WASHINGTON – President Joe Biden unveiled a proposal Tuesday to take aim at high housing costs, but his call to cap rent increases at 5% per year on large landlords has housing groups concerned. Leaders of these groups, including the National Association of Realtors®, are speaking out against Biden’s rent cap plan, saying it would ultimately hurt renters.
“NAR opposes misguided attempts to cap or control rental rates,” says NAR President Kevin Sears. “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 long advocated against rent control, calling such a policy an “infringement upon private property rights” and arguing that property owners should have the right to set their own rents at fair market rates.
The Housing Solutions Coalition, which includes the National Apartment Association, Mortgage Bankers Association and National Multifamily Housing Council, also spoke out against Biden’s rent cap proposal in a statement: “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. Rent caps hurt renters and communities.”
‘Sending a clear message to landlords’
Biden’s proposal would need to be approved by Congress to take effect. His plan calls for a rent cap that would only apply to larger landlords who oversee more than 50 units, which accounts for more than 20 million rental units nationwide, according to the White House. The plan excludes new construction and buildings that are substantially being renovated.
“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,” Biden said in a statement unveiling his plan. “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.”
About 22.4 million renter households are considered “cost-burdened,” spending more than 30% of their income on rent and utilities. That marks a record high; the number has grown by 2 million households over just the last three years, according to a recent report(link is external) from the Joint Center for Housing Studies at Harvard University.
Impact on housing supply
Biden also announced Wednesday a call to repurpose federally owned land for building more affordable homes and renewed his previous push to build 2 million new homes. “To lower housing costs for good, we need to build, build, build,” Biden said.
However, homebuilders say Biden’s call for a rent cap could ultimately curtail new construction. “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,” Carl Harris, chairman of the National Association of Home Builders, said in a statement. “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.”
Instead, the builders’ group has called for policies that focus on increasing the rental housing supply, like strengthening the Low-Income Housing Tax Credit to finance the production of more affordable rental housing. NAR also has long advocated for states and municipalities to adopt zoning laws and building codes, as well as other legislation, to encourage the construction of more rental units.
“Policymakers should look at the tax code to incentivize the development of affordable housing units, not punish housing providers,” says NAR Chief Advocacy Officer Shannon McGahn. “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.”
© 2024 National Association of Realtors® (NAR)
