St. Paul should follow the evidence and abolish rent control
A consensus is developing in St. Paul that rent control has been disastrous for housing construction. Unfortunately, no one wants to repeal the policy. Instead, City Council members are suggesting amending rent control to permanently exempt new construction.
As NPR reports:
Three members of the St. Paul City Council plan to introduce a major amendment to the city’s voter-approved rent control ordinance that will entirely exempt new construction, a concession to developers who have argued that the 3% cap on annual rent increases has stifled financing for their projects and undermined the goal of creating new housing.
The proposal is expected to be introduced April 2 by council President Rebecca Noecker, Anika Bowie and Saura Jost and voted upon three or four weeks later, but it’s unclear if it has the votes to pass.
While this is commendable as it could reduce developers’ hesitancy and encourage new housing, it does not fix many of the other problems associated with rent control.
In addition to discouraging housing construction, rent control disincentivizes maintenance, lowering the quality of housing units. Rent control also often leads to the misallocation of housing by incentivizing tenants in rent-controlled units to overstay. Not to mention, rent control lowers property values — reducing property taxes — while mainly benefiting high-income renters.
Currently, St. Paul’s rent control policy applies to buildings older than 20 years, or those built before 2004, on a rolling basis. By some estimates, this covers about 85 percent of all rental housing in the city. While the share of housing units exempt from rent control would increase over time, it would remain relatively low for decades, particularly given the slow pace of new housing construction.
More housing = lower prices
In the words of Mayor Carter during his budget unveiling in August last year:
A housing crisis is marked by one clear symptom: a housing shortage.
The St. Paul City Council needs to follow the evidence and repeal rent control, focusing instead on policies that loosen regulations around housing construction. New construction reduces competition, putting downward pressure on prices without the unintended consequences associated with rent control.