President Biden recently discussed the need to cap rent at the NATO press conference.

Unfortunately, this is not among his common gaffes for American home renters. The Biden administration released a new plan for rent control that prevents corporate landlords from raising rent by more than 5%, or they will lose generous tax benefits.

According to the White House:

This would apply to landlords with over 50 units in their portfolio, covering more than 20 million units across the country. It would include an exception for new construction and substantial renovation or rehabilitation.

It is a desperate ploy to save his presidency; Biden is choosing a bad economic policy to appeal to his progressive base.

The Biden administration aims for homebuilders to construct single and multi-family housing units, tweeting out:

It's time for Republicans in Congress to join Democrats to pass my plan to build 2 million new homes — because to lower housing costs for good, we need to build, build, build

which is the statement released from the Biden White House to the press.

The problem with his rent control plan is that it manipulates the market, artificially reduces the value of existing homes, and discourages any new construction.

This could potentially lead to stagnation in the housing market, making it difficult for new buyers to enter and for existing homeowners to see a return on their investment. The implications for the housing market are concerning, to say the least.

Rent has risen 22% nationwide since Biden became president. The administration is promoting this plan to prevent price gouging and freeze rent. While research suggests that youth favor rent control, its track record does not produce the desired stabilization result.

The CATO Institute, a well-respected free-market think tank, released a report that said:

The vast majority of studies examining each find that rent control leads to a lower supply of rental accommodation, less new rental housing construction, and a fall in the quality of rental housing too.

In addition:

Under rent control, landlords will be incentivized to cut maintenance, screen tenants more stringently, convert rentals to owner-occupied units, or condos, or AirBnBs, and, in many cases, halt new rental construction.

This report provides strong evidence against the effectiveness of rent control.

A recent example of this happened in 2021 in St. Paul, where the city passed restrictive rent control laws. The law instantly caused new building permits to decline, and landlords ceased building improvement plans and started new maintenance fees to help regain costs. This is a clear indication of the potential economic consequences of such policies, which should make us all apprehensive.

A similar situation occurred in New York City, where rent control was passed to protect renters from being unable to buy property upfront or leave the city due to the expense. At least 26,000 units in the city are intentionally left vacant because landlords cannot afford the servicing to rent out units. In other words, the lack of motivation leads properties to become less profitable.

Even for economists of all backgrounds, rent control is considered an economically illiterate measure. Jason Furman, one of Barack Obama's economic advisers and Harvard's Kennedy School professor, spoke very sternly:

Rent control has been about as disgraced as any economic policy in the tool kit.

In response to Biden's policy prescription, he said:

The idea we'd be reviving and expanding it will ultimately make our housing supply problems worse, not better.

This suggests that Biden's policy could exacerbate the housing crisis rather than alleviate it.

In fact, Tobias Peter, the co-director of the American Enterprise Institute's Housing Center, a conservative think tank, opposes the idea of rent control because, even though it sounds good in theory, there are too many unforeseen circumstances.

Rents are high because there is more demand than there is supply. And so the solution is not to cap rents; the solution is to build more housing so that rents would naturally come down.

Swedish socialist economist Assar Lindbeck is famously known for describing rent control as:

the most efficient technique presently known to destroy a city—except for bombing.

The most economically efficient way to lower rent pricing is to increase the supply of new homes to make the cost affordable, which is essential in supply and demand theory. History has shown that rent control decreases the housing supply and standards of current rental complexes in cities worldwide.

The good news is that this plan has little to no chance of passing due to a divided Congress and the fact that we are approaching an election in November.

However, the concern is that we see a pattern of Biden creeping even further to the left as mainstream Democrats continue to be hostile to free markets. It should make us all wary of the potential for future radical measures.

President Biden is running out of ideas as his campaign is officially closing, marking him an unpopular one-term president. His latest rent control scheme will not help the Democrats win over mainstream voters. The good news is that a Democrat loss could eliminate the possibility of rent control from being injected into the political equation ever again. 

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