St. Paul’s rent control policies have totally predictable consequences
High prices are not problems in themselves; rather, they are symptoms of underlying problems which lead demand to outstrip supply. Digging into these underlying problems and their causes requires some effort. Perhaps it is this effort that discourages some and leads them, instead, to embrace simplistic non-solutions, like the wave of a magic legislative wand.
But genuinely magic wands don’t exist. If we wave the legislative wand, the underlying problems and their causes remain, as those who supported St. Paul’s rent control measure are finding out.
Rent controls, enacted to solve the problem of high prices for accommodation, do nothing whatsoever to combat the underlying problem which led demand to outstrip supply: namely, the lack of supply. In fact, by fixing the price below that which would match demand to supply, they increase demand relative to supply and make worse the very problem they were enacted to solve.
This is Econ 101. It has theoretical and empirical support. It was on this basis that we at American Experiment predicted that St. Paul’s rent control measure would be a disaster.
That forecast is coming true. This weekend, the Pioneer Press reported that Weidner Apartment Homes, a Seattle-based developer of market-rate housing, was pausing future construction at Highland Bridge. This creates a problem:
Financing for real estate development at the sprawling acreage that was once home to the Ford Motor Co. manufacturing campus is structured so the market-rate units subsidize affordable housing on the same streets, using on-site property taxes.
With those market-rate units gone, the affordable housing has gone, too. As a result of trying to solve a problem driven by a shortage of supply by tinkering with the price, St. Paul is now faced with an even greater shortage of supply. And, to repeat, all of this was utterly predictable: we predicted it.
St. Paul’s rent control ordinance has been a disaster. It should be repealed as soon as possible, policies should be undertaken to increase the supply of housing, and people need to learn once and for all that magic wands do not exist.