President Biden has introduced a proposal that would impose rent control measures on nearly half the U.S. rental market, sparking alarm from some experts and industry trade groups.
The Biden administration on Thursday called on Congress to pass legislation requiring landlords with more than 50 units to cap rent increases at 5% or lose federal tax breaks as part of the White House's efforts to lower sky-high housing costs.
The administration is selling the rent control plan as an "anti-gouging" policy, but groups representing landlords blame high rent prices on rising costs and a lack of housing units available to meet demand.
"Inflation is impacting both landlords and tenants, with some real estate costs rising even faster than the general inflation rate," a spokesperson for the American Apartment Owners Association told FOX Business, noting that multifamily insurance premiums have doubled in certain markets.
BIDEN UNVEILS PLAN TO CAP NATIONAL RENT INCREASES AT 5%
"Rent increases are often necessary for landlords to cover these rising costs and continue providing high-quality housing," the AAOA added.
The National Association of Realtors pushed back on the Biden administration's proposal, too, issuing a statement saying, "NAR opposes misguided attempts to cap or control rental rates. Price controls may seem appealing, but they have backfired on local governments and harmed the people we need to help the most."
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Many states had various forms of rent control in the 1970s, another time of high inflation. However, several banned rent control after that, when there was a consensus that price controls were destructive policies.
Despite warnings from economists, rent control is becoming more and more popular in progressive strongholds, and now Biden is aiming to implement it at the federal level.
"Rent control is a rare instance where the research is fairly conclusive: It doesn’t work," the NAR said. "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 NAR argued, "The only way to keep cities affordable for working-class families is to ensure that the supply of housing keeps pace with the growing demand."
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Steven Greenhut, a resident senior fellow at the R Street Institute and the free market think tank's director of state affairs for the Western region, told FOX Business in response to Biden's plan: "There are many reasons this is a terrible idea."
Greenhut argued that, for starters, housing regulations are not a proper role for the federal government. He then pointed out that in California, where he resides, cities with rent controls such as San Francisco and Santa Monica have the state’s worst housing problems.
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Greenhut said that in the short term, rent controls limit prices for select renters, but over the long term, they discourage developers from investing in new rental housing and encourage people to pull their houses off the rental market. That increases the cost of rentals by limiting the number of available units.
He concluded, "The Biden administration plan is a misguided idea that will only make matters worse."
