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Jimmy Williams
The Biden administration is proposing a new strategy to curb rising rents across the U.S.: limit corporate landlords to annual rent increases of no more than 5%, or else they would lose a major tax break.
This proposal comes amid widespread struggles among American households to afford rising rents, which have surged by 26% nationally since early 2020, according to a recent report from Harvard’s Joint Center for Housing Studies. While inflation has cooled for many items, housing prices remain stubbornly high, increasing by 5.2% annually in June.
The plan aims to push midsize and large landlords to limit rent increases, with the Biden administration accusing them of raising rents far beyond their own costs, resulting in “huge profits.” “Rent is too high and buying a home is out of reach for too many working families and young Americans,” President Joe Biden said in a statement. “Today, I’m sending a clear message to corporate landlords: If you raise rents more than 5%, you should lose valuable tax breaks.”
To be enacted, the proposal would need congressional approval, which may be challenging given the Republican-controlled House and potential opposition from some Democrats. Nonetheless, the idea could appeal to voters ahead of the November presidential election, particularly those affected by years of rent increases. This proposal is one of several strategies the Biden administration is promoting to enhance housing affordability, including a plan introduced in March to create a $10,000 tax credit for first-time home buyers.
How the 5% Rent Cap Would Work
The proposed rent cap, requiring legislative enactment, would mandate large and midsize landlords to cap annual rent increases at 5%. Landlords failing to comply would lose access to accelerated depreciation, a significant tax benefit for rental housing owners.
The law would apply only to landlords owning more than 50 units, covering more than 20 million units across the U.S., accounting for roughly half of the rental market, according to National Economic Advisor Lael Brainard. Accelerated depreciation allows landlords to front-load property-related costs, leading to paper losses that can offset rental income. Residential landlords can depreciate properties over 27.5 years, compared with 39 years for commercial landlords.
The Biden administration’s proposal represents a significant attempt to address the ongoing housing affordability crisis and could have a substantial impact if implemented.
