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Rent Increases Are Driving Inflation — and Pessimism About Economy Under Biden

Democrats say the economy is great, but millions of tenants are struggling to pay historic rent increases.

A "For Rent" sign stands in front of a house in Chicago, Illinois.

We’re told that, at least by conventional measures, the U.S. economy is doing great: Inflation is cooling and unemployment remains low. Pundits claim consumers just feel like the economy is troubled because they are still adjusting to higher prices after a global pandemic, and that helps to explain President Joe Biden’s dismal poll numbers as he seeks reelection in November.

However, traditional economic indicators often fail to capture the extreme wealth inequality in the United States. The rich have been getting richer for decades amid stagnating wages for workers. By 2023, nearly 80 percent of people making less than $50,000 a year were living paycheck to paycheck, along with 4 in 10 workers making more than $100,000 a year.

The nation faces a deep crisis of housing and homelessness that gifted inordinate power to landlords, and it’s difficult to put a positive spin on the economy when you’re struggling to pay rent and the landlord ignores your calls to fix the plumbing. Nationally, rent remains a key driver of inflation, with costs rising 0.5 percent since January and 5.8 percent over the past year.

“Tenants are paying more in rent than they have ever before, for the worst conditions that they have ever lived in,” said Grace White, an organizer with the Homes Guarantee campaign, in an interview.

The pandemic caused major disruptions in the housing market. People lost jobs or moved in search of more living space, and construction on new housing came to a halt. Inflation is easing in other parts of the economy, and the Federal Reserve is eager to lower interest rates as post-pandemic housing prices cool in some major cities after a period significant overheating in 2021 and 2022.

However, the nation is still dealing with an affordable housing shortage despite new construction efforts, and landlords have few incentives to refrain from gouging their tenants (or promptly fix the plumbing, for that matter).

A record number of people in the U.S. are houseless after policy makers allowed the pandemic-era safety net for workers and tenants to expire despite soaring housing costs. About 653,100 people reported living without a house in January of 2023, up roughly 12 percent from the same time last year and the largest single-year increase on record, according to Harvard’s Joint Center for Housing Studies. Overall, homelessness has increased by 48 percent since 2015.

An estimated 37 percent of tenants say they are very or somewhat likely to be evicted in the next two months, according to the Census Bureau’s most recent Pulse Household survey, which tracks real-time data on the pandemic’s impacts on everyday life. While the survey’s sample size is small and the results are a national estimate, a majority of households surveyed reported a rent increase in the past year, and the data clearly suggests that millions of people worry about losing their homes due to rent increases.

“As long as landlords have the power to price gouge or inflate rents at whatever rate they so choose, they will,” White said.

White organizes with a national network of tenants’ unions, and she told Truthout that it’s all about power. Landlords leverage access to a basic human need that costs many people a significant chunk of their income. When housing markets are tight and lower-income tenants have few or no options, landlords can continue raising the rent even as inflation cools and simply evict tenants who can’t afford to pay.

If a low-income family’s choice is between an apartment they can’t afford alongside their budget for groceries, or having no apartment at all, then what choice do they really have? White said this is a crucial question for policy makers.

“Time and time again, inflation numbers show that landlords are hiking rents far beyond the rate of inflation, and they are going to continue to do that until the Biden administration steps in and regulates rents and rent gouging,” White said.

President Biden knows that the affordable housing shortage and rent prices are problems for millions of voters — and for him politically. Administration officials met with the Homes Guarantee campaign and housing justice activists from across the country last summer, and Biden pledged to crack down on price-gouging “big landlords” in his State of the Union speech last week.

Biden was referring to the Justice Department throwing its support behind a landmark antitrust lawsuit filed by tenants against RealPage, a real estate website accused to colluding with landlords to inflate rent prices. Biden is also calling on Congress to pass his housing plan, which would expand tax credits for affordable housing construction and incentivize the construction of 2 million housing units with $20 billion in federal grants for cities and tribes.

Building more affordable housing units is a necessary but long-term strategy. White said tenants need relief in the interim, and the most efficient way to help tenants is limiting rent hikes by landlords who finance their properties with federally backed mortgages.

“Currently the federal government, through Fannie Mae and Freddie Mac, are in business with landlords and sometimes the worst rent gougers,” White said, adding that about 12 million units are backed by federal mortgages. “This business should be conditioned on limits to rent hikes and tenant protections.”

After two years of organizing by the Housing Guarantee campaign and its allies, the Federal Housing Finance Agency (FHFA) agreed to take public comments on proposals for enhancing protections for tenants renting from landlords with federally backed mortgages. White said any new regulations would apply to about 12 million homes nationwide, and the goal is to restore some balance of power between tenants and landlords.

“Time and time again tenants have called for the administration to regulate rent, and the most efficient way for the president to address rent inflation and rent gouging is limiting the power of landlords to hike rents, and the administration has the power to do that by conditioning enterprise-backed mortgages for multifamily homes,” White said.

Comments poured into the FHFA from tenants’ unions, the real estate lobby and renters with lived experience across the country. Unsurprisingly, landlords and real estate lobbyists submitted comments to the FHFA arguing against rent controls, which they say would prevent investment in new units.

Last summer, a group of 32 economists signed off on a letter to the Biden administration pushing back on the industry’s economic arguments and supporting national rent controls for multifamily homes with federally backed mortgages. In order to finance their properties with federal loans, landlords would agree to meet certain housing standards and avoid predatory rent increases.

“Implementing rent regulations as a condition on federally-backed mortgages will protect tenants, stabilize neighborhoods, promote income diversity in regional economies, and improve the long-term outlook for housing affordability,” the economists wrote.

The Biden administration says its currently reviewing the comments to FHFA, and White said activists and tenants eagerly await a proposal from federal regulators.

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