The Biden administration is set to announce a new cap on how much rents can go up in certain affordable housing units that are subsidized by the federal government.
The move, hailed by tenant advocates and criticized by other housing experts, limits the amount property owners can raise rents if they are part of a tax-credit program for low-income housing. Under new regulations to be announced Monday, yearly rent increases will be capped at 10 percent, according to senior administration officials.
Some economists estimate the measure could apply to more than a million homes.
Yet experts suggest the impact could be limited because, already, very few units are eligible for double-digit rent increases. To receive funding from the Low-Income Housing Tax Credit, which is the largest federal affordable housing production program, developers have to commit to certain affordability rules. And they must abide by terms that make it difficult for rents to climb 10 percent in a year. The new cap, however, ensures that in those rare situations, there’s still a ceiling.
Initial reactions were mixed. Some housing experts raised concerns that the cap, even at a high level, will discourage developers from building more affordable housing units, especially when costs are already steep.
“You’re discouraging the creation of supply,” said David Dworkin, president and chief executive of the National Housing Conference. “At a time when insurance costs are skyrocketing, and the fixed cost of building is already high … how many different ways are we going to make it harder to build an affordable unit?”
Yet tenant advocates, including those who have criticized the White House for not being more aggressive on rent costs in the past, applauded the decision. Tara Raghuveer, director of the National Tenant Union Federation, said her focus wasn’t on the specific 10 percent cap. Her takeaway is the administration sending a broader signal that federal funding and tenant protections can go hand-in-hand.
“This is a historic win that will protect millions of tenants against rent gouging and stabilize them in their homes,” Raghuveer said. “The Biden administration should expand such protections to federal financing — the biggest subsidy for multifamily housing in this country.”
The announcement comes weeks after Biden proposed several housing initiatives ahead of his State of the Union address, and as housing persists as one of the most fraught parts of the U.S. economy. Decades of underinvestment has lead to a shortage of millions of homes. And while many new houses and apartments are slated to finish construction this year, economists worry that those offerings skew toward the higher end of the market and won’t immediately solve affordability challenges.
The Biden administration has targeted different slices of America’s housing market. Some of those initiatives target supply, like a commitment to build and preserve 2 million homes. Other proposals try to help middle-class first-time buyers.
Then there are rents, which surged during the pandemic and are still a main driver of inflation. Real-time data shows rent dropping in major cities nationwide. But that hasn’t stopped monthly costs from taking up a large share of Americans’ budgets, especially for lower-income tenants.
Basically, most people agree more housing is key to a solution. The Department of Housing and Urban Development, in addition to senior administration officials, said supply won’t take a further hit because of the new cap. Plus, HUD routinely looks at income and housing data to determine how rents should be priced.
“We’ve seen no evidence that this limitation — even those much lower than 10 percent — have limited the supply of new affordable housing nationally,” HUD spokesman Zachary Nosanchuk said in a statement.
But Sharon Wilson Géno, president of the National Multifamily Housing Council, said just because it has been rare for rents to climb 10 percent in the past, that may not always be the case. Upheaval in the housing sector, high inflation and changes in the labor market make it hard to apply previous trends to this new economy.
“The shortage of housing in this country is acute, and it has finally all caught up with us,” Wilson Géno said. “While there may be some history there, you can’t necessarily rely on that history moving forward.”
Source link: https://www.washingtonpost.com/business/2024/03/29/biden-rent-housing/