Biden’s new housing plan has serious flaws

Today, the Biden administration released a new housing policy plan. It combines a really bad idea—national rent control—with a not-so-bad idea: using “underutilized” federal government property to build new housing. Here’s a summary of the White House’s rent control proposals:

President Biden is calling on Congress to pass legislation that gives business owners a basic choice: Either limit rent increases on existing units to no more than 5% or lose valuable federal tax breaks. Under President Biden’s plan, starting this year and over the next two years, corporate landlords would have to keep annual rent increases to no more than 5% to take advantage of the faster depreciation write-offs available to rental property owners. This applies to owners with more than 50 units in their portfolio, covering more than 20 million units nationwide. This would include exceptions for new construction and extensive renovations or restorations.

Economists and housing policy experts across the political spectrum recognize that rent control is an extremely harmful policy because it reduces the quantity and quality of housing. Don’t take my word for it. Take progressives like Paul Krugman and Jason Furman, the former chairman of Barack Obama’s Council of Economic Advisers, who decried Biden’s proposal as “rent Regulation is as disgraceful as any economic policy in the toolkit,” according to a recent meta-study. Journal of Housing Economics Reviews the extensive evidence on the negative effects of rent control.

To be fair, as reason housing policy writer christian Bridgege noted that the plan includes some mitigating factors that may reduce its harmful effects. It only applies to landlords with more than 50 homes and exempts new construction and renovations. Additionally, it would limit rent increases to 5% per year rather than impose a stricter cap. Still, the plan will apply to millions of homes (the White House claims the number is 20 million), which will undoubtedly reduce quality and supply.

If there’s one redeeming quality to the rent control program, it’s that even the White House has acknowledged that it must be enacted by Congress. This is unlikely to happen anytime soon. However, as Bridgege noted that the president’s move to put the idea of ​​nationwide rent control on the political agenda increases its visibility and makes it more likely that it will be implemented at some point.

Biden’s plan does include the opposite good idea: a proposal to free up “underutilized” federal property for new housing. Privatizing federal lands could go a long way toward alleviating the housing shortage. But it’s unclear how much land the government actually intends to make available for this purpose. It’s unclear whether they plan to privatize the land to allow private developers to build on it, or whether they envision some form of public housing, or a combination of the two. The record of public housing is abysmal. Privatization is a better option.

Another frustrating element of Biden’s plan is that the president knows — or at least has known in the past — that the best way to alleviate the housing shortage is to reduce zoning rules and other land-use restrictions that hinder new housing construction. In 2020, he ran on a platform of using federal grant conditions to pressure state and local governments to do the same. But he largely failed to implement these ideas during his time in office.

In his article on Biden’s new plan, Bridgege Pointing out that Trump and new vice presidential candidate J.D. Vance have also enacted some poor housing-related policies. Most obviously, their plan to implement mass deportations of undocumented immigrants would eliminate much of the housing construction workforce, predictably reducing construction and making it more expensive (this effect, coupled with other negative impacts of deportations on housing outweighs the potential benefits of housing construction) demand reduction). Unlike Biden’s rent control plan, the Republican eviction policy is likely to be enacted without major new legislation, making it even more threatening. Vance’s idea of ​​limiting corporate housing investment would also reduce supply.

But Trump and Vance’s bad ideas in no way justify Biden’s rent control plan.

The primary goal of Biden’s rent control plan may not be to alleviate the housing shortage but to bolster the president’s re-election campaign. Research shows that rent control is popular among voters, many of whom don’t understand basic economics. Exploiting widespread public ignorance is a common and time-honored political tactic. But that doesn’t mean it’s correct.