Saint Paul, MN

St. Paul Passes Rent Control

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Rent control, according to a Swedish economist, "appears to be the most efficient technique currently known to destroy a city—apart from bombing." We may soon witness the consequences of rent-control laws that are currently in effect in St. Paul, Minnesota, which is a major metropolitan area.

Earlier this month, the city council approved a rent control measure that will restrict landlords' ability to raise rents on the city's 65,000+ rental properties. Price increases of more than 3 percent per year will be prohibited under the new legislation. The initiative, which has sparked controversy, does not take inflation into consideration and applies to new construction as well as existing properties. As a result, the rent control measure in St. Paul is one of the most stringent in the United States.

The measure's opponents leveled all of the standard criticisms at it. They pointed out that a supermajority of economists, 81 percent according to one survey, are opposed to rent control because of the long-term consequences of the policy. Yes, some renters are able to save money in the short term by taking advantage of artificially low rental prices. However, because of the price restrictions, future construction and housing supply will be limited, resulting in a housing shortage and a reduction in the availability of affordable housing in the long run.

In St. Paul, these ramifications are already beginning to manifest themselves.

It took less than 24 hours after St. Paul voters approved one of the nation's most stringent rent control laws before the phone started ringing for the mayor's office. Developers called to inform the city's director of planning and economic development that they were putting projects on hold, putting hundreds of new housing units at risk.

A major developer, Jim Stolpestad, stated that "We, like everyone else, are re-evaluating what — if any — future business activity we'll be doing in St. Paul."

According to the Pioneer Press, a major developer, Ryan Cos, has already withdrawn plans for three new buildings from consideration.

The law will not take effect until May in 2022. Therefore, the city of St. Paul has five months to reverse its decision.

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