President Biden has unveiled a proposal to address the rising cost of housing in the United States. The plan would cap rent increases and potentially eliminate tax breaks for certain landlords.
“I’m sending a clear message to corporate landlords: if you raise rents more than 5%, you should lose valuable tax breaks,” Biden said.
The president urged bipartisan support in Congress to pass the plan and alleviate housing expenses for struggling Americans.
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Rent increases
Biden's proposal would give corporate landlords a choice: cap annual rent increases at 5% or risk losing valuable federal tax breaks. The measure would likely apply to landlords who own 50 or more units, according to reporting from the Washington Post. This could potentially affect over 20 million rental units nationwide.
Typically, landlords benefit from various tax deductions and incentives that may include deductions for mortgage interest and property tax and repairs and maintenance, depreciation of rental property, and business expense deductions related to property management. However, the administration mentions "faster depreciation write-offs" being impacted by the proposal.
- The proposed rent cap is designed to address what the administration sees as excessive profit-taking by large property owners.
- The Biden administration says some corporate landlords have been raising rents beyond what's necessary to cover increased costs, leading to substantial profits while many struggle to afford housing.
National rent control?
Industry groups and others have already criticized the president's plan, arguing that so-called “rent control” measures are "bad policy," that can have unintended negative consequences. One argument is that the policy might discourage investment in new rental properties and ultimately reduce the number of available housing units.
Despite the pushback, the Biden administration maintains that its approach protects tenants and maintains incentives for housing development. The view is that combining anti-gouging policies with support for new construction will address immediate affordability concerns and long-term housing supply issues.
Homebuyer tax credits
The administration's latest proposal is part of a broader housing effort. For example, the Federal Housing Finance Agency (FHFA) is implementing new protections for renters in certain multifamily properties. Those measures include requiring 30-day notices for rent increases and lease expirations and instituting a 5-day grace period for late rental payments.
Also, as Kiplinger reported, Biden has previously called for new homebuyer tax breaks, including a new Mortgage Relief Credit targeting middle-class first-time homebuyers. According to the White House, eligible buyers could receive a two-year annual tax credit of $5,000.
Additionally, the President has proposed incentives to encourage current homeowners to sell their starter homes. The Biden administration notes that homeowners are sometimes reluctant to sell due to the low mortgage rates they may have, even if their current homes no longer suit their needs.
Biden has called on Congress to provide a one-year tax credit of up to $10,000 to middle-class families who sell their starter homes to another owner-occupant. The administration says nearly 3 million families could benefit from this initiative.
Housing affordability: Bottom line
As the debate over these proposals unfolds, it's clear that housing affordability remains a critical issue for millions across the country.
Given the upcoming election, the coming months will likely see more debate about the most effective ways to balance the needs of renters, landlords, and the broader housing market. So, stay tuned.
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