The Biden-Harris administration recently proposed a rent increase cap of 5 percent for “corporate” landlords as a means to tackle the rising housing costs. This move aims to address the financial strain many Americans are experiencing, with rents increasing faster than wages and mortgage payments doubling due to high interest rates. The impact of rising housing costs is widespread, affecting urban, suburban, and rural areas across the country, including Nebraska.
However, the proposal to implement rent control is criticized as ineffective. Research consistently indicates that rent control ultimately harms tenants, especially low-income ones, by failing to address the root cause of high rents—the insufficient housing supply. By merely capping rents, the policy does not alleviate the fundamental issue, thus failing to provide a sustainable solution.
Joe Biden
Rent control is argued to exacerbate the housing crisis by reducing the supply of rental housing. When landlords cannot cover their costs due to rent restrictions, they may opt to convert rental properties into condominiums or demolish them, shrinking the rental market further. This unintended consequence is particularly detrimental as it discourages the construction of new housing, which is essential for resolving the crisis.
The case of St. Paul, Minnesota, is cited as evidence of the negative impact of rent control on housing development. After implementing rent control, new multifamily building applications dropped by 82 percent, indicating that developers are wary of investing in markets with such regulations. This reluctance to invest further aggravates the housing shortage, counteracting any intended benefits of rent control measures.
To effectively address the housing crisis, the focus should shift from rent control to increasing housing supply by tackling development cost drivers such as permitting processes, material costs, and regulatory red tape.
Former President Trump highlighted these issues as critical factors in an interview, suggesting that reducing these barriers would be more effective. Representative Michael Flood emphasizes the need for the Biden-Harris administration to prioritize these solutions over rent caps to alleviate the housing affordability crisis effectively.
