Biden unveils housing proposal with a national cap on rent increases
President Joe Biden on Tuesday released a legislative proposal that is roiling the real estate industry: nationwide rent control.
Biden’s new plan would cap annual rent increases at 5% for two years for landlords managing 50 or more rental properties, which the administration said would cover 20 million units, or about half of all rental properties in the country. Exemptions would be granted for new construction and units undergoing “substantial” renovation and renovation.
Landlords who exceed the limit would be denied federal tax benefits. The only thing mentioned in the White House fact sheet is “faster depreciation.”
While it is unclear what the monetary impact of this proverbial “stick” of legislation would be, the housing industry and some economists have long argued that rent control policies actually cause rents to rise.
Housing industry organizations were quick to condemn Biden’s proposal. National Housing Conference (NHC) President and CEO David Dworkin released a statement claiming that rent caps “will have a chilling effect on housing supply.”
“While we appreciate the government’s intention to address the shortage of affordable rental housing, research has consistently shown that mandatory rent control is an ineffective policy that fails to address the underlying problems of housing affordability – the fact that the housing supply in our country has not kept pace. with the needs of our growing population,” Dworkin said.
Bob Broeksmit, president and CEO of the Association of Mortgage Bankers (MBA), released a statement that echoed that of NHC.
“There are endless examples in places in America and around the world that prove rent control is a counterproductive policy idea that ultimately hurts renters by distorting market prices, discouraging new construction and deteriorating the quality of rental housing,” Broeksmit said, adding that he believes the proposal is politically motivated. “While the odds are good that this proposal will one day pass Congress, a federal rent control law would be catastrophic for renters and our nation’s rental housing market.”
Diane Yentel, president and CEO of the National Coalition for Low-Income Housing (NLIHC), released a statement hailing the proposal as “historic” while calling for elements of the organization’s goals to be put into practice. National Tenants Bill of Rights, which it developed in collaboration with other affordable housing advocacy groups.
“The recent, unprecedented increase in homelessness in communities across the country is the direct result of equally unprecedented – and unwarranted – rent increases that occurred in the wake of the pandemic,” Yentel said. “Had such protections against rent gouging been in place at the time, many families could have avoided homelessness and remained stably housed.”
Government watchdog Responsible.US called on Congress to act immediately on the proposal.
“The government’s response is common sense,” said Tony Carrk, the group’s executive director. “If a giant landlord who is swimming in profits refuses to limit their rent increases, why should they enjoy tax breaks at the expense of the tenants they give up?”
The rent cap is not the only measure in Biden’s proposal, and some could be set through federal agencies without legislative action from Congress.
The president called for the Federal Housing Finance Agency (FHFA) to implement protections for tenants of multifamily properties financed by loans acquired by the agency. These protections include a 30-day notice period for rent increases, a 30-day notice period for an expiring lease, and a five-day grace period for late fees for missed rental payments.
In combination with Biden’s proposal, the Bureau of Land Management (BLM) has announced that it will open a public comment period on the sale of 80 acres of public land in Nevada for the purpose of affordable housing. BLM is also considering purchasing an additional 562 acres of public land in Southern Nevada and another 26,000 acres in the Las Vegas Valley. Biden unveiled this proposal during a campaign stop in Las Vegas.
Also on Tuesdays U.S. Department of Housing and Urban Development (HUD) has announced $325 million in Choice Neighborhood grants for affordable housing and community development.
The proposal is part of a broader policy to tackle housing costs, which have soared since the start of the COVID-19 pandemic in March 2020. It has been a major driver of inflation, an issue for which Biden has come under heavy criticism.
According to ZillowAccording to the Observed Rent Index, national rents have risen 32.1% since the start of the pandemic. And a new report from Redfin found that mortgage costs for homeowners in swing states have nearly doubled since the last presidential election.
On the homeownership front, Biden has proposed tax breaks for first-time homebuyers and homeowners trading up on second homes, in addition to monthly tax credits for mortgage payments.
