US President Joe Biden revealed a plan to cap rent increases at 5% per year for the next two years on Tuesday.
CNN —
President Joe Biden revealed a series of proposals aimed at lowering housing costs on Tuesday as inflation and elevated home prices are shaping up to be decisive issues for voters this year.
The plan, which is subject to congressional approval, calls for withdrawing tax credits from landlords who raise rent by more than 5% per year, beginning this year and for the next two years. The plan would apply only to larger landlords who have more than 50 units in their portfolio, though that counts for more than 20 million rental units across the country, according to the White House.
The policy would include an exception for new construction and buildings that are being substantially renovated. That’s aimed at incentivizing new rental property construction to increase supply of apartments and homes for rent.
“While the prior administration gave special tax breaks to corporate landlords, I’m working to lower housing costs for families,” Biden said in a statement. “Republicans in Congress should join Democrats to pass my plan to lower housing costs for Americans who need relief now.”
While overall inflation is slowing, the cost of housing remains one of the biggest hurdles for many Americans. A record-high 22.4 million renter households spent more than 30% of their income on rent and utilities in 2022, the last time the data was measured, according to a report from the Joint Center for Housing Studies at Harvard University. That represents an increase of 2 million households over the previous three years.
New inflation data released last week showed that shelter inflation rose in June at the slowest pace in three years. On an annual basis, though, housing price hikes rose 5.2%, outpacing overall inflation.
According to recent polling, the issue is of high importance to voters, with 36% of Americans citing economic issues as the most important problems facing the country today, according to a June Gallup poll. Fourteen percent specifically said the high cost of living was the biggest problem in the US.
It is unlikely that Congress will pass a bill containing such a proposal this close to a presidential election, though.
Some federal lands could be repurposed for housing
Biden announced two additional efforts aimed at reining in high housing costs on Tuesday.
Several federal agencies said they would assess whether to use surplus federally owned land to build affordable homes at the urging of the Biden administration, according to the White House. For example, the Bureau of Land Management said it would open a public comment period on the sale of 20 acres of public land in Nevada at below-market value to create affordable housing, while the US Postal Service said it plans to repurpose some unused properties for housing.
Similarly, the GOP’s policy platform for 2024 also calls for “the opening of limited portions of federal lands to allow for new home construction.”
On Tuesday, Biden, along with the Housing and Urban Development Acting Secretary, Adrianne Todman, also announced $325 million in grant funding to seven cities to “build more homes and revitalize neighborhoods.” Those cities include Challanooga, Houston, Miami, Las Vegas, Syracuse, Trenton, New Jersey and Huntsville, Alabama.
Rent cap proposal faces pushback from housing groups
The Biden administration has addressed home affordability in the past, proposing a “mortgage relief credit” during his State of the Union address earlier this year that would provide $5,000 per year for two years for middle-class, first-time homebuyers.
During CNN’s presidential debate in June, Biden hinted at his new plan to address rent increases.
“We’re going to make sure we cap rents,” he said. “So corporate greed can’t take over.”
Biden also mentioned the plan on Thursday at a NATO Summit press conference.
In a statement after the debate, the Housing Solutions Coalition, an alliance of major housing organizations, including the Mortgage Bankers Association, said that Biden’s plan for rent caps would hurt renters rather than help them, though.
“Decades of academic researchfrom across the United States and around the world clearly show that rent caps — more commonly known as rent control — reduce the supply of available housing and fail to target those renters who need help the most while simultaneously harming other residents and the communities they reside in,” the statement said. “Rent caps hurt renters and communities.”
However, a senior administration official said that the plan to cap rents is only intended to serve as a two-year bridge until rental units enter the market, bringing down rents. There are currently 1.6 million units under construction in the US as of May, according to Federal Reserve data.
