As Democrats continue to question whether he should continue his campaign, President Joe Biden pitched a policy that has proven controversial even in the bluest states: rent control.
Biden unveiled a proposal to cap annual rent increases at 5 percent for landlords who own more than 50 apartments across their portfolio. Those who fail to abide by the limit would lose out on a lucrative tax benefit, known as accelerated depreciation, which permits owners to reduce the taxable income of an asset at a faster pace than usual.
The cap would not apply to new construction or substantial rehab projects, and would only last two years, serving as “a bridge to rents stabilizing,” while more housing is built, according to a White House press release.
In March, the administration released proposals aimed at building or preserving 2 million homes over the next decade. Alongside the rent control proposal, Biden also called on federal agencies to explore opportunities to build on affordable housing on public land.
But real estate groups were quick to shoot down Biden’s rent control proposal.
“Rent control is a rare instance where the research is fairly conclusive: It doesn’t work,“ National Association of Realtors President Kevin Sears said in a statement. “These measures fail to improve most renters’ financial situation and shift the burden of economic difficulties, inflation, and other costs onto the housing provider with no counterbalance.”
The National Multifamily Housing Council also spoke out against the proposal, saying “it will not create a single new unit while raising costs on the very residents it purports to help.”
The Rent Stabilization Association, one of the groups that challenged New York’s rent stabilization law, called Biden’s plan “reckless political posturing.”
The exclusion of new construction from Biden’s proposal is a recognition of a consistent critique of rent control, that it deters development of new housing. A cap on existing housing stock could have a chilling effect on investment activity.
The proposal comes as battles over rent control policies play out across the U.S. In November, voters in California will decide whether a ban on localities applying rent control to newer construction should be lifted. Tenant advocates in Illinois have pushed to lift its prohibition, but haven’t found a progressive champion to take on the cause. Florida included a ban on localities passing their own rent control measures as part of its program to incentivize more housing construction, the Live Local Act.
Landlord groups like RSA have repeatedly challenged New York’s rent stabilization regime, but have not yet been able to get the U.S. Supreme Court to take up the case.
In May, the state adopted a budget that included a form of good cause eviction, which applied automatically to New York City. Other localities in the state have begun to adopt the policy. Similar to Biden’s pitch, the policy excludes newer construction for 30 years.
Tenant advocates praised Biden’s proposal and noted the significance of a sitting president embracing rent control, but urged swifter action. The proposal requires Congressional approval and likely faces a challenging road ahead.
“President Biden is right: rent caps ensure families can set roots in their communities and stay for the long term,” Housing Justice for All Coalition Director Cea Weaver said in a statement. “Biden should act now and not wait for Congress to keep rents affordable.”
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