Biden proposes national rent increase cap of 5%
President Joe Biden will propose a nationwide cap on rent increases of 5% per year on Tuesday, according to The Washington Post, which mentions ‘three people familiar with the matter’.
The proposal would revoke unspecified tax breaks for landlords who raise rents by more than 5%, although it would only apply to landlords who own more than 50 rental units. According to Post sources, this would cover about half of all rental properties in the country.
It would not apply to units that have not yet been built so as not to discourage the construction of new housing, which the Biden administration has made a cornerstone of its housing policy. Affordable housing advocates also support policies that lead to the construction of new housing.
However, research into rent control often shows that lowering rents is not a wise policy because it can encourage landlords to convert rental properties into apartments, reducing the supply of rental properties.
During the first presidential debate three weeks ago, Biden referred to limiting rent increases to 5%, but gave no details. He also said the country would build two million new homes in his second term.
In his March State of the Union address, Biden called on lawmakers to create a $10,000 tax credit for first-time homebuyers and people selling their starter homes. He also mentioned the construction of 2 million new units and an unspecified cost reduction for tenants, which now appears to be the 5% annual cap on rent increases.
Landlords can receive a number of federal tax deductions. This includes depreciation, mortgage interest, operating costs and property taxes. The IRS also offers a low-income housing tax credit that can be claimed by landlords who build or renovate affordable rental properties.
Rents, along with home prices, have skyrocketed since the start of the COVID-19 pandemic in March 2020. According to ZillowAccording to the observed rental index, national rents have increased by 32.1% from then to now. Housing costs have been a major driver of inflation, an issue that has plagued Biden’s campaign.
