Rent control won’t solve affordable housing shortage in Minneapolis

As if Minneapolis landlords have not been hurt enough by the eviction moratoriums, they may soon have to contend with rent control.

As reported by the  Star Tribune yesterday,

The Minneapolis City Council is reviving a hotly contested idea to address the housing crunch: rent control.

Council Members Jeremiah Ellison and Cam Gordon and Council President Lisa Bender introduced two charter amendments that would ask voters to cap rent hikes in Minneapolis, a move they say will protect tenants in the city from “egregious and unaffordable rent increases.”

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City leaders said the proposed initiatives are critical to protecting vulnerable renters from housing costs that have risen faster than their income. The proposed amendments would give the city the power to impose a rent control ordinance or put a question on a future ballot, or to let Minneapolis residents petition to put a rent control question on the ballot. Meanwhile, the city has offered no specifics on how the proposed ordinances would work.

Rent control is a failed idea; research agrees.

For one, rent control disincentivizes investment in the maintenance of existing housing units. It also discourages the production of new housing units. Consequently,  in the long run, rent control hurts low-income individuals by restricting the housing supply. In short, rent control does more harm than good.

Increasing housing supply reduces prices

In competitive markets, prices are determined by the interaction between demand and supply. When supply outpaces demand, prices go down as sellers compete for buyers. Vice versa,  when demand outpaces supply, prices will go up as buyers compete.

The laws of supply and demand hold up even in the housing market.

During the pandemic, for instance, housing prices skyrocketed as demand for housing exceeded supply. Cities around the country, including Minneapolis, have experienced falling rental prices as vacancies have gone up.

If the Minneapolis city council really wants to help its residents, it should focus on removing regulations that make building housing more costly than it needs to be.