Rent Control

Rent control is a set of laws that limit how much a landlord can charge or how much rent can rise each year. Some rules cap increases; stricter ones cap the rent itself. Under rent control, a gross rent multiplier on current rent tells a buyer less, because future rent cannot follow the market.

In an uncontrolled market, a below-market rent is temporary and buyers pay for the reset. Under strict control, the low rent may last as long as the tenant stays. A regulated unit at $2,500 in a $4,000 market can trade at a GRM that looks very high, because the buyer is paying for what the unit is worth once the tenant leaves.

Check which units a local ordinance covers, since rules often exempt newer buildings or single-family homes. Compare regulated buildings only with other regulated buildings. A GRM from an exempt house tells you little about a rent-stabilized fourplex on the next block.

Further reading: Rent Control on Wikipedia.