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Four days after clumsily hinting at a 5 percent national rent cap during a post-NATO press conference, President Biden clarified plans for the next chapter of the Biden-Harris Housing Plan as housing prices and eviction filings soar past pre-2020 norms in key markets across the country.
“President Biden is taking action to make renting more affordable for millions of Americans,” the Tuesday morning briefing read. “Today, President Biden is announcing new actions to lower housing costs, including calling on Congress to pass legislation giving corporate landlords a choice to either cap rent increases on existing units at 5 percent or risk losing current valuable federal tax breaks.”
If passed, the cap would apply to corporate landlords who own at least 50 units. If a landlord agrees to cap rent increases at 5 percent or less for the next two years, they can access accelerated depreciation tax breaks for their housing costs, such as expenses for repairs and maintenance. If a corporate landlord decides to reject the cap, then they’ll lose access to the accelerated depreciation tax breaks. The proposal excludes new construction and units that need “substantial renovation or rehabilitation.”
Beyond the rent cap, Biden also called on federal agencies, including the Bureau of Land Management (BLM), the United States Forest Service (USFS), Health and Human Services (HHS), the General Services Administration (GSA), and the Department of Transportation (DOT), to accelerate their efforts to use surplus public land for affordable housing projects.
The BLM has already found early success in its Southern Nevada Public Lands Management Act program, which paves the way for the construction of up to 15,000 affordable housing units for Nevada residents who make less than 80 percent of the area’s median income.
“Families deserve housing that’s affordable — it’s part of the American Dream,” Biden said of the plan during a Nevada rally. “Rent is too high, and buying a home is out of reach for too many working families and young Americans after decades of failure to build enough homes. I’m determined to turn that around.”
Biden’s plan — especially the 5 percent rent cap — has garnered split reactions from the real estate industry and affordable housing leaders who argue about the effectiveness of rent control.
In 2019, Inman did a deep dive into the groundswell of upzoning and YIMBY (Yes In My Backyard) policies on the state and local levels. Multiple leaders said rent control rarely yields the results leaders seek, as landlords use loopholes to raise rents. Then there’s the issue of building enough inventory to meet demand for low- and middle-income renters.
“For instance, Washington D.C., already has rent control and they have a lot of subsidized units, and they still have an affordable housing problem,” a Minneapolis urban planner told Inman in 2019. “So, rent control is not a panacea, zoning is not a panacea, none of these things alone work. They have to work in tandem with one another.”
National Low Income Housing Coalition President and CEO Diane Yentel called the cap “historic” and called on Biden to use his executive power to enact it as Republican lawmakers have spent the past four years blocking the broader Biden-Harris Housing Plan, which outlines a plan to build two million new homes and provide $10,000 in mortgage relief.
“President Biden’s proposal to temporarily cap rent hikes to prevent rent gouging is historic,” Yentel said in a public statement. “But rather than waiting for Congress to advance anti-rent gouging measures after the election, President Biden can and should take action now to put in place these and other critical protections for renters living in properties with federally backed mortgages, as called for by NLIHC and renters nationwide.”
On the other hand, David M. Dworkin, the president and CEO of the National Housing Conference, panned Biden’s plan, saying rent caps “don’t work” and often have “a chilling effect” on housing supply.
“Exempting new construction will do nothing to change this, making clear that long-term investments in housing can be made uneconomic retroactively,” he told Realtor.com. “It’s time to stop making policy by bumper sticker and get serious about housing production.”
Leaders from the National Association of Home Builders and the National Association of Realtors sided with Dworkin, saying lawmakers must focus on crafting legislation to accelerate efforts to fix a decades-long housing shortage.
“NAR opposes misguided attempts to cap or control rental rates. Price controls may seem appealing, but they have backfired on local governments and harmed the people we need to help the most,” NAR President Kevin Sears said in a written statement. “Developers are reluctant to build in areas where the government imposes rent controls on new buildings, and these policies actually decrease the supply of low- to mid-range housing units.”
“We can protect the most vulnerable by supporting targeted assistance to renters and housing providers when there is a gap between rising wages and rising rent,” he added. “But the long-term solution remains increasing supply. We need more than 328,000 new apartment units each year just to keep up with demand — that’s 4.3 million units by 2035.”
Although the idea of a rent cap has fallen flat, LendingTree senior economist Jacob Channel said other parts of the Biden-Harris Housing Plan could make a meaningful difference in the fight to improve housing affordability.
He said reallocating surplus public land for affordable housing “could help spur construction and bring housing prices down.” However, a push for the broader adoption of upzoning (e.g. building multifamily housing on land zoned for single-family housing) would help cities make the best use of the space they’ve got without needing to sprawl.
“Outside of this latest proposal, the Biden administration has put forward a fairly robust set of policies regarding housing,” he said in an emailed statement to Inman. “In a nutshell, the administration is calling for more new homes to be built, for existing units that are in a state of disrepair to be rehabilitated, for tax credits and other benefits to help would-be buyers afford a home, and for additional funding to go to government agencies like HUD.”
“For the most part, these proposals make logical sense and could help ease the burden of high housing costs for both renters and homeowners,” he added. ” As mentioned above, calls for and investments made toward more home construction are exceedingly beneficial as one of the main reasons housing is so expensive in the United States is because there is too little housing supply.”
