It does not, in fact incentivize upgrades. Because the landlords wait until the tenant moves out, then they can raise the rent to the (high) market rate and tha

It does not, in fact incentivize upgrades. Because the landlords wait until the tenant moves out, then they can raise the rent to the (high) market rate and that is when they make improvements. Rent control is widely acknowledged to lead to a lower quality housing stock as maintenance and upgrades are deferred. The provision for some capital offset for improvements is not, in practice, sufficient justification for making the improvements as the offset is only partial, and you want to encourage the long term tenant to move out so you are not going to provide upgrades to the unit.