In November 2021, residents of St. Paul, Minnesota, voted to pass a rent control ballot initiative by a margin of 53 percent to 47 percent. The new ordinance will limit rent increases by three percent annually, without exemptions for inflation or new construction, making it the strictest rent control ordinance in the nation. The ramifications of the bill were immediately felt across the city. Multiple housing developers opted to halt construction as investors pulled out from projects that were already underway, putting hundreds of new and much-needed housing units at risk.
In many geographies where artificial caps on rent exist, housing underdevelopment has resulted. Given its failed history, it comes as no surprise that the passage of rent control in St. Paul yielded immediate negative consequences.
Rather than rent control, St. Paul residents would be better served by measures that encourage additional construction, such as the elimination of outdated and inherently biased zoning laws, to deliver the housing people need and bring costs down.
Editorial board and other housing experts have weighed in…
“Rent control is a mistake, discouraging investment in both new and existing rental properties over the long haul, even if it provides short-term relief. It eventually hurts the very people it’s trying to help. – Star-Tribune Editorial Board
“If a city’s housing supply can’t grow to meet demand, the natural result is that prices go up. Artificial caps then produce shortages and other distortions, such as dilapidated properties that landlords don’t have an incentive to renovate.” – Wall Street Journal Editorial Board
“Early evidence suggests the passage of St. Paul’s new rent control law caused the growth rate of residential property values to lag behind other cities, according to an analysis of real estate transactions conducted by University of Southern California researchers… They estimate that if voters had not passed a 3% annual cap on rent increases, residential property values would be 6-7% higher — a collective $1.6 billion.” Star Tribune
“From December of last year to the beginning of this past March, firms pulled permits for just 231 St. Paul housing units in mixed-use or multi-family buildings, a decline of more than 80 percent.” Twin Cities Pioneer Press
“If they can invest in Nashville or St. Louis or Milwaukee where they don’t have rent control, why would they take the risk of investing $20-plus million in St. Paul and take the risk of inflation destroying their investment?” – Bob Lux, principal and founder of Alatus, Minneapolis Star-Tribune
“Opponents of St. Paul’s rent control initiative warned before the vote that developers and financial investors would pull the plug on projects if the ballot measure were to pass. And that appears to be exactly what’s transpired.” – National Review
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