US President Joe Biden has pledged to penalise big ticket landlords who increase annual rents by more than 5% per year.
The proposal, which would affect landlords managing more than 50 rental units, would strip landlords from receiving federal tax breaks if they go over the 5% limit – meaning it would act as a soft form of rent controls.
Landlords who go over the 5% limit would find it harder to write off expenses related to costs arising from things like wear and tear on their buildings.
Jacob Channel, senior economist at online marketplace LendingTree, said: “This plan could help reign in rising rent costs, though it certainly won’t be a cure-all.
“In truth, without building more housing units (especially in major urban areas), prices and rents are likely to remain high regardless of whether or not this proposed legislation comes to fruition. Building more homes is arguably the single best way to combat high housing costs.”
The change would cover around half of all rental units, amounting to 20 million, while it would last for two years.
There would be exemptions where there’s construction works or the units are substantially renovated.
Channel added: “The Biden administration has also suggested that it may free up some federal land for new developments.
“While this could help spur construction and bring housing prices down, more targeted building efforts in major metropolitan areas that include ending overly restrictive zoning policies and make it easier for cities to build “up” instead of “out” would probably be of more help.”
Channel went on to say that’s it’s unlikely Biden will be able to go ahead with the proposal, due to the divided nature of congress.
Outside of Biden’s soft rent control proposal, the LendingTree economist praised the Biden administration for putting forward a “fairly robust set of policies” on housing.
Policies include calling for new homes to be built, for existing units in disrepair to be brought back into use, as well as for tax credits and other benefits to be introduced to help would-be buyers.
In contrast, Donald Trump and the Republicans are more vague about housing proposals, with Trump proposing numerous cuts to federal agencies like HUD and the affordable housing programs that they offer.
Republicans tend to favour tax incentives and deregulation to boost homeownership.