President Joe Biden will propose on Tuesday a nationwide cap on rent hikes of 5% per year, according to The Washington Post, which cites “three people familiar with the matter.”
The proposal will rescind unspecified tax breaks to landlords who raise rents by more than 5%, although it would only apply to landlords who own more than 50 rental units. This would cover roughly half of all rental units in the country, according to Post sources.
It would not apply to units that haven’t been built yet so as to not discourage construction of new housing, which the Biden administration has made a cornerstone of its housing policy. Affordable housing advocates also support policies that lead to the construction of new housing.
Studies on rent control, however, often conclude that it is not a sound policy for bringing rents down because it can prompt landlords to convert rental housing into condominiums, thus shrinking the supply of rental housing.
At the first presidential debate three weeks ago, Biden included a reference to capping rent hikes at 5% but didn’t provide any details. He also said the nation would build 2 million new housing units in his second term.
In his March State of the Union address, Biden called on lawmakers to enact a $10,000 tax credit for first-time homebuyers and people who sell their starter homes. He also mentioned the construction of 2 million new units and an unspecified cost reduction for renters, which now appears to be the 5% annual cap on rent hikes.
Landlords can receive a number of federal tax deductions. These include depreciation, mortgage interest, operating expenses and property taxes, among others. The IRS also offers a Low-Income Housing Tax Credit that can be claimed by landlords who build or rehabilitate affordable rental housing.
Rents, in addition to home prices, have skyrocketed since the COVID-19 pandemic began in March 2020. According to Zillow’s observed rent index, nationwide rents have increased 32.1% from then to now. Housing costs have been a key driver of inflation, an issue that’s plagued Biden’s campaign.
