Rent increases would be limited to 5% per year under new Biden-Harris plan

The plan calls on Congress to pass a law that would withdraw tax credits from landlords who raise rent by more than 5% annually. If passed, the plan would apply to about half of all rentals in the United States.

President Biden on Tuesday unveiled a series of proposals aimed at lowering housing costs for Americans as the cost of living continues to be a decisive issue heading into November’s election.

The plan calls on Congress to pass a law that would withdraw tax credits from landlords who raise rent by more than 5% annually. If passed, the plan would apply to landlords with at least 50 units in their portfolio, meaning that overall, 20 million units nationwide would be affected, according to the White House.

That’s about half of all rentals in the United States.

The policy would include an exception for new construction and buildings that are being “substantially renovated,” although there is currently no definition of what that means.

“While the prior administration gave special tax breaks to corporate landlords, I’m working to lower housing costs for families,” Biden said in a statement. “Republicans in Congress should join Democrats to pass my plan to lower housing costs for Americans who need relief now.”

Biden’s proposal was praised by housing advocates.

Shamus Roller, the executive director of the National Housing Law Project, called it a “historic” move that would “increase housing stability for tenants.”

“The President knows that fixing the housing crisis will require a whole-of-government approach. That includes directing Congress to pass major policies that put people over profit. While this is a short-term fix, we commend this proposal and the President’s focus on getting us to a long term solution for the 114 million people who rent,” Roller said in a statement. “Biden’s proposal exemplifies how the federal government can shape housing policy that protects and empowers tenants.”

Major real estate and housing organizations, including the Mortgage Bankers Association (MBA) and the National Apartment Association, oppose the proposal. The MBA criticized the Biden-Harris plan, claiming that rent caps, or rent control, “reduce the supply of available housing and fail to target those renters who need help the most while simultaneously harming other residents and the communities they reside in.”

A senior administration official told CNN, however, that the plan is intended to serve as a two-year bridge until the 1.6 million rental units that are currently under construction nationwide enter the market.

An ongoing housing crisis

These actions from the Biden administration come as the US deals with an ongoing housing crisis.

Nationally, there is a shortage of more than seven million affordable homes for the 10.8 million-plus extremely low-income families in the US. Seventy percent of these families are severely cost-burdened, meaning they spend more than half of their income on rent. There’s also no state or county in the country where a renter working full-time at minimum wage can afford a two-bedroom apartment.

Additionally, mortgage rates are nearing 8% and with steadily rising home prices and the lowest inventory of homes for sale in over a decade, the housing market is increasingly pricing out working and middle-class families.

These efforts also come as housing and rental prices have soared in recent years. According to a report from the Joint Center for Housing Studies at Harvard, a record 22.4 million American households now spend at least 30% of their income on rent.

In Sept. 2020, the median home sale price in North Carolina was $272,000. As of May 2024, that figure had risen to $383,600, an over 41% increase, according to Redfin. In Charlotte, the state’s most populous city, rent prices have gone up 20% over the past three years. These figures are in line with a national trend that’s shown rising home and rent prices since the beginning of the pandemic. 

Other federal efforts to address housing affordability

Tuesday’s proposals are just the latest effort by the Biden-Harris administration to tackle housing costs.

Earlier this year, it announced several new actions to promote fairer rental markets and boost the supply of affordable housing and manufactured homes.

For example, HUD and the Treasury Department announced the indefinite extension of the Housing Finance Agency Risk-Sharing Initiative, which provides capital for state and local housing finance agencies so that they can offer federally-backed loans at lower interest rates in order to create and maintain affordable rental units.

According to the Federal Housing Administration (FHA), this will allow 38,000 affordable rental units to be built or preserved over the next decade nationwide.

The administration also restarted the Federal Financing Bank Risk Sharing program in 2021, after it was suspended by the Trump administration. Since then, it has provided access to nearly $2 billion in financing for the rehabilitation and building of almost 12,000 housing units, according to the White House.

Finally, in May, HUD published new rules regarding the HOME Investment Partnerships Program, which provides grants to state and local governments to create affordable and low-income housing, as well. These new rules “streamline” requirements for the administration of these grants, update certain requirements for those receiving these grants, and outline new tenant protections.