The Unintended Consequences of Zoning

Zoning can limit supply, but not demand. This is an important thing to remember.

I had a chance to sit down with the co-chair of the student group opposing St. Paul's new regulations, Andrew Hasek, along with Streets.MN contributor Bill Lindeke, to discuss the issue on a podcast. I recommend checking it out. You can download it here!

"3 BDRM Home just outside of Student Rental Ban Area! 2 blocks to Macalester! 235 Amherst Ave!!"
These words will probably scare anyone who owns a home just outside of the Student Housing Overlay District. It is a headline for a rental housing advertisement in St. Paul. [Note: This is a nice house in a nice neighborhood - Google Streetview].

The description continues:

It is clear that the student housing overlay district is already starting to fail after only a year. The demand for student housing hasn't ceased and the limited supply near St. Thomas is spreading students further apart, and deeper into other neighborhoods. This is why I was surprised that the Mac-Groveland and Highland District Councils were overall supportive of the measure.

The issue revolves around the University of St. Thomas and its long battle against its neighbors. In this case, the City of St. Paul passed a moratorium on converting owner-occupied dwellings into rentals. The stand-off is summed up brilliantly by a local Twin Cities blogger, Spencer of City of Lakes Urbanism and Streets.MN;

He's 100 percent right.

Here's a small work sample (circa 2004) from my days as a student in the neighborhood. It was a friendly prank on a group of friends who happened to live on Portland Avenue, but neighbors were likely displeased.

To really understand the problem in 2012, you need to rewind to 2003 / 2004. St. Thomas had just spent a decade expanding its student population to around 4,500 plus, and despite new on-campus residential buildings, student populations started to creep further and further into the neighborhood. Part of this was a result of affordability. On-campus housing at St. Thomas (and almost everywhere) is expensive!

Well-intentioned members of the City Council decided to increase restrictions on rental properties and limiting each rental home to include only up to four (4) unrelated people per household. Meaning, large 5, 6 or 7 bedroom houses could only house 4 students.

St. Paul tried to defy the laws of supply and demand. Now, this is where the law of unintended consequences kicks in. They restricted the supply of student housing while the demand remained the same. The market reacted and two things happened as a result:

Today, we now see advertisements boasting that they are close, but not too close, to the University. Who could have predicted this? Well – lots of people. The City of St. Paul just didn't listen. Beside fellow bloggers, there was a student group that is currently lobbying against the proposal ["Like" them on Facebook].