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Biden proposal called ‘self-defeating’ by mortgage, housing advocates

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Inside the Beltway
Tuesday, July 16, 2024

The Biden administration’s efforts to improve housing affordability through rent control initiatives have drawn criticism from mortgage and housing industry advocates, citing data on similar efforts by individual localities.

Biden called for legislation to cap rent increases on existing units at 5 percent. Corporate landlords who choose to exceed the 5 percent increase threshold would risk losing 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 percent each year,” the White House said in a press release. “This would apply to landlords with over 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 is a bridge to rents stabilizing as President Biden’s plan to build more takes hold.”

Mortgage Bankers Association (MBA) President and CEO Bob Broeksmit released a statement calling the new plan “politically-motivated” and “self-defeating,” citing available data about similar rent-control efforts in certain localities.

“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,” Broeksmit said. “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.”

The best way to address renting affordability is by increasing the supply of affordable rental housing nationwide, he contended.

“MBA is focused on working with the Biden administration, Congress, and local communities on common sense solutions that will boost housing supply, lower costs for renters, and improve the federal government’s multifamily lending programs,” Broeksmit said. “One such example would be for the Senate to approve the bipartisan House measure that passed earlier this year that includes meaningful enhancements to the Low-Income Housing Tax Credit (LIHTC) program that would encourage the construction of more low-and moderate-income and workforce housing.” 

Pointing to research findings on the unintended consequences of rent caps in municipalities, the Housing Solutions Coalition also expressed opposition to the administration’s proposal and the sentiment that additional housing construction is the only way to combat the affordability problem.

“[Rent control] reduces the supply of available housing and fails to target those renters who need help the most while simultaneously harming other residents and the communities they reside in,” the coalition contended. “Despite President Biden’s mention of rent caps during the debate, he and his policy experts know that the real reason so many Americans struggle with housing costs is because we need to build more housing.”

In March, the Biden administration received similar industry pushback on a proposed 10 percent cap on annual rent hikes at properties supported by the LIHTC program.

“The LIHTC program is the federal government’s most successful tool to construct and rehabilitate housing for low- and moderate-income households,” Broeksmit said at the time. “If the administration imposes unworkable rent caps on LIHTC programs, it will severely suppress – if not kill – the program. Such a move is puzzling and contradicts many of the administration’s other efforts to increase affordable rental housing.”

FHFA tenant protections

Biden’s announcement came four days after the Federal Housing Finance Agency (FHFA) unveiled a set of required tenant protections for multifamily properties financed by Fannie Mae and Freddie Mac – marking the first time tenant protections will be a standard component of enterprise multifamily financing, according to a press release.

Effective Feb. 28, 2025, covered housing providers will be required to provide tenants with: a 30-day written notice of a rent increase, a 30-day written notice of a lease expiration, and a five-day grace period for rent payments.

“The tenant protections announced today are the culmination of a collaborative effort between FHFA, the Enterprises, tenants, and landlords to address challenges faced in rental housing today,” FHFA Director Sandra Thompson said in a statement. “These requirements reflect basic best practices to ensure housing providers effectively communicate with tenants and that tenants understand their rights and responsibilities under their leases.”

Community development efforts

Biden also announced support for policies to help rehabilitate distressed housing, build more affordable housing, and revitalize neighborhoods. Biden made the announcement in Nevada, stating his plan also would create up to 15,000 additional affordable housing units in the state by repurposing public land.

Four days prior, the Department of Housing and Urban Development (HUD) announced the administration will invest $325 million in HUD’s Choice Neighborhoods program to build new homes and spur economic development in underserved areas in Tennessee, Texas, Alabama, Florida, Nevada, New York and New Jersey.

“Since the beginning of this administration, President Biden has prioritized lowering housing costs by building new homes and investing in communities,” HUD Acting Secretary Adrianne Todman said in a statement. “We are excited to announce the Choice Neighborhoods funding here in Las Vegas, which marks a transformative step towards uplifting our communities. This funding is not just an investment in buildings and infrastructure – it’s an investment in people. By enhancing housing options, this administration remains committed to building neighborhoods where everyone has the chance to thrive.”

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