Biden to Unveil Plan to Cap Rents as GOP Convention Begins

The Washington Post / Jeff Stein, Rachel Siegel

13:23 JST, July 16, 2024

President Biden will unveil a new proposal in Nevada on Tuesday to cap rental costs nationwide, according to three people familiar with the matter, as he works to assuage Democratic concerns about the viability of his candidacy while the Republican convention gets underway.

The policy push reflects the White House’s efforts to respond to widespread voter anger over high housing prices, which have soared since the pandemic and undermined Biden’s standing among voters about the economy. Nevada has seen among the biggest explosions of housing costs in the country, and Democrats have grown increasingly concerned that Trump could win the state in November.

Biden’s plan – which would need to be approved by Congress – calls for stripping a tax benefit from landlords who increase their tenants’ rent more than 5 percent per year, the people said. The measure would only apply to landlords who own more than 50 units, which represents roughly half of all rental properties, the people said. It wouldn’t cover units that have not yet been built, in an attempt to ensure that the policy does not discourage construction of new rental housing. The people spoke on the condition of anonymity to describe a proposal that isn’t yet public.

The president hinted at the plan during his news conference at the conclusion of the NATO summit last Thursday, surprising aides who didn’t expect to reveal the announcement yet. Biden also referenced a plan to “cap rents” during his late June debate with Trump, although he has not explained the policy publicly or how it would work.

“It’s time to get things back in order a little bit. For example, if I’m reelected, we’re going to make sure that rents are capped at 5 percent increase – corporate rents, for apartments and the like, and homes, are limited to 5 percent,” Biden said at the news conference.

A White House spokesman declined to comment.

Tenant advocates – and scores of renters – would probably welcome the move. Housing costs continue to drive overall inflation, and rent often ranks as a top budget item for lower-income families with fewer and fewer options for affordable homes. Fresh inflation data released last week showed much-awaited progress on rent costs. But it is too soon to tell whether that will stick.

Tara Raghuveer, director of the National Tenant Union Federation, said the move was “monumental” and a strong signal of the federal government’s responsibility to regulate the rental market.

“For now, this directive is just messaging,” Raghuveer said. “Tenants need action. Congress must act, and the president can and must take the first step by immediately regulating rents in federally financed housing.”

The plan is also likely to prove controversial among economists, including many Democrats. Experts on both sides of the aisle tend to argue that government limits on rent discourage new development by making it less lucrative. Housing is so expensive in America in large part because there simply aren’t enough homes, with economists estimating a shortage of between 1.5 million to 5 million units. With construction and labor costs already high, some fear that developers could respond to new restrictions by reducing new construction.

“Rent control has been about as disgraced as any economic policy in the tool kit. The idea we’d be reviving and expanding it will ultimately make our housing supply problems worse, not better,” said Jason Furman, who served as a top economist in the Obama administration and is now a professor at Harvard.

That’s the case even if future units are exempted, Furman said, because it could change how developers consider their incentives.

White House officials, however, say the rent cap would give short-term relief to renters before millions of new housing units become available in two years, which should also drive down prices. (The Biden plan would only apply to rental units for two years, by which point, in theory, this fresh supply would alleviate costs.) The Biden administration is also pushing numerous policies to increase housing construction, through incentives to local governments to change their zoning codes and new federal financial incentives for builders. If implemented, they could bring 2 million new units to the market in addition to the 1.6 million already in the pipeline.

“It would make little sense to make this move by itself. But you have to look at it in the context of the moves they propose to make to expand supply,” said Jim Parrott, nonresident fellow at the Urban Institute and co-owner of Parrott Ryan Advisors. “The question is: Even if we get all these new units built, what do we do about rising rents in the meantime? Coming up with a relatively targeted bridge to help renters while new supply is coming on line makes a fair amount of sense.”

After Biden raised the idea of a rent cap, a coalition of major housing groups, including the National Multifamily Housing Council, National Apartment Association and Mortgage Bankers Association, said such a policy would backfire on those who need it most.

“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,” the groups said in a statement.

Biden has been trailing Trump in most Nevada polls. On top of that, a national poll from Gallup in May found that 41 percent of Americans cite inflation and the high cost of living as the most important financial problem facing their families, followed by the 14 percent of voters who cite the cost of owning or renting a home.

The White House has for months tried different policy ideas to respond to voter frustration over housing, including rent caps on certain affordable housing units subsidized by the federal government and a proposal to provide a $5,000 tax credit to first-time home buyers.

The administration has been under pressure by allies to mount a more forceful response: Rep. Alexandria Ocasio-Cortez (D-N.Y.), for instance, has pushed the White House to back more aggressive action on housing, according to a person familiar with the matter, who spoke on the condition of anonymity to describe private conversation. She also traveled to Nevada to call for action against corporate landlords last month.

“We’re going to make sure that we reduce the price of housing,” Biden said at the debate. “We’re going to make sure we build 2 million new units. We’re going to make sure we cap rents so corporate greed can’t take over.”