It’s been a year-and-a-half since Minneapolis voters opened the door to rent control in the city.
In November 2021, more than 53% of the city’s electorate voted to amend the city charter, giving the City Council the power to place a rent control proposal on a future ballot.
Mayor Jacob Frey has been a skeptic throughout the process. In 2021, he blocked a proposal to allow citizens to directly place a rent control measure on the ballot. Last December, he threatened to veto a proposal that emerged from a council-convened task force: cap annual rent increases at 3%.
“I don’t think we should be striving for a least-bad option. I think we should make a decision that’s right for the city,” Frey said in an interview with MinnPost in February.
Finally, on Tuesday, several of Frey’s top deputies presented their conclusion to the council: Don’t move ahead with rent control. Staff said that even relatively lenient restrictions on rent increases could cost the city revenue and scare off housing development.
Nothing about the staff’s recommendation stops rent control supporters from charging ahead anyway. However, City Council members would need to get past the mayor. Frey would have the power to veto any attempt to put the issue on the ballot, and the council would need nine votes to override a veto.
[image_credit]MinnPost photo by Craig Lassig[/image_credit][image_caption]Council Member Elliott Payne[/image_caption]
“I think it’s viable,” Payne said after the council meeting Tuesday. “I think we should move forward with it. I think that we should use the democratic process to answer some of our most challenging questions.”
Last year, the City Council appointed a 25-member working group to study the issue. In December 2022, the group published a final report advancing two “frameworks” for rent control in Minneapolis.
- Framework 5: A majority of the working group — 14 of the 25 members — favored a proposal to block landlords from raising rents more than 3% each year with limited exceptions.
- Framework 7: A substantial minority — 11 of the 25 members — preferred a softer cap that would allow property owners to raise rents by 5% or 7% annually, plus some flexibility to account for rising inflation. The minority group also wanted to exempt newly-built, affordable or owner-occupied units from the rent control limits.
But at a council committee meeting Tuesday, a parade of the city’s top officials on budget, policy and housing matters stood to urge the City Council against pursuing either option, warning that even adopting the more-permissive Framework 7 could be disastrous for the city.
City officials said the main goal of a rent control policy would be to provide relief to the lowest-income tenants — who, in Minneapolis, saw their rents rise 44% between 2006 and 2019, despite very little growth in their incomes.
But officials predicted that capping rent would cause a cascade of effects that would harm these vulnerable renters most. Under Framework 5, staff projected rent control would cause new construction permits to drop off by as much as 75% in the first year — which would undercut the city’s broader goal to expand housing supply, which also helps ease upward pressure on rent.
This is one of the ways that staff argued that rent control, paradoxically, could push rents up faster.
For most of the last two decades, average rents in Minneapolis have increased between 1.5% and 2.5% each year. But staff argued that a hard cap could incentivize “more aggressive rent increases”: Landlords might squeeze every penny of their allowed increase of 3% or more every year — because if they don’t, they might lose out on future revenue.
City officials readily admitted these projections were not the result of a peer-reviewed analysis; they relied on academic studies of other cities’ rent control policies in conjunction with Minnesota data to make their estimates. Staff had tried, and failed, to retain an outside consultant to run a more complex statistical analysis on Minneapolis.
But some University of Minnesota scholars reached different conclusions.
For instance, in a September 2021 white paper, the Center for Urban and Regional Affairs (CURA) found “little empirical evidence to show that rent control policies negatively impact new construction.”
CURA’s research also found that research on other cities’ rent control programs showed that stronger restrictions were effective at “maintaining below-market rent levels and moderating price appreciation.”
[image_credit]MinnPost photo by Craig Lassig[/image_credit][image_caption]Council Member Jason Chavez[/image_caption]
“I don’t think [staff] had the time and resources needed to really do the type of thorough analysis to answer common questions that we have from a policymaking position,” Payne said. “I was hoping to see some sort of statistical modeling, some source data that we could refer to.”
But Minneapolis officials said they also made their prediction by looking “across the river.”
Six months after St. Paul voters enacted a stringent rent control policy (akin to Minneapolis’ Framework 5) in November 2021, new multifamily housing development dropped off by roughly 80%. Last September, St. Paul leaders loosened many of restrictions in the rent control ordinance (with provisions that look more like Framework 7, Minneapolis staff said).
This step by St. Paul’s City Council stemmed from “difficulties and problems [rent control] created around specific developments that were already in the pipeline,” said Angie Skildum, Minneapolis’ director of development finance. She said Minneapolis staff consulted with St. Paul developers and city officials in writing their recommendation.
[image_credit]MinnPost photo by Craig Lassig[/image_credit][image_caption]Council President Andrea Jenkins[/image_caption]
Without naming these policies specifically, Council President Andrea Jenkins noted her desire for “targeted” programs to help vulnerable renters.
“Whatever policy we come up with — and I want to see something happen for these very challenged members of our community — it has to be targeted, it has to be direct,” Jenkins said, “and it can’t exacerbate the problem that our community members are suffering from currently.”
This is why the Founders frowned on a direct democracy. “Whenever the people are well-informed, they can be trusted with their own government.” – Tom Jefferson (Implying, when they’re not, they can’t.) This applies to those misguided people who are pushing for a national popular vote for the presidency.
Dennis, the founders frowned on direct democracy because they wanted to protect the interests of property-owning whites. That is why non-democratic things like the Electoral College and Senate exist in the first place – to prevent actual popular democracy.
“’Whenever the people are well-informed, they can be trusted with their own government.’ – Tom Jefferson (Implying, when they’re not, they can’t.)”
The favored news outlet of the American right-wing just settled a defamation case for $787.5 million, acknowledging that it had disseminated falsehoods.
Do you really want to talk about the ill-informed?
Maybe in 2023 we shouldn’t be using the “Founders” as some kind of moral, intellectual goal. We should be striving for better.
Studies show that rent control is effective, though obviously not in a vacuum. We need to continue to produce more housing and revise zoning laws – we can walk and chew gum at the same time. I also think we should look into implementing vacancy taxes and preventing commercial purchasing of houses. Regardless, something needs to be done about the outrageous cost of shelter and the exploitation of the need to be housed.
I basically agree. A clarifying question: when you say “commercial purchasing of houses,” are you referring to the New York and San Francisco wealthy investment firms that are buying up housing in Minneapolis and Saint Paul? I think that needs to be stopped, period.
Exactly. I realize now I worded it weirdly, but yes, I believe those wealthy investment firms are distorting the housing market by inflating prices and the practice needs to be abolished. Also, I saw your comment below about subsidies for rent like Mayor Frey has promoted and I agree with you – that practice would essentially subsidize landlords and make the problem worse over time because they’d be incentivized to soak as much money as possible from the government. A lot of people don’t seem to understand the concept of elasticity when it comes to basic human needs like shelter.
Rent control is effective in doing what it is intended to do, cap increases in rent prices. But that’s about it. Beyond that the long term effects are going to be a housing shortage and higher rents for those not in rent controlled properties.
If you are renting a property someone owns it and wants to make at least a bit of money on it. If inflation is increasing faster than your rent, you end up losing money. Sometimes there are out of state investors. Someone has to put the money up front.
Studies show rent control damages the housing market and radical policies like St Paul are devastating. Despite this, activists and proponents continue to angle for a St. Paul like policy (prior to St. Paul trying to moderate the damage). The best thing minneapolis can do is make it easier to keep producing housing.
First, did you read the CURA report that says the opposite of what you claim in your comment? Second, you and others can continue to use St. Paul as an example of how rent control “doesn’t work”, but if you don’t acknowledge the context of St. Paul’s relatively new rent control policy policy, i.e. coming out of a pandemic accompanied by an unprecedented increase in the costs of supplies for new construction, then you are likely arguing in bad faith. If new construction is still depressed by 80% in 5 years, I will eat crow, but my money is on new construction ticking right back up in the next few years because there is still a lot of money to be made, even with rent control in place.
The banking sector is not exactly known for creating a stable housing market, recent history tells us.
It’s worth pointing out that the CURA study you cite did not look at rent control caps with no exceptions for new construction, which was pretty much unheard of in the US when that study was compiled.
I wonder if the property tax system could be used as a carrot and stick to prevent price-gouging increases in rent. (I’ve just been presented with a 20% increase, and yes, I’ll be moving.)
How about this?
If your one-bedroom apartments are affordable to people at the city’s median individual income, you pay the normal property tax for the assessed value of the building.
If they are affordable only to people at more than the individual median income, you pay a proportionately higher property tax, so that if a renter needs to be at 150% of the local median income, you are assessed a 50% surcharge on your property tax.
On the other hand, if your units are affordable to people at 50% of the median income, you pay only 50% of the normal property tax.
Given all the new, tiny, thin-walled “luxury” apartments that are affordable only to individuals making more than $4500 a month (=$28 an hour), anyone building or renting out lower cost buildings would have no trouble filling them, not when wages of $15 per hour are still considered excessive in some quarters.
Public subsidies of rent for “targeted populations” (like city staff and Mayor Frey apparently support) will benefit landlords, not renters. Landlords’ rents get paid by city government (with citizen’s tax dollars), but with no restrictions on rent increases, how high will rents go then? It is not a solution for the people (either renters or taxpayers), just for the landlords. We need strong rent control without loopholes.
Exactly! Even my AM radio-Fox News fan brother understood that principle when he explained his opposition to school vouchers.
“If the voucher is worth $1500, then the schools that don’t want poor kids will just raise their tuition by $1500 so they’re still affordable only to the wealthy.”
Certainly the same thing could happen with rental property. You already see rental ads that say “No Section 8,” and it wouldn’t be much difference if the subsidies were provided by the city.
The ironies of life! Renters over the long haul pay for the places they live in along with some pretty good benefits to the landlord. But most renters probably rent because they don’t want to or refuse to commit to a location. So the price of that, lets call it, Bedouin life style is a bit more significant. Getting more commitment from renters to a domicile would solve a lot of rental/homeowner/rent control problems. I.E rent control becomes less of an issue if you get more renters into dedicated and committed home owners. Why pay a landlord $800-$1200 a month for rent instead of helping someone buy and own? But of course don’t forget to make sure they are psychologically, emotionally and physically capable of maintaining the place.
True, but you also need more single family homes in that range and there is little commitment to saving housing in that range vs tear downs for mcmansions.
Well Lisa it depends on where you live, got plenty and then some in this neighborhood. But they will need some TLC and work, city county etc. should think more about supporting home ownership and the responsibilities that go with it and less time signing checks to bad landlords for well below par rentals.
PS: You get outside of the US and a single family home is very high end living, the living standard is a flat, not a single family self standing house with a yard.
Mpls handled this differently from St Paul:
St Paul threw together rent control at 3% and then raised all property taxes 8% that year (more this year!). Sounds like hatred to me- it is the them in our city government sadly.
Nice to see some discussion of rent control and would be great to look at other welfare type programs helping low income to buy homes as that is truly the goal here- get people into stable living.
The 8% raise had nothing to do with rent control, it was the result of courts throwing out their practice of charging for street maintenance and similar fees in separate “non-tax” assessments to property owners, including the 1/3 of St. Paul property that is tax-exempt (owned by fed/state/local gov’ts, schools, colleges, etc.). So when they wrapped them back into property taxes, that made up most of the 8%. The rest went to salaries for the mayor’s increased staff lol.
Those advocating for rent control as a solution demonstrate yet again the triumph of wishful thinking over fact-based reasoning. St. Paul’s sudden severe drop in new rental housing construction should be a clear lesson to Mpls. There are lots of similar examples around the US that wishers try to explain away with other dubious reasoning.
These examples prove what banks and other lenders think of lending to developers who build in such areas. If builders may be legally prevented from earning an sufficiently high ROI, why lend to them? They will obviously suffer higher risks of being unable to pay back their loans if they can’t set their own rent levels according to market conditions.
The real solution is to let the market cure itself. High rents (with no rent control) bring new developers into such areas, eventually leading to more available units than renters, and finally resulting in lowering rents below competitors in order to fill their units and pay their bills. A second benefit is that as more buildings go up, the existing older buildings become rated as 2nd-class and 3-class spaces, again resulting in lower rents than the best priciest 1-st class spots. It takes years, but it actually does work.
The next “wishful thinking” solution I expect to see someday is a law that forces big developers in a rent-control city to add a certain percentage of new units every year. It will obviously get thrown out in court, but don’t be amazed if somebody tries it.
Why should landlords subsidize the housing expenses of affluent renters by renting to them at below market rates? Some landlords are less affluent than their tenants. If poor people can’t afford rent give them subisidies directly, or better yet help them find a better job. Rent control destroys the housing market by destroying the incentive of landlords to be in the business of renting. The socialists on the Council don’t have any idea what motivates people to risk their money in a business endeavour. That motivation is what created all the housing we have, and all the prosperity we enjoy.