Renters across the country are bracing for a steep increase in their rent payments under President Donald Trump’s proposed rent tax, which would raise more than $600 billion over 10 years.
The Republican plan, which is being drafted by Trump’s transition team and the Department of Housing and Urban Development, would impose a 5 percent property tax on most rentals and a 4 percent tax on condos and apartments.
The proposed tax would apply to rental properties in cities with more than 2,000 people and to properties in counties that include the city of Houston, according to a release from the White House.
The new tax is expected to add to the already high costs of living in cities across the nation, which has already hit the lowest point in decades.
The tax will likely raise $1.7 trillion, the Trump transition team said.
Renters across America are already dealing with skyrocketing costs, according the Urban Institute, which forecasts that rent prices will be $1,800 to $2,200 a month in 2020.
The average rent in the United States was $1 in March, the most since January 2000, according Rent Jungle.
Renting a two-bedroom apartment in New York City, for instance, would cost $3,600, while a two bedroom in Chicago would cost around $2.50 a month.
“I’ve lived in the city for a couple of years now and I have a condo that costs $1 million,” said Jessica Oates, who rents from a studio apartment in the New York area.
“I’m afraid I will end up paying more rent than I did when I was renting at a higher rate.”
Some experts, like the Tax Foundation’s Steven Rosenthal, say that the proposed tax will create an incentive for landlords to keep rents high.
The federal government is set to give away money to states to help them raise their rents, Rosenthal said.
But Rosenthal said that the Trump administration’s tax proposal will exacerbate rents by increasing the costs of renting, which could drive up prices.
“The administration is making a mistake,” Rosenthal said of the proposal.
“It is essentially subsidizing the landlord.”
A new study by the Urban League found that the rate of rent increases was the highest in 30 years.
The study also found that average rents in metropolitan areas that have more than 3,000 residents have increased $1 to $3.60 per month, the biggest jump in more than two decades.
Rents have already been soaring for renters in Los Angeles, which now has a median rent of $2 per month.
But the rate has more than doubled in the past year.
The Tax Foundation, which advocates for a low tax, also says the tax will increase housing costs for low-income households.
“Higher taxes are a bad thing for renters because they raise costs for many lower-income renters, and they make it harder for many low- and middle-income families to afford a home,” said Laura Zern, the group’s director of tax policy research.
Zern also said that while the proposed rate is lower than other recent tax increases, it is still far higher than the median tax increase in California in 2020, when the state increased its income tax rate by 5 percent.
Zentz said that in New Jersey, which does not levy property taxes, the proposed 4 percent property and rental tax will be even more expensive than in California.
“We know that New Jersey’s average rent is now $2 a month and that is a lot higher than what most states and localities have to pay to cover the costs,” Zentz told Business Insider.
“And that is because the proposed increases will only apply to housing owned by a single landlord.”
In New York, the proposal is set for a vote in a special session on Monday, so lawmakers can make any changes to the tax bill before it goes to Trump.
The tax is not the only new tax proposal coming from the Trump team.
On Monday, the administration also unveiled a plan to make homeownership more affordable, with the goal of raising the price of a mortgage by up to 8 percent and reducing the amount of debt that Americans have to take on in order to buy a home.
Trump’s plan would also lower the capital gains tax rate, which applies to profits from bonds and stock transactions, from 25 percent to 15 percent.
But critics of the proposed changes argue that it will only benefit the wealthiest Americans, who already make more than a quarter of income.
“It will disproportionately benefit the top one percent of Americans,” said Robert Reich, a labor economist and former Democratic president.
“That’s why they’re willing to go to this extreme.”
Rent control advocates and some economists, however, argue that Trump’s proposal would increase rents by making it more difficult for renters to afford to live.
“Rent is a social issue, it’s not a property issue,” said Tom Pyle, a professor of urban policy at Rutgers University.
“What the Trump plan