Alabama has been lucky, at least when it comes to the impact of inflation on rental prices. While prices have risen over the past four years for everything from food to gasoline, rent prices in Alabama are holding up Cheaper than about 80 percent of the country. But that hasn’t stopped politicians in Washington, D.C., from trying to impose bad economic policy on the Yellowhammer State, the worst of which may be rent control.
In July, President Biden announced his plan To impose rent control Nationally, using the U.S. tax code to limit or eliminate deductions for landlords who increase rental prices by more than 5 percent annually. Vice President Kamala Harris included this proposal in her economic plan during the presidential campaign, adding, as a good measure, her intention to use all the powers of the federal government to punish “rent-gouging landlords.”
These were not just idle threats. In September of this year, the Department of Justice (DOJ) sued RealPage, a Texas-based software company that some landlords use to determine the fair market price of their rental properties, accusing it of antitrust violations and “collusion.” To keep the rental cost high. This harsh action by the Department of Justice is a classic example of blaming the umpire when a pitcher cannot find the strike zone.
Naturally, neither party mentioned any proposal to reduce the cost of inflation, reduce property taxes, lower the cost of goods and services that landlords have to pay to maintain their properties, and remove state and local restrictions on development – all of which contribute to the high cost of rent. Instead, they assign blame, personalize it, create an antagonist, and then devise a solution to a problem they themselves created.
Typical business as usual for politicians in Washington. Fortunately, the Americans rejected these and other dangerous political proposals and voted in favor of a return to prosperity.
The reality is different, of course. While we in Alabama were fortunate to not see unacceptably high housing costs, other areas of the country were not as fortunate. Nationally, since 2020, rental prices have been rising It increased by approx 20 percent, and some states are seeing double-digit increases. But this increase has less to do with “landlords gouging rents” and more to do with bad economic policies.
Since 2020, mortgage interest rates It has more than doubled. The mortgage cost on a $200,000 home in 2020 was $948, not including taxes and insurance. Today, with interest rates near 7 percent, the same property would cost $1,331, an increase of nearly 50 percent. This fact alone has turned tens of thousands of potential buyers into renters, as many first-time homebuyers neither have enough income to qualify for this increased amount nor the desire to pay what can only be described as a “hidden inflation tax.” This in turn puts upward pressure on rental prices as more people look for rental units while supply remains unchanged.
There are two solutions to this problem, neither of which involves cramming rent control – a failed policy if there ever was one – down the American people’s throats nor “blaming software” for the nationwide spike in rental costs.
The first is for the federal government to get its fiscal house in order. Cutting federal expenditures is a surefire way to lower interest rates and ease pressures on the rental market. The second is to stimulate the construction of new housing units through lower taxes and less restrictive zoning and building regulations, which is primarily a state and local issue but could benefit from high-level support from our federal representatives within the Beltway.
One idea that deserves serious consideration is The road to housing lawsponsored by Sen. Katie Britt, R-Ala. This proposal would stimulate housing construction, encourage responsible innovation to meet the housing needs of rural and urban communities, increase the availability of financial education and literacy, and give additional attention to state and local housing authorities that reduce homelessness. Senator Britt was right when… She said“The Pathway to Housing Act is a comprehensive solution that will take a targeted approach to removing unnecessary red tape to lower the cost of housing, while expanding access to important resources…to empower more Americans and Alabamians with the opportunity to own a home.”
Solving the nationwide housing crisis will not be easy. However, the way forward is simple – reduce federal spending, support free market innovation, stimulate construction, and simplify and remove state and local obstacles to development. These four tried-and-true principles will go much further in addressing this annoying problem than any amount of rent control and frivolous lawsuits can ever hope to accomplish.
