July 18, 2024 – President Joe Biden unveiled a proposal on Tuesday aimed at addressing high housing costs by capping rent increases at 5% per year for large landlords. However, this plan has raised concerns among housing groups. Leaders, including National Association of REALTORS® (NAR), argue that the proposed rent cap would ultimately harm renters.
“NAR opposes misguided attempts to cap or control rental rates,” said 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 consistently opposed rent control, viewing it as an infringement on private property rights and advocating for property owners’ ability to set rents at fair market rates.
The Housing Solutions Coalition, including the National Apartment Association, Mortgage Bankers Association, and National Multifamily Housing Council, also criticized Biden’s rent cap proposal. In a statement, the coalition said: “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.”
Biden: ‘Sending a Clear Message to Landlords’
Biden’s proposal, which requires Congressional approval, would apply to larger landlords managing more than 50 units, covering over 20 million rental units nationwide. The plan excludes new construction and substantially renovated buildings.
“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. “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.”
Currently, about 22.4 million renter households are “cost-burdened,” spending more than 30% of their income on rent and utilities. This is a record high, with an increase of 2 million households over the last three years, according to a report from the Joint Center for Housing Studies at Harvard University.
The Impact on Housing Supply
Biden also called for repurposing federally owned land for building more affordable homes and renewed his push to construct 2 million new homes. “To lower housing costs for good, we need to build, build, build,” Biden emphasized.
However, homebuilders warn that the rent cap could discourage 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,” said Carl Harris, chairman of the National Association of Home Builders. “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.”
Homebuilders advocate for policies that increase rental housing supply, such as strengthening the Low-Income Housing Tax Credit to finance more affordable rental housing. NAR supports states and municipalities adopting zoning laws, building codes, and other legislation to encourage rental unit construction.
“Policymakers should look at the tax code to incentivize the development of affordable housing units, not punish housing providers,” said 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.”
