Control over the rental now!

One of the most significant housing initiatives launched by the Biden administration has gone almost unnoticed by anyone. It was not mentioned during the election campaign, on social media, or in statements from the White House, and it is hardly discussed in the media, except for a fairly substantial press release from the Department of Housing and Urban Development and a brief mention in the Washington Post. Despite the low level of attention, the introduction of a 10% cap on rent increases for 2.6 million apartments receiving funding through the Low-Income Housing Tax Credit (LIHTC) program has been a significant step in federal housing policy. Although this cap is too high, it represents a move towards rent control and, importantly, highlights the president's ability to advance this initiative.

In the housing sector, President Biden announced measures aimed at combating unscrupulous landlords, increasing the availability of affordable housing, and supporting new opportunities for homeownership. These measures are quite reasonable; however, they do not match the scale and speed needed to address the rental crisis faced by a significant portion of Americans. To tackle this, he needs to continue in the same vein as with the rent cap under the LIHTC program and go even further by openly advocating for rent control.

Since Biden's presidency began, rent has increased by more than 20%. Renters make up just over a third of all Americans, and more than half of these households (over 22 million) are now experiencing financial strain from rent, meaning they spend more than 30% of their income on rent and utilities, according to the latest data from the Joint Center for Housing Studies at Harvard University. More than 20% of renter households report serious financial strain, paying more than 50% of their income on rent. Only 30% of renters claim they can easily manage housing costs, which is just slightly more than the 22% who say they skip meals to pay their monthly bills. At the same time, homelessness has reached a historic high, and the number of evictions is rapidly increasing. Rent, along with gas prices, accounted for more than half of the inflation increase just this March.

The prolonged high cost of housing is likely contributing to the mysterious "vibrecision" - the gap between the relative strength of the economy (with low unemployment and high growth) and its weak public perception. According to a February survey by Redfin, housing affordability negatively impacted the economic outlook of nearly two-thirds of both homeowners and renters, while 53% of Americans claim that housing affordability will influence their choices in the upcoming elections in November.

It's not surprising that the crisis particularly affects the electoral groups that Biden finds it hardest to compete for — namely, non-urban and young voters. More than 50% of Black and Latino renters are experiencing financial strain from rent, and according to a Zillow study, 52% of Generation Z renters and 57% of millennial renters believe they will need to win the lottery to buy their own home.

In response, the administration is trying to present its housing policy as a "key aspect of Bidenomics." Recent speeches and media events emphasize this issue, and this year's State of the Union address was significant as it addressed tenant issues. Additionally, the president has also targeted some small-scale housing programs.

In May 2022, the administration introduced the "Action Plan to Increase Housing Supply," a set of incentives for new construction without costs. Seven months later, the administration shifted its focus to more pressing tenant issues, announcing the "Tenant Rights Plan" — a non-binding list of recommended policies for local authorities. Last July, the administration also announced specific measures aimed at ensuring "all tenants can contest inaccurate tenant credit reports" and "receive proper advance notice in the event of eviction." Biden also declared that his administration would combat "junk fees" in rentals and "crack down on large corporations" that engage in price-fixing through algorithms, such as RealPage — a company that creates software for mass rent increases. The most significant, albeit limited, is undoubtedly the rent cap under the LIHTC program, which was officially implemented on April 1.

“This is the first time that this administration or any of the recent administrations is considering the use of federal subsidies to implement an annual rent cap,” says Tara Raghuvir, director of the National Tenant Union and founder of KC Tenants, a citywide tenant union in Kansas City, Missouri. Commenting on the high cap, she stated, “This is a partial victory, but it is significant.”

Overall, these measures by the administration are positive steps, but they are not enough to overcome the rental crisis. Regulations in areas such as combating unfair tenant screening practices and curbing algorithmic pricing are helpful, but limited and do not address the core issue of rental problems. "Of course, we want to focus on unscrupulous landlords, but we can't just assume that the only unscrupulous landlords are those using AI. Many landlords and property management systems commit serious violations that have nothing to do with RealPage," noted Tram Hoang, a senior fellow at the national research group PolicyLink.

The country is in urgent need of new rental apartments that are affordable for low-income tenants. The National Coalition for Affordable Housing estimates that there is a shortage of 7.3 million available and affordable rental units in the country. However, even if the proposed measures by Biden are passed by Congress, it will take many years before they have an impact. Even a successful example, like in Minneapolis, where incentives for new construction were implemented, only showed results after several years.

At the same time, assistance in acquiring housing has faced a scale problem. Income tax credit deductions can help some buyers start on the path to the housing costs set by a 30-year mortgage, but tens of millions who remain renters need and deserve similarly stable housing.

More than any other initiative, the rent cap under the LIHTC program indicates the potential for immediate relief. Hoang views the administration's steps to limit rents in LIHTC buildings as "a sign of the administration recognizing its authority and applying it to rent regulation." The logic of "we can regulate rents in buildings receiving federal tax credits" can be easily extended.

The Biden administration could immediately apply this logic to the Federal Housing Finance Agency (FHFA), which oversees the activities of Fannie Mae and Freddie Mac—government-sponsored enterprises, each of which makes $150 billion in deals with landlords annually. "Many landlords' business models rely on increasing rent: they are burdened with debt. They cannot pay off their mortgages unless they raise rents and/or evict current tenants," noted Raghuvir. "In many ways, Fannie and Freddie enable and encourage some of the worst practices in the real estate market. We want to see a unified set of rules, including rent limits, that apply to Fannie and Freddie financing. If you benefit from government funding, you must adhere to these conditions."

While the LIHTC program covers 2.6 million apartments, the FHFA manages loans for more than 12 million units, which accounts for nearly a quarter of all rental housing in the country.

The FHFA's lending condition would have a significant impact. Importantly, Biden can implement this immediately and unilaterally. And rent control works, as practice shows. It creates immediate stability and affordability at unprecedented speed and scale. It is also cost-effective; although it requires an administrative apparatus, it would be significantly cheaper than other proposals. Despite the resistance from supporters of Milton Friedman, who often consider it "a quick way to destroy a city, aside from bombing," studies have shown that rent control does not reduce housing construction, as HUD noted in its announcement about the LIHTC rent cap, and is not the main reason for rising rents in unregulated apartments.

"There are many parallels with the narrative about the minimum wage — most economists are against it, and since then we have had an empirical revolution, with data now showing how the minimum wage works," explained Hoang. As evidence of this changing orthodoxy, more than 30 economists signed a letter to the FHFA supporting rent control.

Although the national rent control bill (along with Representative Alexandria Ocasio-Cortez's "Place for Prosperity" proposal) is unlikely to pass in Congress, the "message about it" could have a legitimizing effect on local campaigns. Appointing a strong tenant advocate as HUD secretary could lead to more decisive actions on rent control and tenant rights. The most tangible initiative is the executive branch's attempts to support this policy, possibly similar to the small non-binding incentives promised to municipalities for actions to increase housing supply, albeit weak ones that could have real consequences—supporting ongoing rent control campaigns in 15 states, including key electoral targets like Arizona, Nevada, Georgia, Pennsylvania, and Michigan, all of which Biden won in 2020 by less than 3%.

“Everything that is currently being discussed in Congress has an impact,” noted Hoang. “There is feedback between local and state campaigns and the federal government. [Federal actions] lend them credibility.” Rent control is also popular: a national poll in 2019 showed that 58% of voters supported this measure, while 17% opposed it, and this was before the surge in rental burdens caused by Covid. This policy has even been backed by unions, such as the powerful Culinary Union in Nevada, and has recently made strides in swing states like Maine and Minnesota, with similar efforts successfully completed in the Colorado legislature. For Biden to be re-elected, it is crucial that young voters and representatives of minority groups turn out in large numbers, especially in major cities located in key states like Michigan and Pennsylvania.

Voters like Teresa Diaz, a 67-year-old part-time medical assistant in Detroit, are facing a nearly 30% rent increase proposed by her landlord. She couldn't afford to move and had no legal protections due to the rent control ban in Michigan, but she managed to negotiate an increase of about 12%. However, the high housing costs are causing her financial strain and delaying her retirement. Although Diaz plans to vote for Biden, even a slight decline in support among renters like her could jeopardize his success in the state.

Of course, the pressure from the real estate lobby, as Biden might "joke," is "no joke." The National Association of Realtors spent $134 million on lobbying in 2022 and 2023. Provoking their anger in an election year could create internal conflicts within a party that includes both large landlords and vulnerable tenants, and this is likely one of the reasons why the administration has so far maintained relative silence regarding the rent cap under LIHTC. But avoiding this confrontation could lead to worse outcomes. "People are hurting, and one of their serious issues is rent. People need a solution they can feel when they pay their monthly bills. In an election year, this matters a lot," said Raghuvir. "For too long, the real estate lobby has dominated every area of the political process, buying outcomes that increase their profits."

By taking control of rent, the president will be able to present himself as a defender of the working class in the U.S. in yet another battle against corporate greed. A striking economic comparison to Donald Trump, the country's most famous landlord, won't hurt either. He won't be the first president to take such measures, as Roosevelt and Truman oversaw national rent control for most of the 1940s. Even Richard Nixon, faced with high inflation and an unpopular brutal war, once implemented comprehensive price controls, including a short-term rent freeze through the now-defunct Cost of Living Council, which was then headed by Donald Rumsfeld.

Even contemporaries criticized this as a popular move that helped curb inflation. As a conservative appointee (and critic) of the CLC wrote, "[Nixon] significantly turned the nation's pessimism into short-term optimism, which created a sense of action," and after Nixon's re-election in 1972, his opponent, Senator George McGovern, even stated that these measures were a significant reason for his "invincibility."

Ultimately, the concentrated power of private landlords over tenants creates a constant state of uncertainty that can only be truly alleviated through significant investments in alternative housing models, such as in Vienna, where more than two-thirds of the population lives in high-quality, affordable public housing. Biden should pay attention to recent proposals to increase the volume of social housing, a successful and popular model already implemented near Washington. However, for immediate, broad, and effective policy, as well as for a smart electoral strategy, Biden now needs to listen to the demands of organized tenants across the country and return to a proven, effective, and popular policy—rent control.