President Joe Biden unveiled a plan he says will make housing more affordable, but critics say could have the opposite effect.
“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,” Biden said Tuesday in a statement. “I’m determined to turn that around.”
White House’s plan to create affordable housing
The White House has proposed rent control as the solution. “If you raise rents more than 5%, you should lose valuable tax breaks,” he said of landlords. This includes asset depreciation write-offs, according to a White House fact sheet.
The measure would apply to landlords with more than 50 units in their portfolio, translating to more than 20 million units nationwide. The plan makes exceptions “for new construction and substantial renovation or rehabilitation.”
Biden added his administration is working to “cut red tape and repurpose public lands” to create 15,000 affordable homes in Nevada. Biden was in Nevada Wednesday on a campaign stop.
“The policy is a bridge to rents stabilizing as President Biden’s plan to build more takes hold,” Lael Brainard, Biden’s National Economic Council director, told reporters, according to USA Today.
According to Zillow’s chief economist Skylar Olsen, rent prices across the U.S. are almost 30% higher than pre-pandemic levels.
Rent is high because of inflation, not rent hikes, say critics
Some groups opposed the rent-control policy, saying rising costs and a shortage of housing are why rent is high.
“Inflation is impacting both landlords and tenants, with some real estate costs rising even faster than the general inflation rate,” a spokesperson for the American Apartment Owners Association told Fox Business.
“Rent increases are often necessary for landlords to cover these rising costs and continue providing high-quality housing.”
The Cato Institute observed these types of measures ultimately hurt the renter because it would lead to “a lower supply of rental accommodation, less housing construction, and a fall in the quality of rental housing too.”
“Under rent control, landlords will be incentivized to cut maintenance, screen tenants more stringently, convert rentals to owner-occupied units, or condos, or Airbnbs, and, in many cases, halt new rental construction,” the libertarian think tank said.
Is inflation under control?
Federal Reserve Chairman Jerome Powell said the latest inflation readings indicate prices are returning to sustainable levels but that it’s a “delicate balance.”
“If we ease too early, we can undermine the progress on inflation,” Powell said Tuesday. “And if we wait too late, we can undermine economic activity.”
A June Gallup poll found at least 36% of Americans cite the economy as the most important issue. Roughly 14% say it’s the high cost of living.
The White House also called on Congress to pass the president’s $258 billion plan to build 2 million housing units. “To lower housing costs for good, we need to build, build, build,” Biden said.
But this proposal, introduced during the president’s last State of the Union speech, was stymied in the GOP-controlled House. Cities including Chattanooga, Tennessee, Houston, Miami, Las Vegas, Syracuse, New York, and Trenton, New Jersey, would receive grants.