On July 24, the U.S. House of Representatives’ committee on financial services (HFSC) subcommittee on housing and insurance held a hearing, “Housing Solutions: Cutting through Government Red Tape.” Topics and ideas discussed were primarily related to examining regulatory barriers and other hot-button housing topics.
But, a central theme of discussion was rent control, which was noted by the chair of the subcommittee, Rep. Warren Davidson (R-OH), as complex and uncertain, and something that negatively increases housing costs while decreasing supply.
“So instead of working to make things more efficient, federal bureaucrats are working to add more cost and complexity and even more uncertainty,” he said. “For example, HUD and USDA are working on…energy code rules in one of their more recent boondoggles to create yet another rent control project to standardize apartment buildings.”
Davidson argued that federal bureaucrats want to “focus on everything but the mission in housing,” and “things aren’t going well in federal housing programs.” He claimed there is no need for rent controls or bureaucracy, which he insisted cap investments.
“We need more supply,” he stated.
Davidson’s claims come in the wake of a recent Biden administration initiative in which the White House said it is “calling on congress to pass legislation giving corporate landlords a choice to either cap rent increases on existing units at 5% or risk losing current valuable federal tax breaks,” with hopes to end landlord corruption.
The Biden administration, for its part, asserted that Republicans have “tirelessly” blocked the administration’s housing agenda, and attempted to cut rental assistance programs that are intended to help build home homes and decrease mortgage costs.
The National Association of Home Builders (NAHB) issued a statement to President Biden in July regarding their thoughts against his potential rent cap policy.
“NAHB is strongly opposed to rent caps and believes it would exacerbate the housing affordability crisis by discouraging new production, which will ultimately lead to higher rents. Capping rents would also lead to reduced maintenance and hurt existing tenants because owners and developers will be unable to cover rising costs if rents are fixed.”
Rent control impact in NYC metro
According to the New York City rent guidelines board, rent control, including rent caps, is “generally” reserved for tenants in certain older buildings who have continuously occupied those units for a significant period of time.
However, there are various other rent-controlled municipalities across the state, including Westchester County, New York—who like other counties, choose whether or not to participate in such policies.
Rich Giaccio is a real estate agent / investment property owner with all of his units in Westchester County. He is also owner and president of Prime Payments, a credit card processing company in Katonah, New York.
Giaccio was transparent in sharing that he in fact does raise the rent on his properties, but shared that they, like with all other landlords in the area, are capped at 5% annually. Giaccio explained that with each of his properties, “it’s whatever the market bears.”
He blames the cause of consistent rent increase on inflation, which has slammed the market in recent months, as well as constant property assessments.
When asked his thoughts on rent control in the current state of the market, he says that he “would not buy rent-controlled properties (subsidized housing, section eight etc.)” for his portfolio, because he wouldn’t “get a better return on my investment.”
“Rent control is great for people that really need it,” Giaccio said. “For example the elderly, people with impairments. But it’s also great for town employees, like firefighters.”
California, Oregon, Maine and Minnesota have implemented statewide rent control laws thus far, with New Jersey and Maryland—in addition to New York—holding laws that give local governments the option to adopt this rent guideline.
