White House Proposes Capping Rent Increases to Lower Housing Costs

President Joe Biden delivers remarks on the assassination attempt on Republican presidential candidate former President Donald Trump, at the White House on July 14, 2024. (Kevin Dietsch/Getty Images)

President Joe Biden could cap rent increases across the country to 5 percent as part of the current administration’s efforts to combat ballooning housing costs.

The White House confirmed on July 16 that the latest housing policy initiative would limit the ability of landlords to raise tenants’ rents.

Officials say that the rent control law, if approved by Congress, would be in effect for two years. Newly built rental properties would not be affected by the proposal.

Additionally, it would apply only to landlords who own more than 50 units and affect approximately 20 million units, representing roughly half of all rental units.

There is reason to believe that “landlords would comply with this proposal,” particularly because otherwise they would “lose valuable tax breaks,” a senior administration official told reporters in a call with news media outlets.

The depreciation deduction would be denied if landlords increase rents by more than the 5 percent limit.

“If landlords are faced with this choice in this next two-year period, many and hopefully most landlords would be compliant here,” the senior administration official said, adding that the supply of rental units is set to increase.

President Biden believes that this measure would help to reduce rents at a time when tenants are paying the highest costs in nearly two years.

“Families deserve housing that’s affordable—it’s part of the American Dream,” President Biden said in a statement.

“Rent is too high and buying a home is out of reach for too many working families and young Americans, after decades of failure to build enough homes. I’m determined to turn that around.”

According to Redfin, the median apartment asking rent in the United States jumped by 0.7 percent year-over-year in June to $1,654, the highest median price since October 2022.

This was the largest gain in more than a year. In addition, officials announced new grants to construct thousands of homes nationwide and efforts to repurpose public lands to build more affordable homes.

The president also urged Congress to approve his initiative to construct 2 million new homes.

“We need to build, build, build,” President Biden said.

In a July 11 speech, the president said that the federal government was “going to make sure that rents are kept at 5 percent increase“ and ”apartments and the like, and homes are limited to 5 percent.”

Moreover, in a speech in Las Vegas in March, President Biden targeted landlords for “rent gouging.”

A "For Rent, For Sale" sign outside of a home in Washington on July 7, 2022. (Sarah Silbiger/Reuters)

“My administration is cracking down on big corporations who break antitrust laws by price fixing to keep the rents up,” the president said.

“Landlords should be competing to give folks the best deal, not conspiring to charge them more.”

Industry expert Carl Harris, chairman of the National Association of Home Builders, is against the rent-capping proposal. He said the plan would “worsen the housing affordability crisis” by discouraging companies from constructing new rental housing and would harm tenants.

“These rent caps would also hurt existing tenants—those that the president is trying to help—because owners and developers would be unable to cover rising costs if rents are fixed,” Mr. Harris said in a statement.

“Leading economists and numerous studies over the years agree that rent control would aggravate affordability problems by exacerbating the housing shortage in America.”

Housing advocate Diane Yentel, president and CEO of the National Low Income Housing Coalition, supports the plan. She said it is a necessary endeavor at a time when rents are surging and called the temporary rent control measure “historic.”

“Recent, unprecedented increases in homelessness in communities across the country are the direct result of equally unprecedented—and unjustified—rent hikes that occurred in the [COVID-19] pandemic’s aftermath,” Ms. Yentel said in a statement.

“Had such protections against rent gouging been in place then many families could have avoided homelessness and stayed stably housed.”

Rather than wait for congressional approval, Ms. Yentel encouraged the president to take action now.

Economists Debate Rent Controls

Over the years, economists from diverse philosophies have advocated against imposing rent control laws.

In 1967, left-leaning Swedish economist Assar Lindbeck wrote that “rent control appears to be the most efficient technique presently known to destroy a city—except for bombing.”

Economist Walter Block wrote in a paper that a government-mandated price control on rents “causes shortages, diminution in the quality of the product, and queues.”

“But rent control differs from other such schemes,” Mr. Block said. “With price controls on gasoline, the waiting lines worked on a first-come-first-served basis.

“With rent control, because the law places sitting tenants first in the queue, many of them benefit.”

However, in a 2023 letter to President Biden, a group of 32 economists championed the use of rent controls.

“The Economics 101 model that predicts rent regulations will have negative effects on the housing sector is being proven wrong by empirical studies that better analyze real-world dynamics,” the letter, initiated by the People’s Action Homes Guarantee campaign, stated.

The economic literature has indicated various cases whereby rent controls have produced unintended consequences.

In 2019, Stanford University economists published a paper that assessed rent control laws in San Francisco.

They discovered that the policy reduced available rental units by 15 percent and “likely drove up citywide rents, damaging housing affordability for future renters.”