President Joe Biden speaks at a community college in Largo, Maryland on Sept. 14, 2023 to tout his economic policies. Photo by Patrick Siebert | Office of the Maryland Governor

President Joe Biden last week jettisoned decades spent crafting an image as a moderate Democrat in a transparent ploy to rally party progressives to his foundering campaign.

The president, who is facing mounting calls within his own party to step aside after his disastrous debate performance last month which as of press time he hadn’t yet heeded, announced that in a second term, he would pursue a 5 percent cap on apartment rent increases.

So-called “corporate landlords” – anyone who owns more than 50 rental units – would either have to limit increases to 5 percent or forfeit a key federal tax write-off on their properties.

Barring a significant shift in the latest political trends, Biden would face a daunting task getting his controversial proposal enacted given it would require congressional approval.

Yet the proposal to force all but mom-and-pop landlords to choose between limiting rent increases to a modest level or being able to claim property depreciation write-offs undercuts the president’s own plans to rev up housing production across the country.

Biden’s Prior, Better Plan

More than two years ago, Biden unveiled a housing plan that made a lot more sense than attempting to revive rent control, an idea that economists have widely panned for its killer impact on new housing construction.

The administration’s “Housing Supply Action Plan” offered up a mix of ideas aimed at helping tackle the now chronic shortage of new housing that is driving up rents and prices across the country, not just here in Massachusetts.

The plan called for expanding federal efforts to preserve existing affordable housing and spur construction of new apartments, while boosting financing for manufactured homes and accessary dwelling units.

But it also included an innovative provision that cut to the heart of the bottleneck holding back the construction of new houses, apartment and condominiums across the country: Communities that revamped and reformed their local zoning rules – considered to be one of the main obstacles holding back new housing development – would get a leg up on competing for federal grants.

Biden’s housing production plan, released back in May 2022, was widely praised by real estate industry groups.

Unfortunately, it also appears to have gone nowhere in terms of clearing Congress, but instead of doubling down on a good idea, Biden is now throwing his support behind a bad idea, rent caps, also known as rent control.

Why It Will Hurt, Not Help

A coalition that includes the National Apartment Association, Mortgage Bankers Association and National Multifamily Housing Council, warned Biden’s rent cap plan would make a bad situation even worse, according to a story in REALTOR Magazine,

“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,” the group said in a statement. “Rent caps hurt renters and communities.”

Economists like Jason Furman, chair of the Council of Economic Advisers under President Barack Obama, are also blasting the proposal.

“Rent control has been about as disgraced as any economic policy in the tool kit,” Furman told the Washington Post. “The idea we’d be reviving and expanding it will ultimately make our housing supply problems worse, not better.”

Biden’s plan attempts to address concerns about stifling new construction, but with nothing more than a fig leaf.

Once rent caps are introduced, investors weighing plans for new apartments will be understandably concerned that the president or Congress could simply remove the exception at a later day.

Or, if there is a time period for the exception, as there is under Boston Mayor Michelle Wu’s rent control plan, investors would be faced with a potential drop in income from any new apartment building they backed after a certain date.

Scott Van Voorhis

Oxygen for a Bad Idea

All that said, rent caps and rent control may be bad economic policy but they are good politics, with polls showing strong support among the public, and not just in Massachusetts, but across the country.

Biden and his advisors clearly know this as the president faces a tough reelection battle against former President Donald Trump.

But the political calculations may be even more immediate than that, with Biden’s embrace of rent control helping win him critical support in his current battle simply to remain as his party’s standard bearer.

In the wake of Biden’s rent control proposal and some other left-ward policy shifts, Sens. Bernie Sanders and Ed Markey, as well as Reps. Alexandria Ocasio-Cortez and Ayanna Pressley, are now singing the praises of a politician who spent decades crafting an image as Mr. Moderate.

Whether it will be enough to save Biden’s candidacy is another question.

However, it comes at the price of giving oxygen to a really terrible idea that, if embraced, could destroy any hopes of coming to grips with the nation’s ever more dire housing crisis.

Scott Van Voorhis is Banker & Tradesman’s columnist and publisher of the Contrarian Boston newsletter; opinions expressed are his own. He may be reached at sbvanvoorhis@hotmail.com.