WASHINGTON — President Joe Biden plans to cap annual rent increases at 5% for tenants of large landlords in a move that signals he is taking action on the high cost of housing, a source said.
The proposal, announced Tuesday during the president’s visit to Nevada, is being championed by Biden at a time when the presidential campaign is tense and home prices are a major factor in overall inflation.
But the plan would require solid Democratic control of Congress to become law. Moreover, most policymakers have said the best way to contain housing costs would be through more construction and changes in land-use regulations.
The person familiar with the plan asked to remain anonymous because the proposal has not yet been officially announced.
Biden himself gave a preview of the announcement during his NATO press conference on Thursday. He referred the announcement to companies trying to maximize their profits after the pandemic, blaming inflation.
“It’s time to get our act together,” Biden said. “If I’m re-elected, we’re going to make sure rents go up 5%.”
The Washington Post first reported details of the plan Monday, which would apply only to landlords who own 50 or more units. The price cap would not apply to units that have yet to be built.
White House officials declined to comment.
The median national rent was $1,411 a month in June, up from about $1,150 in early 2021 when Biden became president, according to Apartment List.
Asking prices for rental properties rose after the pandemic and have since cooled, but the Harvard University Joint Center for Housing Studies The institute’s most recent report found that half of renters were “cost burdened,” spending more than 30% of their income on housing and utilities.
In recent months, housing has played a major role in keeping the consumer price index at 3% per year. Inflation is a fundamental obstacle for Biden politically, as he competes with Donald Trump, the former president and Republican nominee.
The president has proposed policies to boost housing construction, but industry officials have been quick to criticize the rent cap, saying it is not effective enough to address the overall shortage and could result in less housing than the country would otherwise have had.
“This is not going to create a single housing unit — which is what is needed to create more housing opportunities for Americans,” said Sharon Wilson Géno, CEO of the National Multifamily Housing Council. “This is really a campaign-driven piece of rhetoric.”
Géno noted that landlords need to be able to keep up with costs like maintenance, insurance, and state and local taxes. If those costs are higher than what they can charge in rent, there’s a risk that landlords will do less to maintain their properties and tenants could be worse off.
“What does that mean? The quality of housing suffers,” she said.
However, affordable housing advocates said that if Biden’s proposal had been in effect, evictions and homelessness likely would have declined.
“The recent unprecedented increase in homelessness in communities across the country is the result of those equally unprecedented — and unwarranted — rent increases just a few years ago,” said Diane Yentel, president and CEO of the National Low Income Housing Coalition. “If such protections against rent increases had been in place then, many families could have avoided homelessness and remained stably housed.”