Biden Proposes 5% Cap on Rent Hikes for Corporate Landlords
President Joe Biden plans to introduce a proposal today to cap annual rent increases at 5% for major apartment landlords.
Jordan B. & Han-Gwon Lung
July 16, 2024
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Good morning. President Joe Biden is urging Congress to implement a national rent control measure that would cap rent increases at 5% per year for approximately 20 million rental units.
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Market Snapshot
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*Data as of 7/15/2024 market close.
RENTAL & HOUSING POLICY
Biden Proposes 5% Cap on Rent Hikes for Corporate Landlords
The White House plans to introduce a proposal today to cap annual rent increases at 5% for major apartment landlords or face losing out on federal tax breaks.
The proposal: President Joe Biden is urging Congress to implement a national rent control measure that would cap rent increases at 5% per year for approximately 20 million rental units. This policy targets landlords with over 50 units, who would lose federal tax breaks if they exceed the cap, with exceptions for new construction and major renovations to encourage new development.
More measures: Biden also announced plans to repurpose federal lands for affordable housing. The Bureau of Land Management will consider selling 20 acres in Nevada at below-market rates to create affordable housing, and the US Postal Service plans to repurpose unused properties for housing. Additionally, $325M in grants will be distributed to seven cities to revitalize neighborhoods.
Soaring housing costs: This measure is intended to curb rising rental costs, which have seen the median U.S. asking rent reach $1,653 as of May, according to Redfin. The cap would be in place for two years, after which the administration hopes that increased housing supply will naturally lower rents.
Industry response: The commercial real estate industry has strongly opposed the plan. The National Multifamily Housing Council (NMHC) and the National Apartment Association argue that rent control has historically failed, reducing housing quality and supply. They contend that policies should focus on expanding housing supply rather than imposing rent caps, which they believe could worsen the affordable housing crisis. And they are right.
Tighten the screws: Biden’s proposal follows a recent announcement from the FHFA that revealed new tenant protections for multifamily properties financed by Fannie Mae and Freddie Mac. These protections include a 30-day notice for rent increases, a five-day grace period for rent payments, and a 30-day notice of the lease term expiration.
➥ THE TAKEAWAY
Big picture: Despite recent slowdowns in shelter inflation, housing costs remain a significant burden for many Americans. Biden's proposal faces steep odds in Congress, especially with the upcoming November elections and a GOP-controlled House. Nevertheless, the proposal aims to address voter concerns over high housing costs, a major component of inflation.
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✍️ Editor’s Picks
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Budget barrier: Saudi Crown Prince Mohammad bin Salman is cutting spending on his neo-city/horizontal skyscraper project Neom, scaling back by 20% due to economic challenges.
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Stirring things up: Billionaire Laurene Powell Jobs sets a new San Francisco record, purchasing a mansion for $70M in an off-market deal.
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Distress update: In June, CRED iQ's CMBS distress rate reached 8.62%, with office and retail sectors leading at 11.5% each.
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RE goldmine: Goldman Sachs (GS) reported $3.88B in Q2 gains, with 27% more revenue driven by CRE investments, avoiding last year’s write-downs.
🏘️ MULTIFAMILY
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Redefining multifamily: Lument debuts a new multifamily sales platform led by John Sebree to capitalize on company growth trends.
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Converting to the masses: A Greenwich-based firm plans to convert the 500 Michigan Avenue building in Chicago’s Mag Mile into 320 residential units.
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Deal of the day: CAPREIT sells its manufactured home community portfolio of 12,138 residential lots across 75 sites in Canada for $740M.
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Eviction epidemic: Eviction filings spike in Sun Belt cities, up 35% compared to pre-pandemic levels, driven by ongoing rent struggles.
🏭 Industrial
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Innovative Expansion: WendellSummit Real Estate Group buys 189.16 acres in Wendell for $250M industrial development, constructing 1.8MSF across 8 buildings.
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Industrial Growth Spurt: Clarion Partners buys 322,400 sq ft industrial building in McCarran, NV for $41.7M from Pure Development.
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Warehouse wonder: Acore Capital funded a $53M loan to DH Property Holdings for a 282.25 KSF warehouse in Philadelphia.
🏬 RETAIL
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Fancy fitness flex: Life Time Fitness, a luxury health club operator, has closed sale-leaseback deals in Colorado and Texas to reduce debt while expanding its national real estate footprint.
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Portland pause: Retail property construction is slowing down in Portland, with developers cautious due to underwhelming starts and poor site selection.
🏢 OFFICE
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Vacancies soar: Charlotte's office vacancy rate hit an all-time high in Q2 at 24.7%, up from about 21% in Q1.
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Foreclosure fiasco: A Philadelphia real estate firm faces foreclosure on a downtown Cincinnati office tower with only 46% occupancy.
🏨 HOSPITALITY
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Luxury living: Wills Companies purchased Frisbie Group’s Islamorada resort in the Florida Keys for $72M, although they plan to sell the 22 villas as single-family homes starting at $5M.
📈 CHART OF THE DAY
According to CoStar, Scarsdale, NY, is the wealthiest suburb in the nation, with an average household income of nearly $570K, according to a new study from personal finance website GOBankingRates.
Meanwhile, California claims 16 of the 50 wealthiest US suburbs by average household income, while the NYC-Newark-Jersey City metro area has 10.
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