On January 25, the Biden administration announced a new Housing Supply Action Plan (HSAP) initiative, aiming to increase fairness in the rental housing market and advance the principles of fair housing. The executive action comes in two forms. The first is a set of administrative actions and directives to the executive branch and independent federal agencies to 1) study certain market practices that unfairly prevent applicants and renters from accessing or remaining in rental housing, and 2) consider implementing policies that place limits on future rent increases and possible anti-competitive pricing practices using existing regulatory and investigatory authorities. The second element of the proposal is “The White House Blueprint for a Rental Bill of Rights” (the “Blueprint”), a white paper published by The White House Domestic Policy Counsel that lays out the principles with which the agency initiatives will align. The Blueprint is broader in scope and appears to map the longer-term direction of White House rental housing policy.
Administrative Actions and Directives
Specific executive actions and directives to federal agencies and enterprises include the following:
The Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB) are directed to collect information on market practices that prevent households from accessing and maintaining rental housing, including background checks, algorithm-based application screening, and permissible sources of income. The FTC and CFPB will issue and enforce guidelines that will hold credit bureaus and background check companies accountable for lacking procedures that identify and remove incorrect information hindering access to housing.
The Federal Housing Finance Agency (FHFA) will launch a public process to consider proposals that promote renter protections and limits on rent increases at rental properties financed by future multifamily mortgage loans and investments made by Fannie Mae and Freddie Mac (the Enterprises).
The Department of Justice (DOJ) is directed to provide guidance on certain rental market practices that may be anticompetitive, most prominently the use of algorithm-based unit pricing software.
The Department of Housing and Urban Development (HUD) will propose a new rule requiring public housing authorities and operators of properties with project-based rent subsidies to provide at least 30 days advance notice of a lease termination.
The Blueprint for a Renters Bill of Rights
The Blueprint elaborates on the public policy objectives that informed these regulatory actions. As the foregoing executive initiatives will not fulfill all stated policy objectives the document implies that further regulatory steps can be expected. Although the Blueprint itself is not enforceable, as it goes to some length to disclose, rental property owners, investors, and managers should be aware of the agenda items discussed in it as they may foreshadow future executive branch regulatory and legal action.
The Five Principles of the Blueprint
The Blueprint uses five guiding principles as an organizing framework. These principles are:
- Access to safe, quality, accessible, and affordable housing
- Clear and fair leases
- Education, enforcement, and enhancement of rights
- The right of tenants to organize
- Eviction prevention, diversion, and relief
The Blueprint proposes to promote these goals and enforce new national standards through federal action should the “patchwork of state and local laws” that renters and providers must navigate fail to accomplish them. If carried out this would constitute greater federal involvement in the rental application and applicant review process, evictions, lease language and terms, and rent-setting activities than currently in effect.
The major policy proposals discussed under each principle are discussed below.
Access to Safe, Quality, Accessible, and Affordable Housing
This section addresses acts and practices that unfairly hinder households from obtaining and retaining housing. Its objective is to remove barriers that may arise in the application and applicant screening processes that limit access to housing and place constraints on “unfair” rent increases.
The text suggests rent increases should be “transparent” and “fair,” and references a 30% of household income threshold for affordability. Without explicitly calling for federal rent controls the Blueprint implies that property owners should provide tenants support for rent hikes, presumably in written form, an invitation to regulatory scrutiny on fairness and public health grounds.
With respect to concrete proposals to preserve affordability, the document reports that the FHFA and the Enterprises will work jointly to expand the definition of Enterprise mission-driven business to include loans secured by market rate properties that agree to maintain rents at levels affordable to households earning 80% to 120% of area median income. As the Enterprises have economic incentive to maximize mission-driven business qualifying loans are more likely to receive pricing discounts or waivers than conventional products, a tangible benefit.
The white paper also mentions the DOJ guidance on the use of “modern methods of information-sharing in consumer-facing markets” and whether it constitutes an anticompetitive practice. This alludes to use of yield-maximizing software that employs anonymized real-time competitor pricing information to suggest rent strategies – a practice that some critics believe exacerbates rent inflation. An anti-competitive finding will burden users, especially large operators with hundreds of units repricing monthly.
Clear and Fair Leases
This section argues that leases in all jurisdictions should adhere to some minimum national standards. The text explicitly states that leases should not require mandatory arbitration for dispute resolution, contain hidden fees or false, unfair, or deceptive representations. The authors also assert that lease terms should be separately summarized in plain language accessible to the tenant.
How this principle would be applied nationally is left unstated. Rather, examples of actions taken by the Department of Defense, HUD, and the Department of Agriculture to develop standard lease forms that are fair to tenants and written in plain text are offered as templates.
Education, Enforcement, and Enhancement of Rights
Under this principle, the authors of the Blueprint argue that renter protections provided under the Fair Housing Act should be expanded to “expressly prohibit discrimination based on source of income.” This provision would require providers to treat all legal sources of income equally, including child support and alimony payments, housing choice vouchers (HCV), and other subsidies. Under this provision, property owners would be required to accept HCV in situations where rents meet programmatic tests (such as low-income housing tax credit units) and qualify for child support and alimony payments for income test purposes regardless of access to the credit of the obliged payor.
This section also addresses how credit reports and background checks can contribute to housing discrimination. As third-party reports may contain errors, the Blueprint argues that denied applicants should receive, in addition to a legally required adverse action report, a notification of the reason for the denial, enabling them to correct credit report errors and cure deficiencies.
To forward these initiatives, the CFPB and FTC will promulgate rules or guidance to ensure that background screening providers have procedures in place to ensure credit report information is accurate. The CFPB also will ensure that tenants can challenge erroneous credit report information.
The HUD will provide guidance on source of income remedies. Several agencies have ongoing initiatives to prohibit Low-Income Housing Tax Credit property owners from refusing to lease units to HCV holders.
The Right to Organize
The authors stipulate that renters should have the right to organize a recognized tenant association and engage in conversations regarding the rental property with the property owner. The Blueprint reports that organizing was met by retaliation in the past, causing some renter activists to fear that advocating for community investments or collective bargaining rights will result in housing loss.
Suggested remedies are confined to HUD, public housing, and military program properties. The applicability of collective bargaining to market rate situations is not drawn explicitly.
Eviction Prevention, Diversion, and Relief
Regarding eviction or lease non-renewal, the fifth Blueprint principle asserts that evictions should be subject to just-cause protections and that adequate notice must be provided in the event a tenant will not be offered the opportunity to renew. The authors argue that renters subject to evictions should have access to non-judicial alternatives such as diversion and grievance procedures, and to a resolutions process that provides for the opportunity to cure rent arrearages and address non-monetary lease violations.
When an eviction proceeding is filed the tenant should receive notice 30 days prior to an eviction action and be granted the right to counsel during the proceeding. The eviction proceeding should satisfy all fairness and due process standards, granting the subject the ability to present evidence, conduct cross-examination and discovery, and file an appeal without bond. Also, the proceedings should be conducted by an independent, competent hearing officer in a language the tenant understands. A written record should be produced and retained, and evictions should be sealed immediately to reduce the chance that the action will hinder the tenant’s future access to housing.
Already, the FHFA requires that multifamily properties with Fannie Mae and Freddie Mac mortgages provide tenants in arrears at least 30 days notice to vacate. Moreover, the Biden Administration will announce similar requirements applying to public housing authorities and owners of properties with project-based HAP contracts.
Conclusion
At present, the Biden administration’s proposal to strengthen tenant protections and improve rental affordability applies only to properties with mortgages guaranteed by HUD, USDA and the Enterprises, and properties subject to contracts with the Department of Defense. The policy objectives of the initiative as expanded upon in the Blueprint appear broader, however. Applied to the fullest degree, the proposal could lead to the insinuation of the federal government into aspects of the owner-tenant relationship that currently fall under state and local law.
National standardization of lease language, clarification of anti-discrimination laws, and tighter quality control of material reported by credit and background check vendors will benefit both tenants and owners. Many of the proposals outlined in the Blueprint, by contrast, could lead to significant increases in property operating costs, imposition of de facto or de jure rent controls, new constraints on the use of market data to determine asking rents, and more costly and time-consuming eviction procedures. Because of these elements, the Renters Bill of Rights, in the words of the National Multifamily Housing Council, will do nothing to address the nation’s housing shortage and may instead discourage much-needed investment.
