A record number of renters can't afford their housing costs. Biden wants to discourage big rent increases to address the issue.
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President Joe Biden on Tuesday rolled out a plan offering landlords a choice: cap annual rent increases at 5% for the next two years or risk losing valuable tax credits.
The White House proposal would apply to corporate landlords, defined as those who own more than 50 units. These landlords control more than half the national rental market, according to senior White House officials.
Corporate landlords who increase rent by more than 5% would lose the valuable tax benefit known as depreciation deductions.
"Institutional investors are buying up homes with cash, turning them into rentals and raising rents," White House official Lael Brainard told reporters.
Special exceptions would also apply to units that are new construction or have undergone significant rehabilitation.
Biden will announce the plan during a speech on Tuesday in Nevada, a swing state that has faced some of the steepest housing cost increases in the country. As part of the plan, he will also announce new and proposed sales of federal land in Nevada earmarked for affordable housing, including 20 acres near Clark County and 18 acres near Henderson, Nevada.
But the rent cap proposal is essentially a campaign promise. It would first need to pass both chambers of Congress, which doesn't seem likely before the November presidential election.
Biden's announcement comes on the heels of a turbulent few weeks in the campaign, which saw a failed assassination attempt on former President Donald Trump and calls from his own party for President Biden to step down after a shaky debate performance.
This also comes as communities across the country face a severe housing affordability crisis caused largely by a steep shortage of homes. Renters are particularly hard hit. Rents across the country have risen by 26% since early 2020, according to a recent report from the Harvard Joint Center for Housing Studies on the state of US housing.
Half of all tenant households were cost-burdened as of 2022, meaning they spent more than 30% of their income on rent, the Harvard report found. That was the highest share since the US Census first started collecting this data, the report noted. Meanwhile, moving from renting to owning a home has also gotten much harder. Less than 15% of renter households can afford the monthly median payment for a median-priced home after taxes and insurance, Harvard found.
There's evidence that many landlords are taking advantage of high demand and a supply shortage to raise rents far beyond their own cost increases. A slew of corporate landlords have used rent-setting algorithmic software to artificially inflate rents. Some have been sued for alledgedly colluding to set rent prices above competitive levels.
But, at the same time, there's hope: A near-record number of new multi-family rental units are hitting the market, and rents for studios and one-bedroom apartments have recently fallen.
As president, Biden has pushed a series of pro-housing policies and generally favored more federal participation in housing policy. Among those policy pushes was the "Housing Supply Action" plan, which leverages federal grants and loans to incentivize states and cities to loosen land use regulations and facilitate new construction.
The administration has also pushed several initiatives to boost the supply of affordable housing, including encouraging the conversion of office buildings into homes with billions of dollars in federal grants and loans and boosting support for manufactured housing.
Biden's fiscal year 2025 budget proposal, which represents a sort of wish list of the administration's priorities but would require action from an often-gridlocked Congress to become law, includes $258 billion for housing initiatives, including tax credits for first-time homebuyers, homeowners who sell their starter homes, and those who build or renovate starter homes, and an expansion of the Low Income Housing Tax Credit and housing choice vouchers for renters.
But some of Biden's farthest-reaching policies were cut from the Inflation Reduction Act, and still others are unlikely to make it through Congress, where Republicans have opposed the vast majority of Democrats' housing proposals.
Biden has discussed housing in the State of the Union and previously on the campaign trail, including in Nevada.
Tuesday's move is part of a series of recent housing policy announcements from the administration. Late last month, Vice President Kamala Harris and Treasury Secretary Janet Yellen announced $85 million in funding for 21 cities to subsidize affordable housing development and the construction of supportive infrastructure, including power lines and water mains.
