Scapegoating corporate landlords won’t address housing woes

DFL legislators are taking on corporate landlords in a bill moving through the legislature. HF 685, and its Senate companion SF 365, were introduced last year but went nowhere. The proposal is back this session. If passed, it would cap the number of single-family homes that corporate landlords rent at 10.

The bill states,

The corporate owner of a single-family home is probihited from renting the home out to a residental tenant when:

(1) the owner has a property interest in ten or more single-family nonhomestead properties that have a current residential tenant, or are available for rent, or have been rented within the last 12 months by a residential tenant.

For individual owners, the allowable maximum number of single-family homes to rent is 20. Landlords will be fined $100,000 for violating this bill.

While not stated explicitly, it appears that the role of the bill is to preserve affordable housing. The bill, for instance, allows landlords to apply to be exempted from this cap. The Commissioner of the Housing Finance Agency may allow this exemption if doing so would not affect the availability of affordable housing.

In an unsurprising twist, this law would only apply to the private sector. State and local government agencies are exempted, and so are nonprofits. Corporations that are primarily engaged in the development and rehabilitation of single-family homes are also exempted.

In addition to these restrictions on single-family rentals, the bill would create a database for landlords. All landlords in Minnesota would be required to register with the state. And every time landlords rent a unit, they must report on its location, the rent charged, and owners. Landlords would provide this information every year.

Only building more housing would improve affordability

In addition to the massive bureaucracy that enforcing this bill would entail, what is perhaps more concerning is that it is yet another piece of evidence of the growing anti-business, anti-profit, and anti-landlord sentiment that is growing in the legislature, especially among DFL legislators.

Last year, numerous bills were passed targeting landlords. One of the laws passed, for example, requires landlords to keep rental units above 68 degrees in the winter. HF 685 continues this trend of DFL legislators scapegoating landlords for housing-related issues, including high prices.

According to MinnPost, one of the bill authors, Representative Esther Agbage had the following to say when asked why non-profits were exempt from the bill.

“The issue with housing is that it is becoming much more commodified and housing is being used as a way to make profits,” Agbaje told the House Judiciary and Public Safety Committee. “It is actually a necessity for people. It is where they live. It is where they take care of their families.” But it is harder to find housing “when a number of corporations see that property as a source of income for themselves whether the person living there has an increase of income on their own.”

This type of reasoning, however, entirely misses the root cause of the housing problem and how to address it.

In the famous words of Adam Smith,

It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages

Substituting either of the three professions by a landlord, we get the same idea.

Corporate landlords are no more self-interested than individual landlords. And like all other businesses, the ability to earn a profit is what motivates landlords to invest in housing and rent it out to people is to earn a profit. So, while housing may be a necessity, the housing market operates like any other market.

Government fees and regulations, however, impinge on the housing market, introducing shortages which are then blamed on landlords and corporations. As American Experiment has demonstrated, Minnesota has an affordable housing issue because excessive fees and regulations make it costly for developers to build housing. As supply fails to meet demand, we get high prices.

The issue with high housing prices is not due to excessive greed. But even if it is, these restrictions would likely not help. In fact, by increasingly making it difficult to rent housing, these policies would disincentivize investments in rental housing, making housing issues worse for renters.

The housing issue in Minnesota is a supply issue. Scapegoating corporate landlords won’t change that.