The Biden administration’s plan to tackle rising rents in the United States
The Biden administration has proposed a new strategy to address the escalating rents across the United States. The plan involves imposing a cap on annual rent increases for corporate landlords at 5% or risk losing significant tax breaks. This move comes in response to the alarming increase in rents nationwide, which have surged by 26% since 2020, as reported by the Joint Center for Housing Studies at Harvard University. While inflation may be slowing down in other areas, home prices continue to rise at a rate of 5.2% annually.
The rationale behind the proposed rent cap
The aim of the Biden administration’s plan is to rein in midsize and large landlords who have allegedly been hiking rents excessively. By limiting rent increases to 5%, the government hopes to compel these landlords to align their rental prices more closely with the actual costs involved. President Joe Biden emphasized the need to make rents more affordable for working families and young Americans, highlighting the disparity between rising rents and homeownership accessibility.
Implementation and impact of the 5% rent cap
To enforce the rent cap, legislation would need to be passed requiring large and medium-sized landlords to abide by the annual 5% limit on rent increases. Those who fail to comply would forfeit certain tax benefits related to accelerated depreciation. This measure would apply to landlords with more than 50 apartments, covering over 20 million rental units in the U.S. The Biden administration estimates that this accounts for about half of the U.S. rental market.
The potential consequence of losing tax benefits is expected to incentivize landlords to keep rent hikes below 5% annually. This financial disincentive is designed to encourage landlords to prioritize slower rent increases over the immediate gains from hiking rents beyond the proposed limit.
Overall, the Biden administration’s proposal represents one of several initiatives aimed at enhancing housing affordability, including the introduction of a $10,000 tax credit for first-time homebuyers. While the plan may face challenges in garnering support in Congress, it underscores the administration’s commitment to addressing the housing crisis and providing relief to renters facing financial strain.
