Housing groups call for more construction, not rent caps
President Joe Biden is planning to propose a nationwide 5% cap on annual rent increases for tenants of major landlords, a move that has drawn opposition from several housing industry groups.
The plan aims to cap annual rent increases at 5% for tenants of large landlords. Under the proposed policy, which would require congressional approval, landlords owning more than 50 units – roughly half of all rental properties in the US – would face tax penalties for raising rents above the 5% threshold. The measure excludes newly constructed units to avoid discouraging future housing development.
“It’s time things get back in order a little bit,” Biden said at his recent NATO news conference. “If I’m re-elected, we’re going to make sure that rents are kept at a 5% increase.”
Rent caps hurt renters
Biden’s proposal has drawn criticism from real estate organizations, which argue it could backfire, potentially worsening the affordability crisis it seeks to address.
“Increasing the supply of affordable rental housing nationwide – not politically-motivated and self-defeating rent control proposals floated during election campaigns – is the best way to alleviate affordability constraints for renters,” Bob Broeksmit, president and CEO of the Mortgage Bankers Association said in a statement.
Broeksmit added that rent control, if not carefully implemented, can distort market pricing, discourage new construction, and degrade rental housing quality.
“There are endless examples in localities in America and around the world that prove that rent control is a counter-productive policy idea that ultimately harms renters by distorting market pricing, discouraging new construction, and degrading the quality of rental housing,” he said. “While the odds are stacked against this proposal ever passing Congress, a federal rent control law would be catastrophic to renters and our nation’s rental housing market.
Improving the federal government’s multifamily lending programs is also key, according to the MBA.
“One such example would be for the Senate to approve the bipartisan House measure that passed earlier this year that includes meaningful enhancements to the low-income housing tax credit program that would encourage the construction of more low-and moderate-income and workforce housing,” Broeksmit said.
The Housing Solutions Coalition echoed this sentiment, citing decades of research that suggests rent caps often have unintended consequences.
“[Rent control] reduces the supply of available housing and fails to target those renters who need help the most while simultaneously harming other residents and the communities they reside in,” the coalition said. “Despite President Biden’s mention of rent caps during the debate, he and his policy experts know that the real reason so many Americans struggle with housing costs is because we need to build more housing.
“There is no debate. Rent caps hurt renters and communities.”
Collaboration with FHFA
Despite the pushback, the housing advocates agreed that immediate relief is necessary for renters struggling with skyrocketing costs.
A joint statement from the National Apartment Association (NAA), National Multifamily Housing Council, and MBA emphasized the need to increase housing supply as a sustainable solution to lower housing costs.
“Long-term, the only real way to sustainably lower housing costs and create more housing security for renters is to increase housing supply as the Biden Administration Housing Supply Action Plan correctly points out,” the groups stated.
Read more: MBA advises FHFA against tightening rent control
The groups also expressed appreciation for the Federal Housing Finance Agency’s (FHFA) collaborative approach to increasing affordable rental housing supply but urged the agency to continue gathering information about the impacts of potential policy changes.
“We appreciate FHFA’s ongoing, collaborative approach with our members and other industry stakeholders on ways to increase affordable rental housing supply and to adopt common sense practices that better serve tenants.
“The actions detailed in today’s announcement are generally consistent with practices employed by quality, professionally managed housing providers, and we will work diligently with FHFA, the GSEs and our members to make sure these new initiatives are implemented as efficiently as possible.”
Stay updated with the freshest mortgage news. Get exclusive interviews, breaking news, and industry events in your inbox, and always be the first to know by subscribing to our FREE daily newsletter.
