The failure of rent control: Sweden edition
Even though both theory and evidence show that rent control is bad public policy, Minneapolis’ city council continues to pursue it as a solution to the city’s shortage of affordable…
Lack of access to affordable housing is a big issue in Minnesota, especially the Twin Cities. While most of the effort geared towards alleviating this issue has centered around increasing funding for affordable housing development, some legislators are taking a different approach, choosing to focus instead on rules and regulations that make housing expensive in Minnesota.
Leading such efforts is Rep. Steve Elkins, who introduced an act at the Housing Affordability Commission Meeting that took place on August 9.
On Monday morning, Rep. Elkins introduced a first-of-its-kind Housing Affordability Act as a “grand bargain” of sorts. The extensive bill calls for many positive changes in planning and zoning at the local level, limits on aesthetic mandates, caps dedication fees, makes changes to building permit structures and reporting, adjusts the disclosure of energy code paybacks, but also authorizes impact fees and street improvement districts.
In introducing the bill, Elkins said the goal is to develop thousands of additional units of entry-level workforce housing across the state every year to meet the needs of newly forming young families.
“On one hand, financially stressed cities need a means to finance the basic infrastructure required to support new housing development,” said Elkins. “On the other hand, housing developers need relief from regulatory restrictions that are preventing them from building an adequate supply of new homes and apartments that are affordable to young families.”
“This bill addresses both sides of that equation. It would allow cities to use cost-based development impact fees to pay for roads and infrastructure-new development should pay its own way, but no more than that.”
“At the same time, the bill would sweep away zoning restrictions used to promote the construction of expensive homes on large lots and would remove institutional barriers to the construction of new entry-level homes, apartments and condominiums. This is a complex problem which requires a comprehensive solution.”
It is hard to say how the proposal will fare in the special session when it is officially introduced. One thing to note, however, is that cities usually favor local rule-making when it comes to zoning and construction laws. So, the bill already has some opposition.
Regardless, a lot of research evidence exists showing that excessive rules and permits are the root cause of the housing crisis in the Twin Cities. As John Phelan illustrated,
That April 2017 Pioneer Press report, for example, surveyed 60 government officials, builders, Realtors, housing and energy lobbyists, and home buyers on the causes of expensive housing here. They found that “regulations, including energy-saving rules and safety codes, are tougher and costlier than in surrounding states …The cost of metro-area land is elevated by centralized planning, larger mandated lot sizes and a public resistance to development … (and) An increasing use of city fees, tucked into the price of a new house, can add tens of thousands of dollars.”
In February this year, a report commissioned by a builders group, Housing First Minnesota, found that municipal fees and regulations in the Twin Cities are pushing up prices of new homes more sharply here than in other communities, making it nearly impossible to build a single-family house for less than $375,000. Such fees account for up to one-third the cost of a new house here.
Focusing on reforming excessively burdensome fees and regulation is therefore a better approach to housing reform than ceaselessly expanding funding for affordable housing schemes.