Jul 17, 2024
President Joe Biden is proposing a 5% cap on yearly rent increases in an effort to address America’s surging housing costs.
Biden’s plan applies to major landlords who own more than 50 units, which represents about half of all rental properties across the U.S. There would be an exception for new construction and substantial renovation or rehabilitation.
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The current president claims this proposal would go into effect if he is reelected for another term.
“I’m sending a clear message to corporate landlords: If you raise rents more than 5%, you should lose valuable tax breaks,” Biden posted on X. “Families deserve housing that’s affordable — it's part of the American dream.”
What else does Biden’s plan include?
Jim Parrott, nonresident fellow at the Urban Institute and co-owner of Parrott Ryan Advisors, believes Biden’s plan for capping rents needs to be taken in context with his other housing initiatives.
“It would make little sense to make this move by itself,” says Parrott, according to The Washington Post. “Coming up with a relatively targeted bridge to help renters while new supply is coming on line makes a fair amount of sense.”
Biden is urging Congress to pass the Biden-Harris Housing Plan, which he says would build 2 million homes and provide $10,000 in mortgage relief for first-time buyers.
He’s also calling on federal agencies to assess surplus federal land that can be repurposed to construct tens of thousands of affordable homes.
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Is this a viable solution?
Critics say Biden’s rent stabilization plan does nothing to address the root of America’s housing problem — and call for expanding housing supply as a long-term solution instead.
Sharon Wilson Géno, president of the National Multifamily Housing Council, believes Biden’s proposal is nothing more than a “farce” to get more votes ahead of the November election.
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“This whole idea that they’re going to cap rents for two years, just for existing property, but it’s not going to apply to any future property because somehow they don’t want to impede future development is nonsensical,” Géno told Bloomberg. “It’s absolutely going to impede future development because they’re seeing what’s happening to existing property.”
Géno says lower-income households are more likely to reside in housing owned by smaller operators — which means the benefits of the rent cap will largely go toward higher-income households.
But Diane Yentel, president and chief executive officer of the National Low Income Housing Coalition, supports the plan and even calls for immediate action from Biden, instead of waiting for Congress’ approval after the election.
“The recent unprecedented increases in homelessness in communities across the country are the result of those equally unprecedented — and unjustified — rent hikes of a couple years ago,” Yentel said in a statement.
“Had such protections against rent gouging been in place then, many families could have avoided homelessness and stayed stably housed.”
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Serah Louis is a reporter with Moneywise.com. She enjoys tackling topical personal finance issues for young people and women and covering the latest in financial news.
