St Paul Proves Rent Control Causes Higher Rent

When St Paul tenants groups got a rent control measure placed on the city’s ballot in 2021, they, voters, and city staff were warned by members of the multifamily community that placing a 3% cap on annual rent increases would actually result in higher rents.

Four years later is proving true, just as it did in other cities across the nation that previously implemented rent control.

Here’s proof. According to HousingLink’s most recent monthly rental report, median rents for a 1 bedroom apartment in St Paul rose 9% year over year, while 2 bedroom units experienced a 4% increase and 3 bedroom units saw a 3% rise.

Meanwhile, in Minneapolis, where there is no rent control, median rents fell. Monthly rent for one and two bedroom bedroom apartments fell 5% year over year, while 3 bedroom units experienced a 3% increase.

How can rent in St Paul increase more than 3% when there’s a limit? One word. Backlash. Prior to the ordinance passing, apartment developers warned they had received financing for the projects they had in the works based on annual rent increases greater than 3%. They cautioned that if the cap was implemented, they would have no choice but to stop building. Plain and simple, their projects would no longer pencil.

Sure enough, it came to pass. Of course, this meant the already tight housing supply became further constrained as demand far exceeded units available.

Next, many long-term housing providers pushed back against vacancy control. The rent control ordinance prohibited landlords from raising rent more than 3% if a tenant who had been paying below market rent vacated the premises unless substantial capital improvements were made to the unit. Of course, this was especially punitive for mom and pop landlords, whose margins were already thin.

The good news is those policies have since been modified. However, rent control has also made St Paul housing providers a little paranoid. Frankly, we know things can change tomorrow. So those of us who don’t have vacancy decontrol or the privilege of new construction raise rents 3% every single year. No matter what. We simply don’t want to fall behind.

As we move into fall, St Paul’s rising rent and Minneapolis’ declining rent are good reminders. The first Tuesday in November is right around the corner.

Elections have consequences. Pay attention.