Biden’s Rent Cap Plan: A Double-Edged Sword for Renters and Landlords

On Tuesday, President Joe Biden introduced a proposal aimed at addressing high housing costs by capping rent increases at 5% per year for landlords who own more than 50 units. While this plan targets larger landlords, housing groups express significant concerns, arguing it may harm renters and the broader housing market.

Concerns from Housing Groups

Leading housing organizations, including the National Association of REALTORS® (NAR), have voiced strong opposition to Biden’s rent cap plan. NAR President Kevin Sears states, “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. 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.”

NAR has consistently opposed rent control, viewing it as an infringement on private property rights and advocating for property owners to set rents based on fair market rates. The Housing Solutions Coalition, which includes the National Apartment Association, Mortgage Bankers Association, and National Multifamily Housing Council, also criticized the proposal. Their statement highlights that “decades of academic research from 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.”

Biden’s Intentions

Biden’s proposal requires Congressional approval to take effect. It specifically targets larger landlords managing over 50 units, accounting for more than 20 million rental units nationwide. The plan excludes new construction and buildings undergoing substantial renovation. Biden stated, “I’m sending a clear message to corporate landlords: If you raise rents more than 5% on existing units, you should lose valuable tax breaks. 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.”

The Joint Center for Housing Studies at Harvard University reports that about 22.4 million renter households are “cost-burdened,” spending over 30% of their income on rent and utilities. This number has increased by 2 million households in the past three years, highlighting the growing affordability crisis.

Impact on Housing Supply

In addition to the rent cap proposal, Biden announced a call to repurpose federally owned land for building more affordable homes and reiterated his push to build 2 million new homes. “To lower housing costs for good, we need to build, build, build,” Biden emphasized.

However, homebuilders argue that the rent cap could hinder new construction. Carl Harris, chairman of the National Association of Home Builders, stated, “President Biden’s tax plan to cap rents at 5% on existing multifamily structures will worsen the housing affordability crisis by discouraging developers from building new rental housing units at a time when the nation is experiencing a shortfall of 1.5 million housing units. These rent caps would also hurt existing tenants—those that the president is trying to help—because owners and developers would be unable to cover rising costs if rents are fixed.”

Alternative Solutions

Instead of rent caps, homebuilders and housing advocates propose focusing on policies that increase the rental housing supply. Strengthening the Low-Income Housing Tax Credit, which finances the production of more affordable rental housing, is one such measure. NAR also advocates for states and municipalities to adopt zoning laws and building codes to encourage the construction of more rental units.

NAR Chief Advocacy Officer Shannon McGahn argues, “Policymakers should look at the tax code to incentivize the development of affordable housing units, not punish housing providers. We need more than 328,000 new apartment units each year to keep up with demand; that’s 4.3 million units by 2035. This plan would dig us further in a hole and harm the very people it purports to help. Government should work together at all levels to create not just more rental units but also the wide array of all housing types needed to remedy the affordability crisis.”

Wrap Up

While President Biden’s rent cap plan aims to address rising housing costs, it faces significant opposition from key housing groups and industry leaders. The proposed policy could potentially reduce the housing supply, discourage new construction, and ultimately harm renters. Alternative solutions, such as incentivizing the development of affordable housing and reforming zoning laws, may be more effective in addressing the housing affordability crisis.