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Blog Post | May 24, 2024

 Real Estate Industry Attacks LIHTC Rent Cap Win

 Real Estate Industry Attacks LIHTC Rent Cap Win

On April 1, the Biden administration announced that it would move to cap rent hikes in Low Income Housing Tax Credit (LIHTC) properties to 10%. The new regulations from the Department of Housing and Urban Development (HUD) are a historic step that will protect millions of tenants in LIHTC properties across the country from egregious rent hikes. Unsurprisingly, the real estate industry is none too pleased about this major new pro-tenant policy.    

What Is LIHTC?

LIHTC properties are specifically designed for lower-income Americans making up to 50 or 60% of the “area median income” or AMI. LIHTC properties were already capped at rent increases of 5% or twice the increase in national median income, whichever is larger, so the new regulation will prevent the most egregious rent hikes from exceeding 10%. 

The Tenant Perspective

Tenant advocates have hailed the measure as a needed change that provides “housing stability for […] millions of low-income households.” The National Low Income Housing Coalition (NLIHC) called attention to the fact that 58% of extremely low-income tenants living in LIHTC properties without additional support are extremely rent burdened, and risk displacement from high rent increases. Tara Raghuveer from the Tenant Union Federation hailed the move, saying “it’s a huge win, and it wouldn’t have happened if not for tenant unions beating the drum for the past several years demanding that every dollar of federal financing and subsidies be conditioned on tenant protections.”

Even though Biden’s LIHTC rent cap would only have applied three times in the last 13 years, it is a crucial win for tenants. Rent increases of over 10% are very difficult for tenants to absorb, especially low-income tenants who are often rent burdened. Tenants cannot simply arrange a 10% pay raise or a 10% SSI increase on their landlord’s schedule. 

Additionally, HUD’s new approach demonstrates that the federal government has the power to mandate basic tenant protections in government funded properties. As Tara Raghuveer said “It’s precedent-setting in that it’s the first time that we know of in recent history that the government has taken seriously the potential to condition federal financing on this type of protection.”

Big Real Estate’s Objections…

Within hours of the HUD announcement, corporate landlords and their top lobbying groups were crying foul about the LIHTC rent cap.

A coalition of groups including the Mortgage Bankers Association, National Apartment Association, and National Multifamily Housing Council immediately opposed the new LIHTC rent cap, saying the change would make it harder for residents and investors to participate in the LIHTC program.

  • “In a letter to HUD, the coalition said the new methodology ‘changes the calculation in ways that may make it more difficult for some residents and investors to participate in the program.’ The methodology changes ‘pick winners and losers among individuals receiving federal rental assistance,’ according to the letter. ‘While the changes may result in potentially smaller rent increases for some tenants, it will also mean fewer tenants will qualify for LIHTC-funded and other federally supported housing.’” [ConnectCRE, 4/2/24
  • The letter argues that a rent cap is not rent control precisely, but also that rent control is harmful as it “create[s] economic and racial inequality.”
    • “While the change in the income limit calculation is not rent regulation in the traditional sense, it has the effect of limiting the ability of LIHTC housing providers to recover costs through rent in a high-cost environment – which many see as a distinction without a difference. […] Decades of research proves rent caps create economic and racial inequality in communities, limit the supply of affordable housing and exacerbate the very problem it purports to solve by causing rents to increase. Rent control is specifically illegal in 33 states and was recently rejected in in Washington, Florida, Ohio, Idaho and Montana. Some pro-rent control advocates appear willing to call anything rent control simply to falsely proclaim that the policy is gaining support.” [National Association of Home Builders, 4/2/24]
  • Signatories to the letter include the Mortgage Bankers Association, National Apartment Association, National Association of Home Builders, National Association of Realtors, and the National Multifamily Housing Council. [ConnectCRE, 4/2/24

The President of the National Housing Conference, a “coalition of affordable housing leaders in America”  that counts big banks and developers among its members, said the LIHTC rent cap discourages “the creation of supply.”

  •  “‘You’re discouraging the creation of supply,’ said David Dworkin, president and chief executive of the National Housing Conference. ‘At a time when insurance costs are skyrocketing, and the fixed cost of building is already high … how many different ways are we going to make it harder to build an affordable unit?’” [Washington Post, 3/29/24
  • NHC’s members include Bank of America, JP Morgan Chase, Truist, and Wells Fargo, but also affordable housing advocacy  groups like UnidosUS, Center for Responsible Lending and National Low Income Housing Coalition. [NHC Membership Page, accessed 4/2/24]
    • At least one NHC of these member (the National Low-Income Housing Coalition) has, in spite of Dworkin’s statement, come out in support of the LIHTC rent cap. 

The president of the National Multifamily Housing Council, a lobbying association we’ve written about extensively and made up of landlords, banks and developers, warned upheaval in the housing sector meant rent increases of 10 percent may become more common. 

  • “Sharon Wilson Géno, president of the National Multifamily Housing Council, said just because it has been rare for rents to climb 10 percent in the past, that may not always be the case. Upheaval in the housing sector, high inflation and changes in the labor market make it hard to apply previous trends to this new economy. ‘The shortage of housing in this country is acute, and it has finally all caught up with us,’ Wilson Géno said. ‘While there may be some history there, you can’t necessarily rely on that history moving forward.’” [Washington Post, 3/29/24

The Mortgage Bankers Association, a lobbying group for lenders, said in a statement that the LIHTC rent cap is “unworkable,”  and will “severely suppress – if not kill” the LIHTC program. The MBA called on Congress to pass a bill that would “enhance” the LIHTC program instead. 

  • “The LIHTC program is the federal government’s most successful tool to construct and rehabilitate housing for low- and moderate-income households. If the Administration imposes unworkable rent caps on LIHTC programs, it will severely suppress – if not kill – the program. Such a move is puzzling and contradicts many of the Administration’s other efforts to increase affordable rental housing.“ [Mortgage Bankers Association, 3/29/24
  • “Increasing the supply of affordable rental housing – not rent control – is the best way to solve the ongoing affordability crisis. ” [Mortgage Bankers Association, 3/29/24

In an NBC piece about the LIHTC rent cap, MBA president Bob Broeksmit said that rent control is a “failed policy that discourages new construction.” 

  • “However, Mortgage Bankers Association President and CEO Bob Broeksmit said capping rent increases would only worsen the housing-affordability crisis. ‘Rent control has consistently proven to be a failed policy that discourages new construction, distorts market pricing, and leads to a degradation of the quality of rental housing — the exact opposite of what is currently needed in markets throughout the country,’ Broeksmit said.” [CNBC, 4/3/24

The CATO Institute, a far-right libertarian think tank founded by Charles Koch, called the LIHTC rent cap “counterproductive.”

  • “… such policies are misguided and ultimately counterproductive. While well‐​intentioned, rent control fails to achieve its primary goal of improving housing affordability for the poor and disadvantaged […] Economic theory predicts that binding rent controls will discourage upkeep and improvements on rent‐​controlled units, resulting in lower property values. Landlords, unable to charge market rents, convert rental units to condos and sell them, reducing the quantity of rent‐​controlled housing and creating rental housing shortages. Tenants in rent‐​controlled units become less mobile to avoid losing access to below‐​market rents.” [Cato Institute, 4/1/24

Fountainhead Management, a property management company with properties in Oklahoma and Texas (and apparently named for the work of libertarian icon Ayn Rand), claimed in their comment on LIHTC rules that HUD does not have authority to impose a rent cap. 

  • “In addition, Fountainhead Management, Inc. commented that HUD does not have the statutory authority to impose the income cap.” [YieldPro, 4/3/24 and HUD Comment, 2/8/24

YieldPro is a multifamily housing industry publication oriented towards the “CEOs, owners and managers in the multihousing industry.” YieldPro’s Andrew Stephens argued that the rent cap would harm renters with quickly rising incomes as well as owners with quickly rising costs.

  • “The cap on income limit adjustments affects two groups of people. The first is renters whose incomes rise faster than the new maximum annual income limit increase. They may have qualified for assistance under the old income limit rules but find themselves to be ineligible under the new rules. The second is property owners who find their costs rising faster than 10 percent per year and discover that they cannot now raise rents enough to recover those increased costs.” [YieldPro, 4/3/24]

Jay Parsons, the disgraced former chief economist for the rent-gouging company RealPage, explained his objections to the LIHTC rent cap on X (formerly Twitter). Although he admitted that the 10% cap is unlikely to affect supply, he expressed concern that it might hurt tenants in the long run.

  • “Bigger picture, it’s not that 10% cap is supply killer, but risk of slippery slope injects real risk for affordable housing investors. Inevitably, at some point someone will complain 10% is too high, and then what?” [Jay Parsons via X, 4/1/24]
  • “LIHTC has been primary [sic.] driver of new affordable housing construction and rehab preservation. Let’s hope this short-term political win doesn’t backfire at the long-term expense of those they’re ostensibly trying to protect.” [Jay Parsons via X, 4/1/24]

… And Why They’re Bogus

Taken togther, the real estate industry as three main objections to the new LIHTC rent cap:

  1. The LIHTC rent cap will “discourage the creation of supply” of new LIHTC properties, exacerbating the ongoing housing crisis. According to the industry, this could have disastrous consequences for the integrity of the LIHTC program, thereby hurting tenants.
  2. The new LIHTC rent cap will exclude some tenants from qualifying for LIHTC properties who would otherwise qualify, 
  3. Above all, the industry warns against any policy that seems like rent control, arguing that rent control decreases supply, has been shown to fail before, is opposed by most economists, and would increase “economic and racial inequality.”

None of these bogus arguments against the rent cap stand up to scrutiny: 

  1. The rent cap is very unlikely to adversely affect new LIHTC construction. The cap on rent hikes has only exceeded 10% three times between 2010 and 2023, and under normal circumstances, rent increases are expected to be 2 – 3%. The Department of Housing and Urban Development estimates that  “the combined increases in costs for labor, materials, and insurance in 2023 and 2024, capturing the inflationary period of 2022, never exceeded 10 percent in any state.” Even some industry spokespeople admit this, such as economist Jay Parsons.

    In other words, massive increases are too rare to be a big part of the base case for an investor deciding whether to build—but just one such instance of a massive rent increase can permanently scar a family that can no longer afford their home.
  1. It is correct that the new HUD decision will also cap the increase in the Area Median Income measurement, meaning that in years where a tenant’s income increased more than 10%, they may become ineligible for LIHTC. However, it has always been the case that a tenant’s income increasing significantly may make them ineligible for LIHTC, opening up room for a tenant with a lower income to move in. Since there are over 7 million American families living below the poverty line, there is no lack of demand for the roughly 2 million LIHTC units. This is an inevitable drawback of a housing system where affordable housing is an anomaly.
  1. Many of the other industry arguments are simply played-out arguments against rent control, which are being increasingly disproven by economic analysis. As we’ve written on this blog before (and housing experts Mark Paul and Fran Quigley have written elsewhere), the industry’s claims that rent control will depress supply or exacerbate inequality are crumbling under the weight of new evidence.


Industry spokespeople have been quick to attack Biden’s LIHTC rent cap, even though they simultaneously claim that it is not that important and is not a win for rent control. Their most prominent argument is that the rent cap will actually hurt tenants in the long run, which they back up with dubious claims about supply and market dynamics. By claiming that they actually represent the best interests of tenants, they seek to sow division between tenant advocates who are trying to enforce their right to affordable homes and protections from rare but life-altering massive rent increases. In reality, the rent cap will not prevent housing development, and will prevent many tenants from being forced out of their homes.


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