The Biden administration announced plans to try to lower housing costs, including a call on Congress to cap apartment rent increases for corporate landlords at 5%.

The proposal, opposed by major rental property trade groups, ties compliance with the measure to federal tax break eligibility. President Joe Biden is also calling for a repurposing of some public land for affordable housing projects and $325 million in grants from the Department of Housing and Urban Development to build 6,500 new housing units.

“Families deserve housing that’s affordable — it’s part of the American Dream,” President Biden said in a statement. “Rent is too high and buying a home is out of reach for too many working families and young Americans, after decades of failure to build enough homes.”

The White House’s rent control proposal, requiring congressional approval, comes during a highly contested presidential race and landed on the second day of the Republican National Convention that nominated former President Donald Trump on Monday. The proposal would give landlords receiving tax breaks an ultimatum: limit rent increases to no more than 5% or lose federal tax advantages, including "faster depreciation write-offs," which are said to allow tax deductions of property purchases along with improvement costs.

As proposed, the legislation would limit rent increases beginning this year and last through 2026. The rule would apply to landlords with more than 50 units in their portfolio, effectively capping rents on more than 20 million units nationwide, according to the administration.

The plan would only affect existing units with exceptions for new construction and substantial renovation or rehabilitation projects. It was unclear if the rate cap would apply only to renewals or to new leases on vacant apartments as well. CoStar News reached out to the White House for clarification but didn't immediately hear back.

Apartment trade groups, including the National Multifamily Housing Council, National Apartment Association, and the Mortgage Bankers Association, criticized the proposal as a hindrance to new supply and lower rent growth.

“This legislative proposal will not create a single new unit while raising costs on the very residents it purports to help,” Sharon Wilson Géno, president of the National Multifamily Housing Council, said in a statement. “If the administration’s goal is to lower housing costs and support residents it would be better advised to implement policies that expand housing supply — the only real way to sustainably lower housing costs and create more housing security for renters.”

Bob Broeksmit, chief executive of the Mortgage Bankers Association, decried the proposal as “politically motivated and self-defeating,” calling instead for “common sense solutions that will boost housing supply.”

“There are endless examples in localities in America and around the world that prove that rent control is a counter-productive policy idea that ultimately harms renters by distorting market pricing, discouraging new construction, and degrading the quality of rental housing,” Broeksmit said in a statement. “While the odds are stacked against this proposal ever passing Congress, a federal rent control law would be catastrophic to renters and our nation’s rental housing market.”

Analysts at Morgan Stanley characterized the policy proposal as an attempt “to thread the needle between implementing rent control on existing assets, while not disincentivizing new construction.”

According to data from the investment firm, yearly rent growth over the past 24 years has averaged 2.2% for all classes of units on a national basis. Renewals have outpaced that trend, the company said, citing data from national apartment operator UDR showing quarterly new lease growth between 2009 and 2022 averaging 2.1%, compared to 5.4% growth in renewals over that time.

Equity Residential displayed a similar trend, Morgan Stanley said, with new lease growth averaging 1.2% on a quarterly basis since the beginning of 2014 compared to 5% average growth in renewals.

Along with the rent control measure, the White House announcement included a plan to repurpose some federal land for the construction of tens of thousands of affordable homes. The Bureau of Land Management is expected to put 20 acres of public land up for sale in Clark County, Nevada, along with an additional 18 acres in Henderson, Nevada.

The Clark County deal is expected to enable the development of nearly 150 affordable homes for households earning less than 80% of the area’s median income. In Henderson, the city estimates the land sale with support 300 affordable rental units.

The Bureau of Land Management is also considering an additional 562.5 acres of public land in Southern Nevada that could support more than 15,000 affordable units in the area.

Other agencies that are assessing surplus federal lands include the United States Forest Service and the United States Postal Service.

Completing the trio of proposals from the Biden administration was an announcement from the Department of Housing and Urban Development of the Choice Neighborhoods grant program totaling $325 million.

The awards are expected to build over 6,500 units of new housing and revitalize neighborhoods through support for small businesses and the creation of new childcare centers and parks.