Biden-Harris Administration Rent Cap Proposal

Recently, the Biden-Harris Administration introduced another facet in its broader efforts to combat affordable housing shortages. On July 16, 2024, the Administration proposed federal rent control. The proposal would end certain tax breaks for corporate landlords with over 50 units in their portfolio unless the landlords agreed to limit rent increases on existing units to 5 percent per year. Landlords refusing to accede to the rent control would lose specific tax benefits, such as depreciation write-offs. The plan would affect about 20 million units nationwide and per the proposal would impact corporate landlords in the current year and the next two years. New rental housing and properties undergoing major renovations would be exempt. The rent cap is intended to serve as a bridge until more housing units can be built.

The concept of federal rent control has had its share of opponents from both sides. The Washington Post quoted Jason Furman, chair of President Obama’s Council of Economic Advisers and Harvard Professor, as saying “[r]ent control has been about as disgraced as any economic policy in the tool kit. The idea we’d be reviving and expanding it will ultimately make our housing supply problems worse, not better.” Professor Furman goes on to say that even if future units are exempted, rent control does not work, because it could change how developers consider their incentives.

Although the White House has released a fact sheet (available here), there are scant details on the overall plan and specifically, what tax breaks would be at risk for landlords. Most likely, bonus depreciation would be stripped away from those affected landlords not complying with the rent caps. Again, the proposal is part of a bigger plan envisioned by the Administration and members of Congress, including a Renter’s Bill of Rights (available here), repurposing of federal lands for affordable housing, a guidebook for commercial to residential conversions (available here) and bills recently introduced by Sen. Debbie Stabenow (D-Michigan) and Rep. Jimmy Gomez (D-CA) that would provide a 20 percent tax credit for office conversions, which credit would be modeled off the historic preservation credit. At the state and local level, several initiatives, such as property tax abatements, have appeared.

FGMK, LLC will continue to monitor this proposal and other presidential campaign proposals, as well as required Congressional action, that may impact our clients. If you have inquiries about this proposal, please reach out for additional discussion.

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