Rent control will punish small landlords
If you live around the Twin Cities area, chances are you have seen the ad with a rich corporate landlord urging you to vote no on the rent control ballot because that will give him more money. The ad is supposedly a mind twister showing you who will benefit if rent control is not enacted, i.e., rich corporate landlords who will keep getting richer at the expense of renters. Enacting rent control is supposedly a way to reign in these rich corporate landlords.
To say the least, this is a gross oversimplification, not to say an inaccurate statement of what happens in the rental market. For one, the Minneapolis rental market is made up of all types of landlords, and all these landlords will be affected differently.
Corporate landlords generally have an easier time accessing capital. So to some extent, they are able to shield themselves from the effects of rent control by shifting to other, more profitable types of real estate. They can do this by converting to new or luxury units, which are often exempt from rent control or not significantly impacted by rent control.
Mom-and-pop landlords, on the other hand, face a worse fate. Since they are less able to afford to convert to luxury apartments or redevelop their units, they end up paying for a disproportionate amount of the rent subsidies that tenants receive due to rent control. Mom-and-pop landlords make up a significant portion of the Minneapolis rental market –– 33.5 percent, to be exact.
So what the ad fails to mention is the fact that these mom-and-pop landlords will be squeezed by rent control, which will have an impact on the level of housing supply. Quite to the contrary, rent control won’t likely hurt corporate landlords, or it will only have a minimal impact. Rent control will, however, have a disproportionate effect on small landlords and low-income renters who will have a hard time accessing affordable housing.
Not to mention that rent control comes with numerous other costs that our report has outlined.