Record-breaking rents are now possible.
Renters, don’t be afraid! Progressives convinced people in Minnesota to vote for rent controls, including Minneapolis and St. Paul.
It will punish greedy landlords!
But profits are what motivate builders to make things. Profits are what motivate other builders to build. This creates more homes and ultimately lower rents.
Set prices limits, and greedy landlords will look elsewhere to build.
The supply of rentals decreases when rent control is implemented. Many studies support this conclusion.
However, activists are reluctant to listen.
“We don’t need more studies! It doesn’t make sense to gather more data. We need action now!” says Claire Bergren of Home to Stay, Minneapolis, in my Video of the Week.
Rent control in St. Paul is unique. Many cities do not allow new construction. But St. Paul does. The law was placed on the future apartments.
“This is such a step backwards,” says Salim Furth, economist at the Mercatus Center. “The market is going to shrink, and quality is going to fall.”
After all, if you are a builder, “Why would you enter a market where it seems like the government is actively trying to hurt you?” asks Furth.
Developers from St. Paul can move only a few blocks to Twin City Minneapolis. Minneapolis also voted for rent control. However, they have not yet enforced it.
It’s why Minneapolis builders are still building. Last winter saw a rise in permits by 65%, while those for St. Paul fell by 61%.
Melvin Carter (St. Paul mayor), who had voted for rent controls, suddenly thought differently. Now he’s realized, “Turning off our supply of new housing would be disastrous.”
What lessons can the rest of progressive politicians learn from St. Paul’s misstep? No. They are in a magical world. They don’t learn.
“I want us to follow (St. Paul’s) lead,” says Minneapolis City Council Member Aisha Chughtai, the rare rent control supporter who would talk to me.
She said that rent control would not stop the housing supply from growing.
“In other cities, we have continued to see development,” Chughtai says.
“What cities?” I ask.
“San Francisco,” she says.
What? San Francisco!?
It’s a bizarre example. San Francisco’s housing crisis is a well-known fact.
“Builders still build in Minneapolis,” I tell her. “But you’re not going to get apartments by pushing this.”
Here she pauses for a full 17 seconds — an eternity in a video interview — before answering, “I’m going to maintain that guaranteeing housing for people and making sure that they can stay in their homes matters more than anything else.”
For insiders such as her, this may make for interesting work. Tenants will have the option to live in apartments that are in disrepair for a lifetime. Newcomers won’t have the same opportunity.
“I live in the only town in Maryland that has rent control,” says Furth. “We’ve had it since the ’70s. We have not built a single multifamily building since that law was passed.”
Chughtai considers herself a socialist. This explains why Chughtai doesn’t know how apartments and houses are built.
I inquired at the city councilwoman if socialism had worked. She said it has not.
After another long pause, she answers, “I’m doing a just fine job of representing my community.”
She’s not.
The late economist Walter Williams explained, “Short of aerial bombardment, the best way to destroy a city is through rent controls.”
My New York City town was once devastated by rent control. The landlords couldn’t increase rents enough for a profit so they stopped fixing the buildings. Many people then burned their buildings in order to get insurance. Many Bronx residents lost 97% of their homes to fire or abandonment between 1970 and 1980.
Under rent control, says Furth, “Landlords just don’t reinvest.”
Rents have risen in recent years, which is hard to believe. However, renting controls won’t solve the problem in the long-term.