From the Wikipedia page ( http://en.wikipedia.org/wiki/Rent_control ):

Most economists believe that a ceiling on rents reduces the quality and quantity of housing available.[41][42] This view is based on analysis of empirical evidence as well as the understanding generated by theoretical models.[42] Economists from differing sides of the political spectrum, such as Paul Krugman[43] and Thomas Sowell,[44] have criticized rent regulation as poor economics which, despite its good intentions, leads to the creation of less housing, raises prices, and increases urban blight.

It probably works both ways, depending on exactly how low or high the rents are held. I've lived in some really, really nice areas that are rent controlled (SF Pacific Heights, Santa Monica, Downtown San Diego), apparently others have lived in relatively crappy neighborhoods where rent is also controlled.

Now that I think about it further, it seems obvious that rent control would be a tool that can be used by a municipality to control rents in either direction, depending on their goals.