This week, the White House unveiled a nationwide rent price control plan that calls on Congress to "pass legislation giving . . . landlords a choice to either cap rent increases on existing units at 5% or risk losing current valuable federal tax breaks." (White House Fact Sheet)

While the package is focused on imposing flawed rent price control policies and eliminating long-standing depreciation write-offs, it also includes policies to help build more housing. (WSJ, July 16)

Housing Proposals

• Under President Biden’s plan, beginning this year and for the next two years, owners of rental housing would only be able to take advantage of faster depreciation write-offs if they limit annual rent increases to no more than 5%, effectively trading depreciation deductions for rent price controls.

• This would apply to landlords with over 50 units in their portfolio, covering more than 20 million units nationwide—nearly half the U.S. rental market. It would include an exception for new construction and substantial renovation or rehabilitation. (White House Fact Sheet)

• While intended to make renting more affordable, these proposals would impede the production of much-needed housing, particularly for affordable units. (Bloomberg, July 17)

• The Biden-Harris Housing Plan also includes initiatives to:
  • Call on all federal agencies to assess surplus federal land that can be repurposed to build more affordable housing;
  • Rehabilitate distressed housing, build more affordable housing, and revitalize neighborhoods; and
  • Authorize $325 million in Choice Neighborhoods grants under the U.S. Department of Housing and Urban Development (HUD) to build new deeply-affordable homes and spur economic development in communities across the country.

• The proposal would require congressional action to become law.

FHFA Proposed Tenant Protections

• Last week, the Federal Housing Finance Agency (FHFA) announced a set of required tenant protections for multifamily properties financed by Fannie Mae and Freddie Mac (the Enterprises). (FHFA News Release)

• This is the first time tenant protections will be a standard component of Enterprise multifamily financing.   

• These protections apply to future loans acquired by the Enterprises and would include:
  • Requiring 30-day notice before rent increases;
  • Requiring 30-day notice on lease expiration; and
  • Providing a 5-day grace period before imposing late fees on rental payments.

Industry & Roundtable Response

• This week at the Republican National Convention, our National Real Estate Organizations (NREO) partnered with POLITICO to host a series of discussions on the elections, affordable housing, revitalizing cities, the commercial real estate industry, and proactive policy solutions. (Watch here)

• The Roundtable’s President & CEO Jeffrey DeBoer was a featured speaker alongside Shannon McGahn (National Association of Realtors), joining Heidi Sommer (POLITICO) for a discussion on affordable housing, upcoming tax priorities, interest rates, and the economy.

• DeBoer stated in response to the administration’s recent rent cap proposal, “Rent control is fundamentally flawed and historically ineffective. Wage and price controls, even during wartime, have consistently failed to deliver the intended results. Implementing such measures now will only exacerbate the root cause of America’s housing problem by discouraging new housing development and reducing investment in existing housing.”

• Many of our NREO colleagues, including NAR also spoke out against the proposal. (NAR statement) (NMHC statement) (Housing Solutions Coalition statement)

The Roundtable is developing comments on the proposed plans and will continue work to enact measures that will help spur the expansion of America’s affordable housing infrastructure.

This week, The Roundtable urged the Departments of Treasury, Energy, and the Environmental Protection Agency to develop voluntary, science-based guidelines to help U.S. real estate companies align their climate-related programs with global targets. (July 16 letter)

U.S.-Specific Climate Investment Principles

• The Roundtable’s letter to Treasury Secretary Yellen, Energy Secretary Granholm, and EPA Administrator Regan, builds on Treasury’s Principles for Net Zero Financing and Investment. (Roundtable Weekly, Sept. 23)

• Treasury’s principles can guide net-zero corporate commitments in the United States.

• However, foreign organizations aim to exert significant influence over capital decisions in America’s real estate – which can leave buildings “stranded” in the eyes of some overseas investors because they do not meet “energy requirements being rolled out in Europe.” Bloomberg (June 18)

• These market risks prompted the Roundtable’s letter requesting voluntary building “decarbonization curves” designed by the U.S. government reflecting climatic, market, and data conditions in our country.

• Investment principles for America’s real estate “should not be the creation of the European Union,” The Roundtable states.

• “This is a matter of global economic competitiveness for capital access,” said the Chair of The Roundtable’s Sustainability Policy Advisory Committee, Anthony Malkin (Chairman and CEO, Empire State Realty Trust, Inc.). “America’s buildings should not be expected to meet standards that speak to assets, laws, power grids, and regulatory environments in Europe or elsewhere.”

U.S. Energy Programs and Recommendations

• Malkin continued, “The United States leads the world in government developed, voluntary guidelines for all types of buildings' energy use and emissions. Agencies like US-EPA and US-DOE know the conditions of our markets, climate zones, and power grids and can help make it easier for capital to come into real estate and grow jobs and tax revenue in the United States.”

• America’s global leadership in developing climate-related real estate guidelines is shown through tools and resources such as:
  • EPA: ENERGY STAR Standards for efficient and low-carbon buildings, including NextGen certification. (Roundtable Weekly, March 22)
  • DOE: The first voluntary National Definition for a Zero Emissions Building (“ZEB”) (Roundtable Weekly, June 7), and the wealth of scientific research from the agency’s 17 national labs.
  • Federal Data Collection: Systems like the national Commercial Building Energy Consumptions Survey (CBECS) and ENERGY STAR’s Portfolio Manager.
  • Electric Grid Information: Unmatched resources profiling carbon intensities of grid regions across the U.S.

• The Roundtable urged the U.S. government to develop building “pathways” through a robust public input process that considers the experiences of companies that own, develop, manage and finance America’s real estate.

The Sustainability Policy Advisory Committee (SPAC) will continue to work with the agencies and Congress to shape policies that promote cost-effective investments to optimize building energy efficiency and help the real estate sector mitigate the effects of climate change.