If Enacted, These Cities Will Benefit Most From President Biden's Rent Cap Plan

President Joe Biden this week proposed a plan to cap rent increases for millions of Americans, aiming to address the ongoing housing affordability crisis in the U.S.

The proposal, which would require congressional approval, hopes to limit annual rent hikes to 5% for corporate landlords with more than 50 units or risk losing valuable federal tax breaks. While the plan faces opposition from industry groups, it could relieve renters in cities seeing rapid price growth.

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According to Zillow, several areas that have seen sharp price hikes in the last year are better positioned to benefit most from Biden’s proposed rent cap. Hartford, Connecticut, tops the list with a 7.8% year-over-year rent growth, followed by Cleveland, Ohio (7.2%), and Louisville, Kentucky (6.8%).

“Renters are being drawn to more affordable areas within the Northeast and Midwest,” Skylar Olsen, chief economist at Zillow, said in a statement. “In this new age of remote and hybrid work, the savings seem worth it for many renters, even if it means an occasional painful commute.”

The cap would effectively curb landlords’ ability to raise rents beyond the 5% threshold in markets like Hartford, Cleveland, and Louisville. That could translate into savings for tenants in these growing markets.

For instance, in Hartford, where rents have risen by 7.8% over the past year, renters could see their annual increases nearly halved. The cap would create a buffer against sharp rent spikes, providing a measure of predictability and financial relief for renters in high-growth areas.

According to Zillow's data, here are the cities that could see an impact from the rent cap:

Hartford, Connecticut (7.8% rent growth)
Cleveland, Ohio (7.2% rent growth)
Louisville, Kentucky (6.8% rent growth)
Providence, Rhode Island (6.3% rent growth)
Milwaukee, Wisconsin (5.7% rent growth)
Boston, Massachusetts (4.6% rent growth)
New York City, New York (3.8% rent growth)

While traditional high-cost markets like San Francisco and Los Angeles continue to have some of the highest rents nationally, their slower growth rates mean they may see less dramatic effects from the proposed cap.

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The White House argues that some corporate landlords have taken advantage of the housing shortage, raising rents beyond increases in their costs. The administration estimates the plan could affect around 20 million rental units nationwide.

However, industry groups, such as the Mortgage Bankers Association (MBA), warn that rent control policies could ultimately harm renters by discouraging new construction and degrading the quality of existing rental housing.

“Increasing the supply of affordable rental housing nationwide – not politically motivated and self-defeating rent control proposals – is the best way to alleviate affordability constraints for renters,” Bob Broeksmit, President and CEO of MBA, said in a statement issued this week.

Real estate brokerage Redfin also cautioned that while caps on rent hikes may be appealing in the short term, they could exacerbate the housing supply shortage in the long run by disincentivizing new construction.

“The root of the housing affordability issue is a severe shortage of housing units,” Redfin said on Monday. “Estimates range from 1.5 million to 5.5 million or more units needed nationwide.”

While acknowledging potential pitfalls, supporters of the Biden administration’s proposal argue it includes measures to address some concerns. The plan carves out exceptions for new construction and renovations, aiming to maintain incentives for housing development and improvement.

Additionally, the White House has proposed complementary measures, like using federal land for housing development and providing grants to communities for building affordable units. However, Redfin suggests that while these efforts are a step in the right direction, they may not be sufficient to solve the supply problem entirely.

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