Rent control shrinks supply of housing in Saint Paul

Rent control shrinks supply of housing in Saint Paul
City Council members

Rent control can cut the supply of housing by a lot. “In 2021, Saint Paul, Minnesota limited rent increases to three-percent a year even if there’s a change in occupancy. As a result, multi-family building permits decreased by eighty-percent in the city,” reports Reason Magazine. Homeless encampments are growing again in Saint Paul. In most of America, homelessness has declined over the past decade (except in a few states like California and Hawaii). Even as multi-family housing construction has fallen in Saint Paul, it is “ramping up in the rest of the state,” which regulates rents less, and mostly does not have rent control.

Rent control also reduces the quality of housing over time. As the liberal Brookings Institution notes, “Rent control can also lead to decay of the rental housing stock; landlords may not invest in maintenance because they can’t recoup these investment by raising rents.”

When landlords can’t raise rents to pay for repairs and renovations, they may let apartment buildings decay. After New York limited rent increases to pay for major capital improvements to 2 percent, landlords cut back on such improvements. A survey of rent-stabilized landlords found that when rent increases were curbed,

Three out of four reported cutting back on essential building-wide repairs, such as a roof or boiler replacement, since the rent law passed. Nearly 90 percent said they had forgone kitchen or bathroom renovations. Just over half decided against revamping their buildings’ security systems to include cameras or video intercoms or adding storage lockers for deliveries to thwart porch pirates. Efficiency upgrades have also been pushed to the back burner. Over 40 percent of respondents said they would not replace lighting with LED fixtures that use 90 percent less energy — a budget saver for tenants. A quarter said they opted against installing fuel computers, which better regulate heat and hot water systems and reduce a building’s energy consumption.

Almost all economists think rent control is a bad idea: In a 1992 poll, 93 percent of them agreed that rent control reduces the quantity and quality of housing available. As the Wall Street Journal observes, “If there’s any consensus in economics, it’s that rent control achieves the opposite of its intended goal. It leads to housing shortages by discouraging new development and maintenance of existing properties. Reason Magazine says that “rent control has a history of constricting the supply of rental housing and reducing housing quality.”

Rent control reduces the value of housing stock, shrinking the property tax revenue that funds schools and local governments. “Researchers at the University of Southern California said rent control hurt property values in St. Paul, Minn. by $1.6 billion,” reported Market Watch.

Once limited to places like New York City, rent control is now spreading to more areas, reducing housing construction there. In July 2023, Maryland’s most populous county, Montgomery County, imposed rent control. Some housing projects stopped as a result. Montgomery Perspective reported that a “Montgomery County-based developer has written the county executive and the county council with news: their company is stopping a county project because of the pending passage of rent control. And they are not alone as at least six other developers are stopping further projects here and shifting resources to other areas including Northern Virginia.”

LU Staff

LU Staff

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