This paper develops a theoretical model to study the effects of regulation on the rental housing market. Our model emphasises the following specific features of the housing market: product heterogeneity and search costs play a central role, switching (moving) costs are substantial, and the possibilities to price discriminate are important. We show that with short-term rental contracts rents will increase at the time of renegotiation as a result of the ?hold-up? problem. Tenancy rent control which limits the owners? possibilities to increase rents for a certain number of years leads to lower equilibrium rents and higher social welfare. Our model strongly suggests that a policy which consists of indexing rents may be socially preferable to short-term contracts.