Next Tuesday, voters in the city of Minneapolis will go to the polls to decide whether or not to give the Minneapolis City Council the authority to draft a rent control proposal to put before voters in 2022.
While the passage of this proposal would not necessarily result in rent control being put on next year’s ballot, here are 5 reasons just giving the city council that authority is in and of itself a bad idea:
- Economists Agree Rent Control Does More Harm Than Good, So Why Are We Even Talking About It? Virtually every economist who has ever studied rent control in the cities where it’s been implemented, in all of its forms, agree it is a bad policy that actually results in less affordable housing. For reference:
- Bloomberg Editorial
- Rent control statistics boiled down (6th paragraph)
- Why Rent Control Doesn’t Work – Freakonomics Episode 373
- There Is A Housing Shortage for Everyone – Why Aren’t We Talking About That? Americans stopped building homes during the Great Recession but kept having babies. In other words, we just don’t have enough houses for the population. Period. Shouldn’t we be discussing fixing that issue? After all, when supply exceeds demand, prices go down. That’s just high school level economics. See #5 and 6.
- The Threat of Rent Control Will Result In a Flood Of Rental Property Sales, Devaluing Property – Between June and September of this year, the number of new 2-4 unit listings on NorthstarMLS increased nearly 40% over the same period this year. As a result of more competition, it is taking a bit longer for properties to sell and there are fewer multiple offer scenarios. While it’s anecdotal, I can also tell you I have visited with numerous housing providers who intend to sell if Question 3 passes. If all of these owners decide to sell due to the threat of rent control, prices will fall. Falling prices result in lower taxable values. This results in less property tax revenue for municipalities.
- The Very Threat of Rent Control Is Resulting In Landlords Raising Rent – Rent determines value. Period. If rents can’t be increased to market rates more than a limited city-mandated amount, and it was low when the policy was first implemented, owners will get less for the sale of their property had rents been at or very near market value. As a result, many housing providers are wisely edging rents closer to current market value so as not to be behind if rent control becomes policy.
- What Happened to the 2040 Plan? The 2040 plan, which was supposed to result in more housing by removing single-family housing zoning designations and allowing up to three units to be built on what was formerly a single-family home lot. While the policy is just a year old, it has resulted in only an incremental increase in housing supply. Why aren’t more properties being built under this plan?
- Rents In Minneapolis And St Paul Have Actually DROPPED Since 2020 – Again under the category of why are we even talking about this, according to the the apartment rental site Zumper, rents in Minneapolis have actually dropped 8.5% since last year, while St Paul rents are down a whopping 15.2% year over year. What’s more, many mom and pop landlords have told me the quality of tenants applying to rent their units has declined greatly from just one year ago.
- Do We Trust The City Council – With Anything? In a recent StarTribune poll, Minneapolis voters seemed to agree on one thing, regardless of their stand on the issues. They don’t like the city council. Do we really believe they are knowledgable enough to enact a policy that actually works, when every other city in the world that’s tried to enact workable rent control has failed? I don’t.
If you don’t think rent control is the answer to the city’s housing shortage, there are three things you can do:
- Talk with your friends and family how rent control may effect you, your current income, and your retirement.
- Donate to the Sensible Housing Ballot Committee or a city council candidate whose beliefs align with yours.
- Vote next Tuesday.