The Twin Cities area, home to some of the nation's most aggressive advocacy for rent control, does not appear to have a corresponding problem with rent increases.
The Apartment List National Rent Report estimates year-over-year rent growth at 4.8% in Minneapolis, 23rd on its list of 40 cities and on the "slower growth" side of the ledger. Meanwhile, the real estate site Redfin estimates it at 9%, 44th among 50 cities listed and below the national average of 14.1%.
Neither are complete pictures of the rental scene. Redfin uses the average rent sought for vacancies, and Apartment List uses the rent agreed upon for those that are newly filled. Neither captures the degree of change for renters who stay put.
For comparison, the rental portion of the Consumer Price Index compiled by federal Bureau of Labor Statistics increased by 3.3% in the Twin Cities area year over year as of December, equal to the nationwide number.
However, a study commissioned a few years ago by the Minneapolis City Council and conducted by the University of Minnesota's Center for Urban and Regional Affairs (tinyurl.com/CURA-rent-control) found that tenants in the bottom income quartile tend to see the largest percentage increases in rent. This presents the most compelling case for some sort of response, although the best approach would be to expand the housing supply. Due consideration also could be given to other actions, such as the direct rent assistance proposed at the state level.
Further, more information is needed about variations within the most-burdened quartile (do a subset of egregious examples affect the overall calculation?) and on fundamental economic causes (by nature, lower-income renters have fewer housing alternatives and thus less power to sway rents).
In November, voters in St. Paul approved a ballot initiative seeking the nation's most restrictive rent control policy, one designed by housing advocates. In Minneapolis, five of the most ideologically left-leaning members of the City Council now seek the same.
However, rent control is a mistake, discouraging investment in both new and existing rental properties over the long haul, even if it provides short-term relief. It eventually hurts the very people it's trying to help.
Minneapolis can still avoid the error. Its voters, unlike those in St. Paul, were not asked in November to approve a specific policy but simply to give the City Council permission to explore one. There was no mandate that rent control be implemented, even though supporters are reading the sentiment otherwise.
The city is developing a work group of housing advocates, landlords and others to make a recommendation to elected officials. The timeline isn't clear. "Something like this, we don't want to rush into it and get it wrong," City Council President Andrea Jenkins told an editorial writer. On that point, the Star Tribune Editorial Board would agree.
Before the November vote, we argued against any introduction of rent control, and that's where we still stand. Others, like Jenkins, favor a targeted approach. If that's to be the path, there are several aspects of the policy that should be considered non-negotiable:
• Annual caps on rent increases must be dynamic. St. Paul's policy caps increases at 3% annually without regard for economic conditions. Rent policies created elsewhere in recent years, understanding the stifling impact of strict caps, have tended to set them at the rate of inflation plus a certain amount.
• New construction must be exempted for a reasonable period of time. In recent years, Minneapolis has made zoning changes that were intended to increase the housing supply, among other goals. Rent control with no exemption is at odds with this.
• Rent resets must be allowed when a unit changes tenants. This is called vacancy decontrol, and it could help keep a rent-controlled market from becoming moribund.
• Finally, the City Council should set the policy instead of returning the issue to voters. The ballot question approved in November allowed for either outcome, but specific policy decisions are best made by elected officials rather than by referendum. This allows for modifications, an ability St. Paul officials lack as a result of the direct ballot initiative there.
Advocates for strict policies have come to believe that less restrictive ones equate to less effective assistance. Perhaps, but this only points to the fundamental quandary of rent control, since they're willing instead to risk the downsides long associated with it.
Even with softening, there's no clear evidence that such policies can do more good than harm. A 2021 report by Martha Njolomole, an economist at the Center of the American Experiment, aggregates evidence against them (tinyurl.com/CAE-rent-control). Some people may discount the source, given the center's free-market philosophy, but the ultimate burden of proof regarding rent control is on those wishing to override a longstanding consensus among economists and introduce new restrictions.