Industry Leaders Push Back Against White House Rent Control Plan

Several multifamily owner-operators and other industry experts are pushing back against President Joe Biden’s proposed rent control plan. Critics argue that the best way to lower rents is to build more supply rather than imposing a nationwide rent cap of 5 percent, as the administration’s proposal calls for.

The national rent control policy would, were it to pass the U.S. Congress, apply to landlords with upwards of 50 units in their portfolio, impacting more than 20 million units across the United States or about half of all rentals.

“Biden’s proposal for nationwide rent control would stunt much needed investment into the housing space,” said Zamir Kazi, CEO of Tampa, Fla.-based multifamily investment firm ZMR Capital, which owns more than 7,000 units across the U.S. “We need more housing plain and simple and if returns aren’t there, builders won’t build and investors will look elsewhere for yield.”

New housing supply will naturally lead to lower rents, Kazi told Multi-Housing News. “Lack of supply has been driving rents.”

The Biden proposal would give corporate landlords a choice: either cap rent increases on existing units to no more than 5 percent or lose federal tax breaks for faster depreciation write-offs. The provision would last two years, presumably until more housing hits the market, and would not impact new development or properties undergoing substantial renovations.

“Rent is too high and buying a home is out of reach for too many working families and young Americans, after decades of failure to build enough homes. I’m determined to turn that around,” Biden said in a statement accompanying a six-page fact sheet on the rent control proposal and other plans to repurpose public land for affordable housing and issue $325 million in grants to build new deeply affordable homes, spur economic development and revitalize communities across the country.

Biden also called on Congress to pass the Biden Housing Plan, which the administration says would build 2 million homes and provide $10,000 in mortgage relief to unlock home ownership for millions of Americans.

Critics warn of adverse effects

Noah Kaufman, director of acquisitions at Los Angeles-based multifamily investment firm Universe Holdings, said the matter of rents simply comes down to supply and demand.

“The more available units to rent pushes management firms to bring down rent pricing to compete with other properties so they can increase occupancy,” Kaufman told MHN. “On the flip side, if there is no increase in supply, then management firms can push rents because the demand is there for apartment rentals with less competition.”

Developers are reluctant to build in areas where government imposes rent controls on new buildings, National Association of Realtors President Kevin Sears noted. “These policies actually decrease the supply of low- to mid-range housing units,” he said in a prepared statement. “Rent control is a rare instance where the research is fairly conclusive: it doesn’t work. These measures fail to improve renters’ financial situation and shift the burden of economic difficulties, inflation and other costs onto the housing provider with no counterbalance.”

Bob Broeksmit, president and CEO of the Mortgage Bankers Association, said in a prepared statement that federal rent control law would be “catastrophic” to renters and the rental housing market. Echoing others in the sector, he called for increased supply as a way to alleviate affordability constraints.

The MBA is focused on working with the Biden administration, Congress and local communities solutions to boost housing supply, lower costs for renters and improve the federal government’s multifamily lending programs, said Broeksmit.

Furthermore, Broeksmit pressed the U.S. Senate to pass the Affordable Housing Credit Improvement Act. The measure, which cleared the U.S. House of Representatives earlier this year, would offer “meaningful enhancements to the Low-Income Housing Tax Credit program that would encourage the construction of more low- and moderate-income and workforce housing.”

Other industry groups including the National Association of Home Builders and the National Housing Conference, a coalition of affordable housing stakeholders, also called on Congress to pass the LIHTC bill.