Nearly 50 Economists Were Asked How They Feel About President Biden's 5% Rent Cap: This Is What They Had To Say

President Biden’s proposal to cap annual rent increases at 5% for properties owned by corporate landlords sparked a debate in economic circles.

A survey of 46 prominent academic economists conducted by the University of Chicago reveals a strong consensus against the measure, raising questions about its potential efficacy and unintended consequences.

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The survey, which asked economists to weigh in on three key aspects of the proposed rent cap, found that an overwhelming majority believe the policy would fail to achieve its intended goals and could potentially harm the very people it aims to help.

When asked if the rent cap would make middle-income Americans substantially better off over the next decade, 74% of respondents disagreed or strongly disagreed. Just 2% agreed with the statement, while 16% remained uncertain.

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Perhaps more concerning for proponents of the measure is the economists’ outlook on housing availability. Sixty-two percent of respondents agreed or strongly agreed that the 5% cap would substantially reduce the number of available apartments for rent over the next ten years. That finding aligns with the long-standing economic theory that price controls often lead to supply shortages.

"Rent control reduces investment in both existing and new housing," Steven Kaplan, a research associate at the National Bureau of Economic Research, said in his free-form comments in the survey. "A very bad idea. Embarrassingly bad proposal."

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The survey also addressed the policy’s potential impact on income inequality, a key concern for the Biden administration. Here, too, the economists were skeptical. Sixty-six percent disagreed or strongly disagreed that the rent cap would substantially reduce U.S. income inequality over the next decade.

Larry Samuelson, a Professor of Economics at Yale, said, "Experience indicates that rent caps or controls typically backfire."

The findings present a challenge for the White House, which has positioned the rent cap as a tool to address the affordable housing crisis and reduce economic disparities. 

The economists’ responses suggest that the policy could potentially exacerbate the issues rather than fix them.

Jay Parsons, a housing economist, critiqued the plan earlier this month, saying, "The White House announced a proposal to install rent control AND stimulate more housing, which is like arguing to cap organic food prices AND produce more of them."

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It’s worth noting that the survey focused on academic economists, whose views may differ from those of policymakers or housing advocates. However, the strong consensus among the experts raises questions about the potential consequences of implementing the policy on a national scale.

Critics of rent control often argue that it discourages new construction and maintenance of existing properties, leading to a deterioration in housing quality and availability over time.

Supporters, on the other hand, say that it provides necessary relief for renters in high-cost areas and helps maintain diverse communities.

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