Rents Too High? Here Comes Biden with... Price Controls!?

Biden's Teleprompter, Fighting the Capitalist Bogeyman, and America's Housing Crisis

Back in May, in a piece about how the current Bidenomics-driven economy is not working for Americans, I (sarcastically) wrote this:

Thankfully, President Biden realizes the housing affordability issue could undermine his reelection chances, so he’s wracking his brain to defuse it. Oh, I'm sure only good things will come from this.

Well, we certainly didn’t have to wait long for Biden to attempt to “defuse it.” This week on Tuesday, President Biden officially unveiled his plan for federal rent control. And let’s just say it wasn’t exactly a smooth start. Take a look at the video below (up to the 18-second mark).

Geesh. Biden's relationship with the teleprompter is like a bad first date misread cues, awkward pauses, and all.

The real plan is to cap rent hikes at 5% year, not $55 a month. Looks like he misread 5% as $55 and isn’t clued in enough on his own policy to catch that on the fly. Not too reassuring, Joe.

After recovering from the blunder, Biden said, and I quote:

Families deserve housing that's affordable. It's part of the American dream. Rent is too high, and buying a home is out of reach for too many working families and young Americans. After decades of failure to build enough homes, I’m determined to turn that around. Today, I’m sending a clear message to corporate landlords: If you raise rents more than 5% on existing units, you should lose valuable tax breaks.

Ah, how noble (and tough) of him. And, of course, it’s purely coincidental that this is happening just months before an election where Biden seems poised to lose by a landslide.

Now, the cap will only apply to big landlords who own more than 50 units. But it’ll still affect 20 million rental units — about half of the U.S. rental market — so it’s a big deal.

But is it a sensible solution? With rents having gone up nearly 30% since 2020, and in many places, it’s been even more, the appeal is definitely there.

Not a chance.

They say doing the same thing over and over while expecting different results is the definition of insanity. And I’d struggle to think of a housing policy that's been tried — and failed — more times than this one.

Sure, rent controls may help some renters in the short term by capping their rent increases. But, in the long run, they cause all sorts of havoc in the market. For one, you get lower-quality housing because landlords have little incentive to invest in maintenance or upgrades. Rent controls also drive prices higher in non-controlled units, which in this instance are landlords with 49 units or fewer — a group said law is sure to produce a lot more of.

Most importantly, rent caps kill the incentive to build more housing. Why would anyone take on a risky building project when there's a law capping their potential return? Unsurprisingly, this just makes housing shortages worse and eventually drives rents up regardless.

Just to give you a recent example, in 2022, when St. Paul tried a 3% cap (with a 20-year exception for new construction), new permits for multifamily housing development dropped by nearly 90%.

More Homes, Not Biden's Goofs 

The facts are clear: the U.S. hasn't built enough housing to keep up with its growing population. This has led to a home affordability crisis.

The answer to this problem is remarkably simple: we need more homes. But instead of using market-based solutions to control soaring rents, the White House is proposing a Soviet-style nationwide rent control. This won't solve the shortage of 4.5 million homes in the U.S. In fact, if history is any guide, it will only make things worse.

So, why is Biden doing this?

His DEI aides might not be the brightest, but even they must be aware of the history and the predictable backfiring of such policies.

To me, this seems like nothing more than a last-ditch attempt by Biden to win over younger and lower-income voters, as well as his progressive base, by pretending to fight the capitalist bogeyman. Ever since taking office, the Biden administration has been blaming institutional investors for buying up homes, turning them into rentals, and raising rents.

This kind of talk is nothing new among leftists, who often see anything “big” and “capitalist” as inherently bad. The problem is that it falls apart when you realize that “institutional investors” own only about 3% of the single-family rental stock nationwide.

Even if we ignore this fact, there's no evidence that institutional investors are driving up rents. Yes, some data suggests investor-backed properties are linked to higher rents, but that's because they usually invest in big cities where rents are already high and rising.

The real problem is there just aren't enough homes. Reasons include slow construction, labor shortages, ineffective regulations and zoning laws, and locals blocking new housing with lawsuits, among others. None of that's going to be fixed by the outgoing President’s ridiculous policies.

Regards,

Lau Vegys