Regretting Rent Control

Posted By: Karey Landers AACO Resources, Industry,

Rent control is among the dumbest policies known to man, but cities keep trying it. St. Paul, Minn., is the latest to discover this universal truth, though not before significant damage was done.

Voters passed a ballot measure last November imposing a 3% cap on annual rent increases. The result was that builders shunned the city, and the City Council has responded by voting late last month to create new exceptions to the cap.

Effective Jan. 1, there will be a 20-year rent-control exemption for new residential properties and some apartments that participate in government affordable-housing programs. After a tenant leaves or is evicted with just cause, landlords will be able to raise rent by 8% plus inflation.

Property owners can also apply to St. Paul for an exemption to the 3% rent cap if their property taxes go up or if there are “unavoidable increases” in maintenance and operating costs, including increases owing to inflation. But the City Council also restricted landlords from passing along new utility charges to tenants as a way to offset the rent caps.

Score half a point for the persuasive power of economic reality. The City Council noted in its reform bill that, “according to data from the Department of Housing and Urban Development, there have been only two hundred (200) residential building permits in Saint Paul through April of 2022, compared to 1,391 at the same point in 2021.” Imagine that.

Mercatus Center senior research fellow Salim Furth has also found that multifamily permitting surged in Minneapolis after its twin city passed rent control. Developers have a choice of where to build, and St. Paul gave them little incentive to invest there.

The City Council’s reforms treat the old rent-control ordinance as merely too much of an acceptable policy. But rent control is destructive because it reduces the supply of housing, especially for low-income households. The city’s reforms are a wink at this economic reality, but repeal would have been better.


WRITTEN BY: Wall Street Journal Editorial Board