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 be soon facing 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.”


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, it disincentivizes investing in the maintenance of existing housing units. It also discourages the production of new housing rentals. Consequently,  in the long rent control hurts low-income individuals by restricting the housing supply. In short, rent control does more harm than good. Why the Minneapolis city council wants to bring this disastrous policy back is beyond logic. Besides, much research shows that increasing the housing supply is a more effective way of reducing housing costs.

Increasing housing supply reduces prices

In competitive markets, prices are determined by the interaction of demand and supply. When supply is higher compared to demand, prices will go down as sellers compete for buyers. In the same way, when demand is higher than supply, prices will go up as buyers compete to buy.

This is, however, a phenomenon that gets ignored when it comes to housing. But regardless, the demand and supply theory holds up even in the housing market. During the pandemic, we have seen house prices skyrocket as demand for housing exceeded supply. But even more specifically, cities around the country, including Minneapolis, have experienced falling rental prices as vacancies have gone up.

The issue of addressing housing by focusing on increasing supply is one that was made by Neel Kashkari before the coronavirus pandemic. This is a point that a lot of research proves, as illustrated by John Phelan. Even increasing high-priced building helps bid down prices on existing housing.

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.