President Biden Announces Major New Actions to Lower Housing Costs by Limiting Rent Increases and Building More Homes
I did not anticipate getting news of a Biden-administration rent cap proposal when we were discussing the topic of rent control this week. Spencer mentioned how Biden brought up the idea during the debate, but I had assumed that it was just a brief moment of Joe Biden saying “we’re capping rents!” without a fleshed-out plan behind it. I assumed this because, in so much of the White House’s official communications regarding their housing initiatives, the policies and proposals are dominated by the idea of increasing housing supply rather than rent control, rent caps, and similar ideas.
The White House leads with rent caps in their headline here, or “Limiting Rent Increases” to be specific, and right away, the first bullet point signals the rent cap focus:
- “Calling on Congress to pass legislation giving corporate landlords a choice to either cap rent increases on existing units at 5% or risk losing current valuable federal tax breaks” [ed. note: bold text is taken from source]
The next 2 bullet points cover a plan to create more housing in Las Vegas, NV:
- Repurposing public land sustainably to enable as many as 15,000 additional affordable housing units to be built in Nevada; and
- Rehabilitating distressed housing, building more affordable housing, and revitalizing neighborhoods, including in Las Vegas, Nevada.
The following paragraphs paint a bleak picture of corporate landlords “raising rents by more than increases in their own costs,” the Biden administration’s attempts to promote legislation to address the housing affordability crisis, and the opposition from Republicans in Congress to Biden’s housing plans. It’s worth noting there that, from the way it’s written here, I don’t think that rent control legislation was brought before Congress, but maybe it will be soon? Because “President Biden is calling on Congress to pass legislation presenting corporate landlords with a basic choice: either cap rent increases on existing units to no more than 5% or lose valuable federal tax breaks.”
- The tax breaks here include the “faster depreciation write-offs” that owners of rental properties currently enjoy, and if you were wondering who qualifies as a corporate landlord, here’s their definition: Do you own more than 50 units? You’re a corporate landlord.
That’s essentially the meat of this press release from the White House. The following section of the document covers the plan in Nevada, which is notable because it’s a concrete action rather than an abstract wish for more rent control, and it’s notable because it’s not a restrictive plan like rent control and is more in the vein of increasing housing supply by removing the barriers to building more homes. They’ve cleared 20 acres of land in NV to build more housing there, and that’s great! But the impact of this local effort would be dwarfed by any nation-wide legislation aimed at a 5% rent cap. The 15,000 potential housing units in NV, that’s not what’s actually underway. “BLM is considering an additional 562.5 acres” that, if developed, could get those additional 15,000 units, but we’re not there yet.
Returning to rent control, again, this announcement from the Biden administration does not mean that they are any way close to enacting 5% cap on rent increases. There is no legislation before Congress (yet), and while I haven’t done a deep dive to see if a rent control bill would pass, I think it would be an uphill battle, at the very least. Maybe it would find a place in some kind of omnibus bill?
But as a plank in Biden’s election platform, targeting rent hikes from corporate landlords fits in nicely with targeting price hikes from corporate profiteers. They’re a juicy target for angry emotions about an inflation narrative that has since come to a close.
- So, if rent caps are on the table, why can’t we have price caps? Price controls for things like groceries aren’t discussed at the same level as rent control due to some clear practical reasons that make it easier to choose a different food item vs. a different apartment, but also, there’s an extra quality to housing and the idea of the home that connects people way more strongly to the place where they live.
- Housing, I think, really does have a different emotional valence than food, and the way that housing and landlords are depicted, it often seems like the customers or consumers of housing, (renters) have less power in the market compared to say, someone deciding to buy an Oscar Meyer hotdog or a Ballpark Frank.
- Granted, in certain locations there is definitely a lack of choice of housing, and not everyone has a car or public transportation that would allow them to live somewhere different, and moving itself is costly and time-consuming. Also, the fact that you’ve got to sign a lease for a full year is a huge, maybe the biggest practical restriction.
- But that kind of comparison, shopping for hot dogs vs. shopping for an apartment—even acknowledging how much a year-long lease creates a lack of choice for renters unable to pick up and move when they want—this kind of practical comparison is not why housing hits so hard emotionally. The emotional weight comes from how much of ourselves we put into the places we live. How much “an” apartment becomes “my” apartment for renters, and how that emotional investment in a home can be disrupted when the more practical rules of the market and competition force you to change when you don’t want to.
But here’s some really cool math! Check it out!
- Rent in Q1 2020 was 1455 according to CoStar (national average).
- 5% rent cap, right?
- $1,444, increase that by 5%, you’re at $1516.20 in Q1 2021. Another 5%, you’re at $1,592.01 in 2022. $1,671.61 in 2023. And in Q1 2024, you’ll be at $1,755.19.
- The actual average rent in 2024 was $1,696.
- The market arrived at a rent that was 3.3% LOWER than where we would have been if we just had 5% rent increases each year.
- If you start the 5% increases in 2021, you still end up with rents 1% higher than where market rents ended up without this (hypothetical at this point) intervention.
- What does this mean? At the very least, it means that the -ahem-*free*-ahem- market got to a place that was well under the allowable limit under the government-controlled paradigm. More expansively, if rent control keeps creeping up as a topic of discussion, it’s well worth repeating that rents have NOT increased a lot in the past 2 years. The problem of rents being too high is old news. It’s not a threat. Notwithstanding the timeless conceptual problems with rent control, the very time-specific conditions of the market right now are such that 5% rent growth is a pipe dream. Because people saw the rent growth and built more apartments.
- To put it in more exciting terms, the greedy corporate apartment builders greedily saw more wealth that they could suck from the marrow of renters, and they built more apartments. But lo! What hubris! These builders and buyers of apartments. Their greed brought about their downfall. Due to their greed-driven building spree, the very rent growth these apartment buyers greedily sought, that rent growth vanished. Woe be to the greedy! Your heartless pursuit of wealth will lead you to your ruin!
