Better cash flow and higher resale value are just two of the many important reasons to keep the rents in your Minneapolis or St Paul duplex at or near market value.

But there is one more casting its shadow among multifamily property owners in the Twin Cities: rent control.

Minneapolis and many of its surrounding communities are suffering from an acute lack of affordable housing.

The majority of residents in Minneapolis are renters, with more homes in the city being rented than owned.  The vacancy rate in the city is at just 3.4 percent; a historic low.

It’s the old law of supply and demand: when supply is low, the cost of rent skyrockets.

To combat this, the city has tried a number of strategies including passing an ordinance that prohibits landlords from renting to tenants using Section 8 vouchers, as well as trying to incentivize the construction of workforce housing by changing some zoning laws to spur the development of smaller apartment buildings.

They are considering other ideas as well, like:

  • requiring landlords to renew tenants leases unless they have legal grounds to evict them
  • requiring landlords to give the city and tenants advance notice when they intend to sell the property
  • giving tenants the right to buy a building before it goes on the market
  • rent control

As horrifying as those may sound to Minneapolis landlords, rent control is the one that would impact every aspect of investment property ownership.

And while it hasn’t been passed by the city council, it has been a topic of conversation.

Rent control prohibits landlords from increasing rent more than an amount or percentage determined annually by the city.

If your rent is below market value if rent control is implemented, the only way you will be able to raise it is if the tenant vacates the unit. If rent is artificially low, a resident may stay for a lifetime.

This low rent will not only have a negative effect on a duplex owner’s cash flow, but also dramatically decrease the value of the property when it comes time to sell.

It’s nice to have good tenants who stay. But is your tenant so great that they have the right to impact the value of your portfolio?

Most residents won’t move if their rent is below market value. And that’s just as true if it’s $100 below what they can rent any other unit for as it is for $400 less.

Keep your rent near market value. It will pay off in more ways than one.