Biden’s rent cap is a half-hearted populist gesture

The News

Mainstream economists largely groaned this week as the Biden administration rolled out its new proposal for a limited version of national rent control, especially as the country faces a housing crunch.

The plan — officially unveiled Tuesday morning — would temporarily bar large landlords from claiming lucrative tax deductions if they raise rents by more than 5% per year.

“The administration is using all available tools and taking a number of new steps to unlock more affordable units,” said Lael Brainard, head of Biden’s National Economic Council.

Harvard professor and Obama administration alum Jason Furman set the tone among professional wonks, telling the Washington Post in a Monday teaser piece that “Rent control has been about as disgraced as any economic policy in the tool kit.”

The brickbats continued to fly on X, where various experts from both sides of the political aisle pointed to the long-established findings that rent caps tend to backfire, making housing less affordable in the long run by discouraging new building. “Rough day to be an economist working in the Biden administration,” quipped economist Donald Schneider, the deputy head of US policy at Piper Sandler. “Seems like comms is leading policy now.”

Jordan’s view

One way to think about this is that Biden is taking a page out of Donald Trump’s playbook, by pitching a catchy, populist policy proposal that will make people who read white papers for kicks tear their hair out. Trump has declared his intention to impose an across-the-board 10% tariff and end taxes on tips. Biden now has his rent cap, which could conceivably poll quite well. In 2019, Data for Progress found that more than half of Americans backed national rent stabilization, while only one-fifth opposed it, while more recent surveys have found broad support for price controls to combat inflation.

A key distinction, though, is that Trump’s populist gestures appear to be fairly serious, while Biden’s latest seem a bit half-hearted, mostly serving as shiny rhetorical wrapping paper on some otherwise interesting but technical and politically dull proposals.

The president’s rent control scheme is somewhat limited in scope: The cap would only last two years, and apply to companies that lease more than 50 units, which account for about half the rental market. It also wouldn’t touch new construction, to try and avoid discouraging new development. (Some economists argue those carveouts don’t usually work, since builders still worry they will face restrictions in the future.)

But most critically, it would also require Congress to pass legislation, which is unlikely in the near future. Housing activists had urged Biden to take a more aggressive approach, by limiting rent increases on properties with mortgages backed by Fannie Mae and Freddie Mac, which make up much of the market. The Federal Housing Finance Agency — which oversees the two housing giants — is opting for much more incremental reforms instead: It will require landlords with federally backed loans to provide tenants with 30 days notice before their rent goes up or lease expires, and a five-day grace period on late payment fees.

Housing advocates that have pushed the administration to embrace rent controls had a mixed reaction to its new proposals. Sarah Saadian, the vice president for public policy and field organizing at the National Low Income Housing Coalition, said Biden’s decision to put forward a national rent cap was “historic,” but that his executive actions fell short. “It’s great that he’s calling for it, but he should back that up by taking action where he can,” she told Semafor.

It’s possible that the rent cap will turn out to be an important conversation starter that encourages future, left-leaning Democrats to campaign on more aggressive versions of the idea. But from a practical standpoint, the most important initiative the White House announced Tuesday may be its plan to make federal land available to build more affordable housing, and use surplus federal properties to shelter the homeless. Given the vast size of the government’s land holdings, especially in the west, the move could open up significant new sources of housing supply. It’s just not a snappy pitch you can talk about at a debate like capping rent.

Trump’s more populist economic proposals are different in that there seems to be a decent chance he’ll attempt to implement them. There’s some disagreement among Republicans about whether his call for a universal 10% tariff is truly serious, or a negotiating feint meant to wring deals from trade partners. But allies are already exploring legal justifications he could use to execute it.

Ending taxes on tips, an idea Trump put forward to win over service employees in Nevada, also appears to have some momentum. The proposal has been criticized across the ideological spectrum on the grounds that many tipped employees already pay little to nothing in federal income taxes, and that other workers who currently earn stable wages would game the system by opting to be paid in tips instead. (It’s also not clear why you’d give a tax break to tipped workers, but not other low-wage workers.) But several top Senate Republicans have already sponsored legislation that tax experts think could plausibly end up folded into whatever pact Congress strikes to deal with the 2025 tax cliff.

Republicans “still like cutting taxes, and this is a tax cut,” Kyle Pomerleau, a senior fellow and tax expert at the American Enterprise Institute, told Semafor. He added that he found both the tip exemption and Biden’s rent proposal “depressing.”

Room for Disagreement

Not every moderate, DC wonk is completely down on rent control. Alex Armlovich, a senior housing analyst at the Niskanen Center, noted that studies suggest it’s possible to “design modest rent controls that spare supply,” particularly if they target much older buildings.