Twin Cities housing shortage worst in the nation
Shortage of housing is one of the biggest issues facing metropolitan regions. But according to the Star Tribune, the Twin Cities have it worse than all regions in the nation.…
Rent control is making a comeback in Minneapolis. According to the Star Tribune, the Minneapolis city is “pushing two charter amendments that would ask voters to cap rent hikes”. These proposals are, however, likely to run into opposition from Minneapolis’ mayor, Jacob Frey.
“I do not support policymaking, especially for complex initiatives like this one, through initiative and referendum,” Frey said. “It’s critical right now that we rely on a data-driven process to evaluate policy options and that includes any form of rent control.”
Frey said that he does not support rent control “in its classic form” because it disadvantages future renters and does not help make housing affordable beyond those individual units.
Mayor Frey is right; rent control does not work, and in the long run, it hurts low-income individuals by restricting the housing supply. Mayor Frey is, however, misguided on what should be done in order to solve the affordable housing crisis.
“[Rent control] has been pretty widely shown by economists to not work,” Frey said, referring to New York City’s model. “We know what works. We have put in record amounts of funding to both produce and preserve affordable housing units and we in return saw record amounts of production and preservation of those affordable housing units.”
The mayor said he favors giving landlords up to a 40% break on their property taxes if they keep at least a fifth of their units affordable to people whose household income is less than 60% of the area median. That program, which was crafted by city and state housing experts, he said, has been successful at supplying and preserving affordable housing unit.
Throughout the pandemic, we have seen huge fluctuations in rental prices driven largely by demand and supply interactions. In various cities, including Minneapolis, rental prices went down as vacancies went up. This should tell us that increasing the housing supply is the only sustainable solution to the affordable housing crisis.
More funding or subsidies (through such things as tax breaks), while they reduce rental prices for individual renters, are merely a way to transfer costs to taxpayers. Tax breaks, additionally, distort economic behavior and complicate the tax code without getting to the root of the problem.
The fact of the matter is that Minnesota developers face excessive fees and regulations, which are all culprits for our expensive housing. If the city council and the Mayor are really dedicated to solving the affordable housing crisis, it is time they let the market lead. The private sector is more than capable of delivering affordable housing to Minnesotans, but only if it is not encumbered by excessive rules and fees.