Main Takeaway: Although decelerating, the growth in rent over the few years will mean sustained pressure from political and advocacy groups to control rent, promote various forms of tenant protections, and cap rising housing prices. This increased regulatory pressure will continue to be a headwind for multifamily owners and investors.
Story: A few weeks ago the White House released a blueprint for a Renter’s Bill of Rights. This is not a legal document, but rather a white paper “intended to support the development of policies and practices that promote fairness for Americans living in rental housing.” The following are the key components of the blueprint:
- The U.S. Department of Housing and Urban Development will publish a notice of proposed rulemaking requiring public housing authorities and owners of project-based rental assistance properties to provide at least 30 days advanced notice before terminating a lease due to nonpayment of rent.
- The Federal Trade Commission and the Consumer Financial Protection Bureau will seek information on a broad range of practices that affect the rental market, including the creation and use of tenant background checks, the use of algorithms in tenant screenings, the provision of adverse action notices by landlords and property management companies, and how an applicant’s source of income factors into housing decisions.
- The Federal Housing Finance Agency (FHFA) will increase affordability in the multifamily rental market by classifying multifamily loans with loan agreements that restrict rents at levels affordable to households with incomes between 80 and 120 percent of the Area Median Income.
- The Federal Housing Finance Agency announced it will launch a new public process to examine proposed actions promoting renter protections and limits on egregious rent increases for future investments.
These were just a few of the highlights from the report. The Washington Post reports that this move follows President Biden’s campaign promise to address rising rents and decreased affordability. That said, the President doesn’t have the authority to legislate nationwide rent controls, and instead uses a patchwork of incentives for local governments and federal agencies.
It’s important to remember that most of the housing issues are affected by state and local laws, including zoning and permitting. In reaction to this release, the National Association of Home Builders (NAHB) released this statement:
“While a key part of the Biden plan focuses on ensuring landlords help tenants who are behind in their rents, it is important to note that millions of small business multifamily property owners have already been working together with their tenants to keep them in their homes and make sure they are not evicted…And they were doing this during the height of the pandemic when renters were most vulnerable…If the administration is truly committed to help America’s renters, it will champion solutions that will enable builders to construct more apartments and homes to reduce the nation’s deficit of 1.5 million housing units.”
Many advocacy groups are also not happy with the proposal, with People’s Action (PA) saying the announcement included some wins, but that the policies weren’t enough to change “tenants’ lives materially today.” The group also pointed out that the announcement excludes conditions on federal financing, instead provides incentives to landlords who accept rent vouchers rather than helping tenants directly.
Shamus Roller, executive director of the National Housing Law Project, stated in the media that this proposal was weak on commitments. Similarly, Next City, a not-for-profit advoacy group, noted that “[w]hile clearly informed by tenant demands and advocacy, most of Biden’s announced protections are baby steps toward larger policy goals, and not the bold renter protections some expected.”
Kenny Parcell, president of the National Association of Realtors (NAR) commented that “[r]ental housing policy is heavily regulated at the state and local level…Federally enacted policies can potentially drive housing providers out of the market, which will have an immediate and long-term impact of making rental housing even more competitive and, therefore, more expensive for renters…expanding the federal government’s role in rental policy also places an even greater undue burden on mom-and-pop housing providers.”
Expert Take on President Biden’s Renters Bill of Rights
“The proposed housing regulations may cause a decline in both the quality and quantity of housing available due to artificial limits on rent. If rents are established at less than market rates, demand will exceed supply, and rent control will create a shortage of dwellings.” — Virginia Van Zandt, Forbes
