White House Proposes National 5% Rent Cap
July 23, 2024
Last week, the White House officially announced a proposal to cap rent growth at 5% on multifamily properties owned by large landlords. As written, Congress would need to enact Biden’s proposal via a change in the tax code.
- On July 22, CREFC and other real estate organizations sent a letter to Biden opposing the rent control proposal.
Why it matters: The proposal, announced at an event last week in Nevada, is part of a larger initiative to reduce housing costs, which President Biden referenced at the June presidential debate and the NATO press conference earlier this month. The move also follows the recent Federal Housing Finance Agency announcement on tenant protections for GSE multifamily loans.
By the numbers: According to the White House’s fact sheet, the most recent plan includes the following initiatives:
- Legislation forcing corporate landlords to choose to either cap rent increases on existing units at 5% or risk losing accelerated depreciation for federal tax;
- Repurposing public land sustainably to build additional affordable housing units; and
- Rehabilitating distressed housing, building more affordable housing, and revitalizing neighborhoods.
Go deeper: The rent control squarely targets “corporate landlords”, who have been a continual punching bag for the Biden administration. Biden frames the proposal as “anti-gouging” as opposed to traditional rent control, as proposed in a 2021 NYU Furman Center Study.
If enacted, the rent control legislation would operate as follows:
- Coverage: Applies to landlords with more than 50 units in their portfolio;
- Exceptions: Exempts new construction and substantial renovation or rehabilitation;
- Rent Cap Tradeoff: Landlords would be eligible for existing accelerated depreciation only if rent growth is capped at or below 5% annually. The fact sheet does not provide details on what would be included in the 5% number, but the administration’s crusade against “junk fees” would suggest that other costs could be lumped in.
- Time frame: The limitations would apply in 2024, 2025, and 2026.
Last week’s announcement includes a directive to the Bureau of Land Management to assess surplus federal land that can be repurposed to build more affordable housing across the country. This would be in addition to other initiatives to examine unused federal buildings.
Yes, but: As covered in the letter to Biden, CREFC and other trades have repeatedly opposed the Biden Administration’s attempt to enact nationwide rent control, in particular, via FHFA and the GSEs.
- “Rent control policies have proven time and again to increase rents, reduce the capital needed to boost the supply of housing, and ultimately hurt renters today and in the future.” Real Estate Coalition Letter to President Biden.
- Instead, the coalition supports production and cost-reduction measures designed to increase the overall supply of housing.
- Click here for yesterday’s letter to Biden.
- Click here for our previous joint letter to FHFA on the issue of rent control.
The bottom line: The rent control proposal is unlikely to be enacted this year in a divided Congress, but we expect the White House to continue implementing tenant-focused policies via regulation and FHFA.
- However, the use of the tax code to implement a rent cap could be more easily passed via the “reconciliation process” if Democrats were to win the House, Senate, and Presidency.
Contact David McCarthy (dmccarthy@crefc.org) or Sairah Burki (sburki@crefc.org) with questions.