A task force wants to change St. Paul’s rent control policy but the damage has already been done

Anyone with basic knowledge of economics could have predicted that St. Paul’s rent control ordinance was going to be a disaster. That is one conclusion that numerous observers have made pretty easily, especially considering how strict the law is.

Yet the city of St. Paul spent tens of thousands of dollars and months to reach that very simple conclusion. In an unsurprising turn of events, the 39-person group that was tasked with analyzing St. Paul’s rent control policy is suggesting making changes that would exempt new housing, and allow landlords to raise rents between tenants, among others.

As reported by the Star Tribune,

According to a 36-page report from the University of Minnesota’s Center for Urban and Regional Affairs (CURA), which facilitated the task force’s conversations, 60% of members support a policy that would exempt new housing construction from the law for 15 years and allow landlords to bank rent increases below 3% for future years. They also said they would like a law that prevents renters from being evicted without just cause.

A majority of group members also supported allowing landlords more flexibility to raise rents in between tenants, though the report did not specify how that would work.

As American Experiment warned last year, second-generation rent control ordinances usually include a set of provisions that are supposed to mitigate the negative impacts of rent control on the housing supply.

These provisions include exempting new housing, indexing rent hike caps to inflation, and allowing landlords to reset rents to market rates once a tenant moves out. The original St. Paul ordinance had none of these. And for that reason, it was one of the most restrictive ordinances in the country.

Sure, the law has gone through some tweaks, like allowing landlords to raise rents beyond the allowable 3%. But the process involved with such exemptions is overly complex and too subjective.

It makes little sense that Mayor Melvin Carter supported the ordinance given that even before St. Paul residents voted, he had noted that it was too strict.

Seeing how housing permits have already declined significantly in St. Paul in the last couple of months since the passage of rent control, making changes to the policy is a welcome move. But the law is already active, and making extra changes would add a level of uncertainty that could also prove damaging. Businesses plan their operations in advance. And for that to work, they need stability. The uncertainty around St. Paul’s rent control rule is bad for long-term planning and investment.

But even more importantly, regardless of whatever changes the city makes, nothing will beat scraping the ordinance altogether.