Luxury housing is commonly exempt from rent control laws. This exemption incentivises an unnatural shifting of resources from ordinary housing to luxury housing, even in the face of housing shortages.
During eight years of rent control in Washington in the 1970s, the housing stock declined from 199k units to 176k. Builders are incentivised to develop only those houses which can be priced above the rent-control level. The undesired side effect is that the average rent in a rent-controlled area is increased, such as in San Francisco or New York.