The Biden Administration wants to do everything to lower prices BESIDES lowering taxes. Joe Biden released a new plan that would cap rental raises at 5% annually. Landlords who have over 50 units in their portfolio would lose their tax credits if they failed to adhere to this proposed law. Yet, property taxes throughout the US increased by 6.9% in 2023 alone.
This does not factor in rising insurance premiums or rising maintenance fees. Taking the data back from before the pandemic, property taxes across the nation have risen by over 25%, steadily increasing about 5.9% each consecutive year since 2019. Now this varies widely by state and city. Charlotte, North Carolina, saw a 31.5% increase in property taxes from 2022 to 2023. Indianapolis experienced a 16.8% yearly increase. Atlanta, Georgia, and Denver, Colorado, both saw tax rates rise over 15%.
The government points to greedy landlords while failing to admit that they are shaking down their citizens and taking advantage of rising property values. The National Apartment Association (NAA), National Multifamily Housing Council, and Mortgage Bankers Association (MBA) issues a letter to the president to explain that rental caps will hurt supply:
“Decades of academic research from across the United States and around the world clearly show that rent caps – more commonly known as rent control – reduce the supply of available housing and fail to target those renters who need help the most while simultaneously harming other residents and the communities they reside in. Despite President Biden’s mention of rent caps during the debate, he and his policy experts know that the real reason so many Americans struggle with housing costs is because we need to build more housing. There is no debate. Rent caps hurt renters and communities.”
Housing demand outweighs the available supply. We see this issue everywhere from Canada to the UK and it has been exacerbated in recent years thanks to populations multiplying with million of incoming migrants. Around 34% of Americans rented as of 2023 (45.2 million) with 53% of renters spending over 30% of their income on rent. The old 30% figure is long outdated and it is all but assumed that most new homeowners are paying this sum due to the cost of financing the debt of a home. If these landlords simply offload their homes into the market, it will not help those who cannot afford to buy. People will not conduct business if it is not profitable and while there are greedy landlords many have been forced to raise rental prices out of necessity.
Look at San Francisco or New York City where they have implemented rent control laws. No one is going to give up a locked-in low rental and this has disproportionately affected the number of available units. Landlords have converted these properties into co-ops and condos to avoid losing out on profits. This also reduces the quality of available rentals. Why would an investor upgrade their property if they could not benefit on those upgrades? Potential investors have no incentive to create new rental units for those who cannot afford to buy because it is no longer lucrative. Supply stagnates in the long-term.
The migrant crisis truly corners every aspect of our economy and has undoubtedly hurt the number of available units. If 45.2 million rented last year and we increased the population with 8 million new migrants, that alone is a surge of over 17.65% now seeking rentals. No, they cannot secure loans or show a credit score or two years of consecutive employment. The government is willing to use taxpayer funds to house them, however, increasing the cost of living for those taxpayers.
You cannot control the free market. No one ever asks, “Has this been done before? If so, did it work?” The answer is NO. Look at Spain, Germany, Austria, or anywhere else that attempted rental caps. We are experiencing an issue of SUPPLY. Rental caps will only work to tighten the already limited supply of rentals available.
