Not so sure about your second point - If a person has a place that has been rent controlled for 5+ years, this is quite doable.
Additionally, how is renting out a "rent controlled" place at market rates not transferring income from the actual landlord, to the lessee, while defeating the "control" at the same time?
It's curious, because there's no reason to think the 'actual landlord' has a right to that additional income. They signed a lease at a given price for a given term. They could have signed that lease at dramatically higher terms. Just because the tenant made out good on the deal in the long term doesn't negate the initial contract. It's not like the landlord must be the only one that makes out best on any given contract...
Except that most rental agreements allow "use of the premises" or some such wording to the named lessee, and forbid sub-leasing.
The contract that you're referring to doesn't give the renter the ability to then turn around and do whatever they want with the living space for their own financial benefit.
Additionally, how is renting out a "rent controlled" place at market rates not transferring income from the actual landlord, to the lessee, while defeating the "control" at the same time?