Economists are railing against President Joe Biden's plan to impose rent controls on nearly half of the nation's rental market as a ham-fisted election year ploy that would disincentivize building new housing and make it more difficult for Americans already struggling to pay their rent.
Biden on Tuesday unveiled his nationwide rent control plan, which would strip federal tax breaks for corporate landlords with more than 50 units who increase rents by more than 5 percent annually. The White House is promoting the plan as an anti-price-gouging measure to stabilize rents, which have ballooned 22 percent since Biden took office, that would last for only two years. But economists who spoke with the Washington Free Beacon said the Biden administration can't spin its way out of the fact that the policy would almost certainly exacerbate housing shortages and ultimately increase prices for renters.
"Most economists would agree that it's a pretty bad idea because it has many unintended consequences," said Tobias Peter, the co-director of the American Enterprise Institute's Housing Center. "Rents are high because there is more demand than there is supply. And so the solution is not to cap rents, the solution is to build more housing so that rents would naturally come down."
Indeed, rent control is one of the few issues that garnered near-universal opposition from economists of all stripes. The late Swedish socialist economist Assar Lindbeck famously called rent control "the most efficient technique presently known to destroy a city—except for bombing." Rent controls have shown time and time again to reduce housing supply and the quality of existing rental units in cities across the world that have instituted the policy.
In 2021, for example, St. Paul, Minn., instituted one of the strictest rent control measures in the country, capping increases across the board at 3 percent annually with no exceptions. The law immediately caused new building permit applications to plunge, and existing landlords froze building improvement projects and instituted new utility fees to help recoup their costs. By 2023, the city instituted several exemptions to the law to stave off an economic catastrophe.
Biden's nationwide rent control proposal is his latest olive branch to the far left as the president struggles to ward off a steady drumbeat of calls from his Democratic allies to drop his reelection bid over concerns about his mental acuity. In recent weeks, Biden has also proposed passing a wealth tax on unrealized gains, eliminating all medical and student loan debt, and instituting term limits for Supreme Court justices.
Biden failed to correctly articulate his own plan when he announced it at a speech Tuesday before the NAACP, incorrectly saying he was going to cap rent increases by $55 annually.
Though Congress is unlikely to approve Biden's rent control measure, it signals a leftward-lurch in mainstream Democratic policy that could linger long after Biden's presidency ends, said Joel Griffith, a research fellow at the Heritage Foundation who focuses on financial regulations.
"Even if this has very little chance of passing in Congress, it signals an increasing appetite in Washington, D.C., to intervene in the marketplace in a way that will actually reduce future supply," Griffith told the Free Beacon. "This bill would have harmful consequences for renters. It doesn't get to the heart of the problem, it actually makes the problem worse. We need more housing units, and we need to lower costs."
Despite the near-universal agreement among economists on the dangers of rent control, Biden's favorite group of 16 Nobel Prize-winning economists is notably silent on his proposal.
Biden has touted his economic prowess on the campaign trail by citing an open letter signed by those economists in June warning that former president Donald Trump, if reelected in November, would exacerbate economic inflation.
"While each of us has different views on the particulars of various economic policies, we all agree that Joe Biden's economic agenda is vastly superior to Donald Trump," the economists wrote.
None of those 16 economists responded to inquiries from the Free Beacon asking for their thoughts on Biden's nationwide rent control proposal.
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