Yves here. The fact that Biden only now has announced a headline-garnering proposal, certain not to be passed this term, targeting the young and lower-income workers, is yet another proof of his Administration’s cynicism and desperation. Yours truly is far from alone in this view:
If Biden had embraced eliminating medical debt, capping rent increases, and expanding social security months or years ago, Tr*mp would probably not be leading among 18-29 year old voters. https://t.co/7Ph1Vi1sds
— Sam Haselby (@samhaselby) July 13, 2024
On top of that, there is a good bit of controversy as to whether rent controls work. While conventional views are decidedly negative, the studies are not of this particular implementation, which is barring the use of accelerated depreciation for landlords who own more than 50 units. So this is not a simple across the board limit. Second, it isn’t clear how many landlords are early enough in their depreciation schedules for the loss of accelerated depreciation to bit. Third is that rent increases have been substantial in many markets, well in excess of cost rises. Our Conor Gallagher, along with many others, wrote about how major landlords had been colluding to increase prices:
After becoming the target of multiple state attorney general lawsuits and investigations, nationwide class action lawsuits, a Department of Justice criminal probe, and the likely target of a recent FBI raid in Atlanta, RealPage – a private equity-owned corporation that creates software programs for property management – is finally responding to allegations it orchestrated a national rent price-fixing cartel that has sent rent prices through the roof.
Texas-based RealPage is accused of acting as an information-sharing middleman for real estate rental giants. The lawsuits against it and large property managers [1] contend that the latter agreed to set prices through RealPage’s software, which also allowed the companies to share data on vacancy rates and prices in many of the US’ most expensive markets.
Many of the rental markets dominated by large landlords have seen astronomical growth in rental prices in recent years (even before the pandemic), as well as a rising number of evictions and spikes in homelessness. The lawsuits against RealPage and the rental management companies contend that its software covers at least 16 million units across the US, and private equity-owned property management companies are the most enthusiastic adopters of the RealPage technology. A separate lawsuit filed last year targets Yardi Systems and property management companies [2] using its price-setting software to collude on at least another eight million units….
Again, the lawsuits against RealPage and statements by the company’s founder indicate that RealPage played a role in undersupply by advising property companies to leave units vacant in order to create an artificial scarcity of rentals. This anti-competitive behavior is made possible because property managers know that their “competitors” are also using RealPage’s system and will not undercut them
So this cap is not at all comparable to the rent control regimes implemented (mainly) during World War II and continued in some cities in a reduced form even to today. There was no persistent and wide-spread regime of collusion that resulted in price increases well beyond those warranted by supply and demand. This is a legal intervention to compensate for a widespread abuse.
It is therefore not clear that a cap after a period of profiteering would curb new development, as in it might take several years (or more!) of curbs to bring big landlord profits back to old normal levels.
But again, this discussion is moot since this measure is sure not to get through Congress. It’s not only mere virtue signaling, but also of the “too little, too late” variety.
By Jessica Corbett. Originally published at Common Dreams
As former U.S. President Donald Trump secured the Republican nomination and announced his running mate on Monday, Democratic President Joe Biden prepared to unveil a proposal that would cap annual rent increases at 5% for tenants of major landlords.
After Biden briefly previewed the proposal during a press conference last week, The Washington Postreported on the planned announcement Monday, citing three people familiar with the matter. The Associated Press separately confirmedthe plan.
Biden is set to formally introduce the proposal on Tuesday in Nevada, which “has seen among the biggest explosions of housing costs in the country,” the Post noted. “Democrats have grown increasingly concerned that Trump could win the state in November.”
The president, who is seeking reelection, will propose taking a tax benefit away from landlords who hike rents by more than 5% annually, according to the reporting. The plan would only apply to the existing housing stock of landlords who own more than 50 units and would require congressional approval—so it is not expected to go anywhere unless Biden wins in November and Democrats secure majorities in both chambers of Congress.
As the newspaper detailed:
The Biden administration is also pushing numerous policies to increase housing construction, through incentives to local governments to change their zoning codes and new federal financial incentives for builders.If implemented, they could bring 2 million new units to the market in addition to the 1.6 million already in the pipeline.
“It would make little sense to make this move by itself. But you have to look at it in the context of the moves they propose to make to expand supply,” said Jim Parrott, nonresident fellow at the Urban Institute and co-owner of Parrott Ryan Advisors. “The question is: Even if we get all these new units built, what do we do about rising rents in the meantime? Coming up with a relatively targeted bridge to help renters while new supply is coming online makes a fair amount of sense.”
While housing industry representatives criticized the reported proposal, Diane Yentel, president and CEO of the National Low Income Housing Coalition, told The Associated Press that having it in effect in recent years could have helped renters.
“The recent unprecedented increases in homelessness in communities across the country are the result of those equally unprecedented—and unjustified—rent hikes of a couple years ago,” she said. “Had such protections against rent gouging been in place then, many families could have avoided homelessness and stayed stably housed.”
Other rent control advocates and progressive officials also welcomed the plan, with Kendra Brooks—the first Working Families Party member ever elected to Philadelphia City Council—declaring that “this is exactly the kind of leadership that working families need!”
Jacobin‘s Branko Marcetic said that “this is huge,” particularly considering that “housing has rapidly climbed as a cost-of-living concern (and is also under 30s’ most important issue).”
Multiple campaigners and organizations credited housing advocates for pushing rent control at the national level.
“It’s amazing how rapidly the conversation around rent caps has changed,” noted Shamus Roller, executive director of the National Housing Law Project. “Tenant organizing has created this change. It’s a proposal for Congress which will face serious headwinds but the president just called for rent caps (even if only temporarily).”
The Debt Collective said, “We will say it over and over again: The rent is too damn high—and rent control is a real fix.”
“Rent caps wouldn’t be a national policy proposal without tenants unions across the country making it possible through organizing,” the group added. “On our way to land without landlords, remember that rent control works. The 99%’s need for a roof over our head should not be 1% profits.”