President Joe Biden appeared to announce new plans to crack down on rent hikes at his press conference following the NATO summit in Washington, DC, on Thursday.
During the wide-ranging press conference, Biden sought to allay fears that his reelection campaign is unviable after a disaster debate performance against Donald Trump last month. While commenting on the economy, Biden slipped in the apparent campaign vow.
“It’s time — for example, if I’m reelected, we’re going to make sure that rents are kept at 5% increase, cor- — corporate rents for cor- — apartments and the like and homes are limited to 5%,” he said, according to the official White House transcript.
Biden’s comments could indicate that he plans to tighten a 10% annual rent increase cap that the Department of Housing and Urban Development previously announced in April, which applies only to affordable units financed through the Low Income Housing Tax Credit program.
But the president’s phrasing sparked speculation in some housing policy quarters that he is preparing to propose a broader national cap on “corporate rents” for traditional housing units.
The White House declined to offer specifics clarifying Biden’s remark, but pointed to numerous steps the administration has taken to protect renters, including emergency rental assistance to 8 million renters during the COVID-19 pandemic and proposals to crack down on junk rental fees and price-fixing.
“The President has taken a number of actions to cap rents and crack down on price gouging by corporate landlords, and will continue to take action to build on these efforts,” White House spokesperson Jeremy M. Edwards told Realtor.com® in a statement.
(Demetrius Freeman/The Washington Post via Getty Images)
Is Biden planning a national rent control plan?
It is possible that Biden simply misspoke about the administration’s previously announced 10% rent cap on LIHTC units, misidentifying the level of the cap in question.
The prior policy on LIHTC units capped rent increases at either 5% or double the percentage change in national median income, whichever is higher. The Biden administration’s new rule limits any increases to 10%, regardless of how quickly incomes rise.
LIHTC (often pronounced “ly-tec”) is a federal tax credit program to encourage private investment in affordable housing projects. The program is responsible for at least 3.65 million affordable housing units placed in service since 1987, according to HUD.
However, housing policy experts say it is also possible that Biden’s comment inadvertently revealed previously unannounced plans for a broader crackdown on what the administration calls “rent gouging by corporate landlords” in traditional rental units.
“It’s not the first time that he’s mentioned wanting to cap rents,” says Sarah Saadian, senior vice president of public policy and field organizing at the National Low Income Housing Coalition. “I’d be really interested to know if the administration is planning a move on that, because we’ve been pushing for a long time to put in place really strong renter protections, and one of those is anti-rent-gouging.”
During his debate last month with Trump, the presumptive Republican presidential nominee, Biden made comments on a rent cap that went largely overlooked in the furor over his poor performance.
“We’re going to make sure we cap rents, so corporate greed can’t take over,” the Democratic incumbent said in his first answer at the debate.
The National Apartment Association, an industry group representing multifamily property landlords, responded to Biden’s latest remarks at the NATO conference with a furious statement.
“Implying that rent control will solve the nation’s housing crisis is the easy way out. Rent caps, more commonly known as rent control, are failed policies that don’t work—research has shown it, the lack of affordability in rent-controlled jurisdictions reinforces it and statements from countless economists across generations and the political spectrum are crystal clear,” the group said.
(Aaron Schwartz/Xinhua via Getty Images)
How would a national rent cap work?
If the Biden administration sought to impose a broader cap on rent increases in traditional rental units, one possible mechanism to do so would be through the Federal Housing Finance Agency, an independent financial regulator.
For example, just on Friday, FHFA announced new tenant protections for multifamily properties financed by Fannie Mae and Freddie Mac, both government-sponsored enterprises.
Those rules require landlords with government-backed loans to provide a five-day grace period for late rent payments, as well as a 30-day written notice of a rent increase or lease expiration. The new rules will be written into new multifamily loan agreements starting in February.
It’s possible that FHFA could use a similar mechanism to impose rent caps on properties that are financed by Fannie and Freddie, says Saadian.
“We weighed in with FHFA to encourage them to apply renter protections to all properties with federally backed mortgages,” she says. “We really want to see FHFA move forward with much more robust renter protections, and so hopefully that’s what [Biden] was hinting at.”
An FHFA official told Realtor.com that the agency has not ruled out any new measures for tenant protections, including examining rent increases. But the person said that no decisions have been made on a timetable for future announcements, and that potential changes would have to be carefully studied for any legal or other risks.
The official also stressed that FHFA is an independent agency, and that the tenant protections it announced Friday were not in response to Biden’s recent remarks, but rather were the product of a years-long process in conjunction with Fannie and Freddie to assess, identity, and address the challenges faced by tenants and housing providers.
If—and it may be a big if—the Biden administration is planning a broad 5% cap on rents, it would be a historic move.
The federal government has never imposed broad nationwide restrictions on rent increases by landlords. Historically, rent control policies in the U.S. have been implemented at the state and local levels, not federally.
Local rent control policies in the past have helped many people afford to remain in their rental units. But some economists warn that if they aren’t carefully crafted, they could distort the market or discourage new construction.
“Rent caps can help tenants mitigate affordability concerns by limiting rent increases and reducing the stress of potential evictions. However, rent caps could also negatively impact the supply side by limiting developers’ potential returns on investment,” says Realtor.com economist Jiayi Xu.
“To address today’s rental affordability challenges, more new construction is needed to drive prices down,” she says. “Therefore, finding a balance between rent caps and housing supply is crucial in today’s market.”
