President Biden has issued a new plan to make renting more affordable for millions of Americans through new actions to lower housing costs.
The Biden Administration’s three-pronged approach involves capping rent increases, rehabbing distressed properties, and building affordable housing. More specifically, the new Biden plan aims to:
- Call on Congress to pass legislation giving corporate landlords a choice to either cap rent increases on existing units at 5%, or risk losing current valuable federal tax breaks;
- Repurpose public land sustainably to enable as many as 15,000 additional affordable housing units to be built in Nevada; and
- Rehabilitate distressed housing, through the construction of more affordable housing, and revitalizing neighborhoods.
The President called on Congress earlier this year to make homeownership a reality for more families by passing the Biden-Harris Housing Plan, an initiative that would build two million homes, and provide $10,000 in mortgage relief. According to the White House, the rate of new housing starts is up 17% compared to the presidential Administration.
Crackdown on rent hikes
Some corporate landlords have taken advantage of the shortage of available housing stock by raising rents at a time when millions of Americans are struggling to cover monthly payments.
Last month, a post on Accountable titled “Corporate Landlords See Profits Soar Amid Rent Hikes and Fees” found that the six largest publicly-traded apartment companies reported large profits earlier this year, and many of these same landlords are named in pending litigation for their alleged use of proprietary algorithms to raise rents on tenants. For example, the article cited Essex Property Trust’s net income spike of 76% year-over-year to more than $285.1 million due to “average monthly rental rate” increasing 2.1%.
According to the Biden Administration’s new plan, legislation must be passed to present corporate landlords with the choice of either cap rent increases on existing units to no more than 5%, or to lose federal tax breaks. Under President Biden’s plan, corporate landlords, beginning this year and for the next two years, would only be able to take advantage of faster depreciation write-offs available to owners of rental housing if they keep annual rent increases to no more than 5% each year. This would apply to landlords with more than 50 units in their portfolio, covering more than 20 million units across the country. It would include an exception for new construction and substantial renovation or rehabilitation.
The policy represents a bridge to rents stabilizing as President Biden’s plan to build more takes hold. The Biden Administration believes that a combination of both anti-price gouging policies and the construction of more affordable housing can effectively balance the needs of tenants.
Boosting affordable housing
Another component of the Biden plan is to repurpose federal land to build tens of thousands of affordable homes by calling on all federal agencies to assess surplus federal land that can be repurposed to build more affordable housing nationwide.
To this end, the White House will work with a number of federal agencies to provide financing tools for housing and needed infrastructure—with the goal of quickly building more climate resilient housing.
Federal agencies tapped to assist in the initiative include:
- The Bureau of Land Management (BLM) will create thousands of affordable housing units on BLM land in Nevada. BLM is opening a public comment period on a sale of 20 acres of public land to Clark County, Nevada for below market value at just $100 per acre—the largest-ever sale for affordable housing under the Southern Nevada Public Lands Management Act program, which the county estimates will enable the development of nearly 150 affordable homes for households making less than 80% of area median income (AMI). BLM is considering an additional 562.5 acres of public lands that have been identified by local governments in Southern Nevada and that are appropriate for affordable housing in the Las Vegas Valley—supporting the construction of up to 15,000 or more additional affordable rental and homeownership units for Nevadans. BLM will also work with local governments as they come forward with housing-related requests for the roughly 26,000 acres in Las Vegas Valley that remain under BLM control and are eligible for disposition under the Southern Nevada Public Lands Management Act program.
- The United States Forest Service (USFS) is announcing plans to lease Forest Service land to build workforce housing—the first-ever such projects in the nation. USFS is planning to lease strategically positioned sites for workforce housing developments in Steamboat Springs, Colorado and Ketchum, Idaho, to create new affordable housing. USFS is actively exploring additional federal land that can be leveraged to support workforce housing, including in high-cost areas across the country.
- The United States Postal Service (USPS) will pilot the repurposing of certain surplus properties for housing. USPS owns more than 8,500 facilities nationwide, including some that are not needed for postal operations in areas that face a shortage of affordable housing.
- HUD, Health and Human Services (HHS), and General Services Administration (GSA) plan to release a final rule to make it easier for public and nonprofit developers to use federal buildings and land to house the homeless. The Title V program, authorized by the McKinney-Vento Homeless Assistance Act, allows federal agencies to use unutilized, underutilized, excess, or surplus federal properties at no cost to develop housing for people experiencing homelessness. The new rule would make it easier for developers to navigate the process, potentially resulting in thousands of additional housing units to address homelessness and affordability challenges.
- The Department of Transportation (DOT) published interim guidance to permit transit agencies to use their property to support transit-oriented development. This will make it easier to build affordable housing near transit.
Investing in community development
HUD has also announced $325 million in Choice Neighborhoods grants to build new deeply-affordable homes, spur economic development, and revitalize neighborhoods in communities across the country. The awards will build more than 6,500 units of new housing, support small businesses, build childcare centers and new parks, and will be used to leverage more than $2.65 billion in additional public and private investments in these neighborhoods.
For example, the $50 million grant awarded today to the Southern Nevada Regional Housing Authority and the City of Las Vegas will restore 235 existing affordable housing units for extremely low-income renters and build 400 new units of housing. They will invest in an early learning center and provide support for small businesses. In addition, these funds will leverage an additional $212 million in public and private resources in this community, that will activate indoor and outdoor community spaces, and provide supportive services to residents.
Latest move toward tenant protection
Late last week, the Federal Housing Finance Agency (FHFA) announced a set of required tenant protections for multifamily properties financed by Fannie Mae and Freddie Mac (the GSEs), representing the first time that tenant protections will be a standard component of GSE multifamily financing. The protections will be required for new loans signed on or after the policy effective date, February 28, 2025, and covered housing providers will be required to provide tenants with the following:
- A 30-day written notice of a rent increase: Renters must receive at least 30-days’ notice for any rent increase.
- A 30-day written notice of a lease expiration: Renters will be notified at least 30 days in advance of their lease expiration, whether fixed/scheduled or terminated by the landlord.
- A five-day grace period for rent payments: Renters will be permitted to pay their rent up to five days after their due date, without incurring fees or being subject to eviction or other penalties.
The GSEs will monitor and enforce these tenant protections, and failure to comply could result in penalties under the loan agreement. A detailed description of the tenant protection policies is expected to be published by the GSEs in August 2024. Tenants can see if their property is GSE-backed using Fannie Mae’s and Freddie Mac’s multifamily property look-up tools.
The industry reacts
News of today’s Biden’s plan was met with mixed reactions so far.
“This plan could help reign in rising rent costs, though it certainly won’t be a cure-all. It would only impact about half of the rental market, and even landlords who could lose access to tax breaks because of it will still technically be free to raise rents by however much they want, assuming they don’t care about tax breaks and aren’t violating any laws (including local rent regulations). Moreover, the plan would exclude new construction and buildings undergoing major renovations. It would also only be in effect for two years,” said LendingTree Senior Economist Jacob Channel. “For the most part, these proposals make logical sense and could help ease the burden of high housing costs for both renters and homeowners. As mentioned above, calls for and investments made toward more home construction are exceeding beneficial as one of the main reasons housing is so expensive in the United States is because there is too little housing supply.”
Mortgage Bankers Association (MBA) President and CEO Bob Broeksmit, CMB, voiced opposition to the nationwide rent control proposal.
“Increasing the supply of affordable rental housing nationwide–not politically-motivated and self-defeating rent control proposals floated during election campaigns–is the best way to alleviate affordability constraints for renters,” said Broeksmit. “There are endless examples in localities in America and around the world that prove that rent control is a counter-productive policy idea that ultimately harms renters by distorting market pricing, discouraging new construction, and degrading the quality of rental housing. While the odds are stacked against this proposal ever passing Congress, a federal rent control law would be catastrophic to renters and our nation’s rental housing market.”
National Multifamily Housing Council (NMHC) President Sharon Wilson Géno felt that instituting national rent control will drive up housing costs and limit the building of new and badly needed housing.
“This legislative proposal will not create a single new unit while raising costs on the very residents it purports to help,” said Géno. “If the administration’s goal is to lower housing costs and support residents it would be better advised to implement policies that expand housing supply – the only real way to sustainably lower housing costs and create more housing security for renters as the Biden administration pointed out in its very own Housing Supply Action Plan. Rent control has been tried for decades and been a resounding failure. Now is the time for actual solutions, not electioneering.”
National Association of Realtors (NAR) President Kevin Sears agreed:
“NAR opposes misguided attempts to cap or control rental rates. Price controls may seem appealing, but they have backfired on local governments and harmed the people we need to help the most. Developers are reluctant to build in areas where the government imposes rent controls on new buildings, and these policies actually decrease the supply of low- to mid-range housing units. We can protect the most vulnerable by supporting targeted assistance to renters and housing providers when there is a gap between rising wages and rising rent. But the long-term solution remains increasing supply. We need more than 328,000 new apartment units each year just to keep up with demand–that’s 4.3 million units by 2035,” said Sears. “Rent control is a rare instance where the research is fairly conclusive: It doesn’t work. These measures fail to improve most renters’ financial situation and shift the burden of economic difficulties, inflation, and other costs onto the housing provider with no counterbalance. NAR has advocated for federal legislation and policies such as YIMBY and the Neighborhood Homes Investment Act to help eliminate discriminatory land use policies and remove barriers that weaken housing production in the United States. The only way to keep cities affordable for working-class families is to ensure that the supply of housing keeps pace with the growing demand.”
