Trends in Housing and Biden’s Rent Control Proposal

By SBE Council at 18 July, 2024, 6:13 pm

by Raymond J. Keating -

According to the latest report from the U.S. Census Bureau, the slide in the residential housing sector stopped in June - but not for single-family homes. Meanwhile, President Biden has come up with a housing plan that will make matters worse for renters.

Residential housing construction is an industry almost completely about small businesses. According to the latest Census Bureau data (2021), in the residential building construction sector:

● 92.3 percent of employer firms have fewer than 10 employees

● 97.3 percent fewer than 20 employees

● 99.7 percent have fewer than 100 employees

That's small business.

As for housing starts in June, they were estimated at a seasonally adjusted annual rate of 1,353,000, which was up by 3.0 percent versus May, but off by 4.4 percent compared to June 2023.

Meanwhile, building permits - which is a gauge of future starts - in June came in at a seasonally adjusted annual rate of 1,446,000. That was up by 3.4 percent compared to May, but down by 3.1 percent versus June 2023.

Inside these numbers, however, single-family starts at 980,000 in June 2024 were down by 2.2 percent versus May, but up by 5.4 percent compared to a year earlier. As for single-family building permits, those registered 934,000 in June 2024. That also was down by 2.3 percent versus May, and down by 1.3 percent compared to a year earlier.

Indeed, it must be noted that both single-family starts and permits continued a multi-month slide in June (five months for permits and four months for starts).

This generally lines up with the National Association of Home Builders' measure of builder confidence for newly built single-family homes, which was down in June, and registered its lowest reading since December 2023.

However, NAHB Chairman Carl Harris, a custom home builder from Wichita, Kansas, struck a hopeful note: "While buyers appear to be waiting for lower interest rates, the six-month sales expectation for builders moved higher, indicating that builders expect mortgage rates to edge lower later this year as inflation data are showing signs of easing."

Small businesses in the housing business and across all other industries should be hoping that this optimistic take offered by Harris comes to fruition.

President Biden's Rent Control Plan

President Biden's proposal for federal rent control would undermine housing in what should be obvious ways. Biden wants to impose a two-year plan under which annual rent increases would be capped at 5 percent on housing providers of multi-family structures with 50+ existing units.

These housing providers would either accept rent control or lose accelerated depreciation.

Rent control's main accomplishment over the decades has been to disincentivize the building of new housing, and diminish investment and upkeep in the current housing stock. As costs rise for housing providers, like everyone else, rent control limits current returns and places future returns in doubt.

Biden's proposal for rent control is another case whereby a politician panders while ignoring basic economics. Housing issues are not about so-called "greedy" landlords, as too many politicians assert, but instead they are about impediments at local, state and federal levels to building new rental housing units. The Biden rent control proposal would merely add to such impediments and costs.

If President Biden is looking to hurt small businesses and renters, he has chosen the right policy choice.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His latest books on the economy are The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist, The Weekly Economist II:52 More Quick Reads to Help You Think Like an Economist and The Weekly Economist III: Another 52 Quick Reads to Help You Think Like an Economist.

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