Ramstad: Rent control proposals are a deal-breaker in Minneapolis city elections

The old, discredited idea of rent control is a sleeper issue in the Minneapolis races for mayor and City Council, creating a danger to the economy if voters don’t pay attention.

The city’s Nov. 4 election mainly revolves around voters’ views on public safety and Mayor Jacob Frey’s eight years in office as he tries for a third term.

But Frey’s leading challenger, state Sen. Omar Fateh, and enough candidates for the City Council favor imposing limits on rents that voters eager for new blood in City Hall may create incredible economic damage by electing them.

I don’t think anyone favoring rent control, including Fateh, should be elected.

Using government power to cap rents has long been a goal of progressive Minneapolis activists who hope to help the city’s poor. They got a referendum passed in 2021 that put it on the City Council agenda. But a study of economic effects persuaded Frey and most council members not to do it.

If Fateh and other leftists win, whether they call it “rent control” or “rent stabilization,” their policy won’t help the poor. They will hurt an already underperforming real estate market and a city economy all Minnesotans depend on.

They will arrest the growth of Minneapolis just when it is getting back on its feet. The city fell in population after the pandemic and, data this summer showed, is finally back to where it was in 2020.

Proponents of rent control in Minneapolis need look no further than St. Paul to see it’s a bad policy. St. Paul voters passed a rent control referendum in 2021 and have paid the price since.

Financing on apartments disappeared even before its council passed a restrictive policy capping rent increases at 3% annually.

Construction slowed, property values and transactions fell and, across the country, real estate investors came to believe they wouldn’t be able to make money in the Twin Cities market.

Since then, the St. Paul council has repeatedly gone back to water down its policy.

In candidate forums in recent weeks, Fateh downplayed St. Paul’s troubles and said Minneapolis can be different.

But you can’t tinker away bad policy, especially when history and the market are working against you.

Minneapolis, the Twin Cities region, and all of Minnesota fell behind demand for new housing in the 2008 recession. The Twin Cities metro area needs about 18,000 new housing units a year to account for population increases and long-term affordability. But it got 8,600 last year and around 15,000 the year before that.

High interest rates, rising costs for materials and a shortage of labor have all played a role in constraining supply.

So has market interference by city councils and other regulators. In Minneapolis, you can spot it almost anywhere you see a new apartment building.

In the city’s southeast, you see restaurants and other business cycling unprofitably through the ground-floor spaces in new apartment buildings that the council insisted reserve space for commercial use.

At a forum last week, mayoral candidate the Rev. DeWayne Davis told me, “I’m an economics major. I’ve been reading about rent control for a very long time. I cannot get myself to believe that, if the government sets a rent price, it would do what we want it to do.”

In 2021 — the same year St. Paul voters went 53% to 47% in favor of rent control — Minneapolis voters by that exact margin approved the ballot question saying the City Council “may enact an ordinance” to “regulate rents on private residential property.”

In April 2023, a group of city staffers produced a report recommending against any such policy, saying it doesn’t “target relief to renters whose incomes are insufficient to afford rent in the housing market.”

Frey, who had opposed rent control in the 2021 election, and the City Council majority put the issue aside.