President Biden to propose nationwide rent control plan, capping increases at 5 percent on existing units, with exceptions.
by Ryan Young
President Biden will soon announce a proposed 5 percent cap on rent increases. Rent control is one of the most ridiculed economic policies there is, right up there with tariffs. Rent controls create housing shortages. They also discourage maintenance and improvement of existing housing.
The best way to lower rents is to build more housing. Higher supplies equal lower prices.
For example, Austin, Texas is allowing new housing to be built at ten times the rate as in San Francisco. As a result, Austin rents are falling 7 percent per year, while Bay Area rents continue to soar.
St. Paul, Minnesota passed a 3 percent rent increase cap in 2022. Permits issued there for new multifamily housing decreased by 65 percent in one year, while they increased by 61 percent in next-door Minneapolis.
President Biden, of all people, should remember President Nixon’s failed 1970s experiment with price and wage controls. So why is he proposing rent control that he knows will fail?
One answer is do-something bias. Housing policy is mostly a state and local issue. There is not a lot that Biden, as a federal official, can do to signal to voters that he cares about their rents.
He could lower tariffs on building supplies like steel and lumber. This would take a few thousand dollars of the cost of building an average home. He could also loosen rules for federal permits and environmental impact reviews. But these have indirect effects on housing prices that are harder to sell in soundbites, and he has already committed to a Trump-style tariff policy.
That leaves rent controls, which poll well despite their predictable failures. This proposal is about politics, not the merits.
Originally published by the Competitive Enterprise Institute. Republished with permission.
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