Francisco and Oakland without openly controlling rent. But it risks creating rent control burdens without its political honesty. If a landlord must renew indefinitely, absorb large relocation liabilities or negotiate a payment to regain an apartment, the nominal freedom to set rent becomes less meaningful.
FAIR is the more tenable alternative of the two “reform” efforts.” It is not nearly as intrusive as PRO is. Chicago’s housing problem, however, is one of supply or lack thereof. Neither FAIR nor PRO addresses that side of the coin. Both are de-facto forms of rent control. They would not be nearly as destructive as the de jure forms of rent control but would not address the issue of supply. The six municipalites with de jure rent control are suffering from the deleterious effects of dwindling supply as a result of capping rents. It can help existing tenants whlie shrinking the housing supply overall. Refer to my article published on October 16th to see how the housing supply can be increased. Ignoring the laws of supply and demand is tantamount to ignoring the law of gravity.
