Rent control

Developers Halt Projects, Mayor Demands Reform After St. Paul Voters Approve Radical Rent Control Ballot Initiative

Unlike almost every rent control law in the country, the ordinance passed by St. Paul voters includes no exemption for new construction.

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It's only been a week since voters in St. Paul, Minnesota, approved a sweeping rent control ballot initiative, but developers are already pausing projects while city leaders scramble to amend the most harmful aspects of the new law.

In last Tuesday's municipal election, 52 percent of voters approved Question 1, an ordinance that puts a hard annual 3 percent cap on rent increases. It makes no allowances for inflation or exemptions for vacant apartments and new construction that are typical in other rent control policies.

The new ordinance doesn't go into effect until May 2022. Nevertheless, several real estate companies with large projects in the works have already announced that they're pulling their permit applications.

That includes Ryan Companies. Local NBC affiliate KARE 11 reports that the company pulled applications for three buildings in its proposed 3,800-unit Highland Bridge project.

"The City and Ryan took great care in creating a finance plan that leveraged market rate developments to provide funding to support deeply affordable housing creation both at Highland Bridge and throughout Saint Paul," said a company executive in a statement to KARE 11. "The rent control policy threatens the funding sources for market rate projects and therefore the overall finance plan for the development."

Other developers are singing a similar tune.

"We, like everybody else, are re-evaluating what—if any—future business activity we'll be doing in St. Paul," Jim Stolpestad, founder of development company Exeter, told the Minneapolis Star-Tribune.

The Star-Tribune reports that developers have also been calling Nicolle Goodman, the city's director of planning and economic development, to say that they were placing hundreds of new units on hold in response to the passage of rent control.

"We don't want our equity goals to be at odds with our growth goals," Goodman told the St. Paul city council at last Wednesday's meeting, reports the Star-Tribune. "The ordinance as written may actually put those goals at odds."

In response to the developer freakout, freshly reelected Mayor Melvin Carter's administration sent an email to the St. Paul City Council on Monday saying that while he supported "rent stabilization" as one necessary tool to make housing affordable, the new ordinance passed by voters could use some work.

"Allowing a reasonable return on investment is why virtually every other rent control ordinance in effect today exempts new construction," reads the email. "The Mayor requests you consider an amendment to exempt new housing construction, which he will sign once it reaches his desk."

That would make St. Paul's new rent control policy more similar to those that exist in other states around the country.

Both California and Oregon, which passed statewide rent control ordinances in 2019, exempt buildings that are less than 15 years old from their price caps. New York's long-standing rent stabilization law mostly applies to apartments built before 1974 or to newer units that received certain tax benefits.

The idea, as Carter's email mentions, is to allow investors and developers to make a decent return on a project so as not to deter new construction. Some economists have argued that even with exemptions for new construction, rent control policies still suppress the value of new buildings and thus deter some amount of new construction.

That academic debate is kind of beside the point in St. Paul where developers are actively walking away from in-progress projects because of the new ordinance's lack of an explicit exemption for new construction.

And even with an amendment for new construction, St. Paul's rent control ordinance is still likely to reduce the supply of rental housing.

The 3 percent cap on annual rent increases is itself pretty strict. California and Oregon permit annual rent increases of 5 and 7 percent respectively. Allowable increases at rent-stabilized apartments in New York are typically much lower, and are often in the 1 to 2 percent range.

Both California and Oregon also allow landlords to factor inflation into rent increases. St. Paul's ordinance makes no allowance for inflation, meaning that if prices rise more than 3 percent, landlords will effectively be required to lower the real rents that they charge. St. Paul's ordinance also does not allow landlords to raise rents beyond that 3 percent cap for vacant units.

All of this could well encourage landlords to just get out of the rental market altogether and sell their properties to owner-occupiers. Rising home values in St. Paul, where prices have increased 12 percent in the last year, only make this option more attractive for landlords.

This is what happened in San Francisco where an expansion of preexisting rent controls led to a 15 percent reduction in the supply of rental housing, according to one 2018 study. That study found that incumbent tenants benefited handsomely from the limits on rent increases but that their windfall came "at the great expense of welfare losses from future inhabitants."

Even if the city's new ordinance is amended to exempt new construction, St. Paul renters, current and future, can expect a similar result.

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  1. Hey guys, the voters have spoken! Don't try to override the expressed will of the people!
    If the residents wanted rental housing, they would have voted NO.

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    2. Well, it's stuff like this that reminds me why we don't have direct democracy. Many things you do really need to leave to the experts because policies that sound good on paper often have critical side-effects, and you end up re-learning lessons all the time.

      1. Learning???

      2. What good would leaving it to "experts" do? All they would do is staff HUD with ideologues willing to say rent control doesn't restrict new construction.

        Think it's implausible someone could assert this with a straight face? Then remember Paul Krugman now claims raising the minimum wage does not increase unemployment. When it means achieving a left wing priority truth is simply not relevant to the left.

        1. There have been instances in which raising the minimum wage did not increase unemployment. Not many, but they exist. In fact, it is easy to demonstrate that in a monopsony market, such a situation can arise. However, the overall principle of increasing the minimum wage leading to higher unemployment applies to most situations.

      3. How do you know if someone is an 'expert' if you don't know anything about the subject?

        'Leaving it to the experts' is a recipe for getting ripped off or worse.

        1. Does nobody remember Winnie the Pooh? The book, not Xi.

          When they wanted Happy Birthday Eeyore on the honeypot, they brought it to Owl, the smartest person they knew. He'd surely know how to do that for them.

          Owl, of course, only knew the slightest bit more than they did about letters. He wrong Hippy Bippy Eyor or something like that. But Pooh and Piglet couldn't read so they assumed Owl was a genius.

        2. How do you pick your doctor?

          1. You think libertarianism is close to marxism. Tell us how Russia does it.

          2. I was in the military - they showed me pictures of 6 doctors and told me 'pick your PCM'.

            Since I've been out, I've seen three dentists, had work done by all three, looked at reviews of their businesses, and made a choice of dentist.

            The former is how you get to 'pick' your government agency experts. The latter is what people do when they're free to use their own judgement.

    3. Beat me to it. If you amend it, shouldn't the law be invalid until the next election so that the amendments can be voted on?

      1. Nah. The law should go into effect immediately as-is. They voted for it, they can lie in that bed.

        Then the next election - after they have some experience of what they demanded be forced upon them - they can vote on the amendments.

    4. If "the voters" pass a law that says they no longer have freedom of religion, or of speech, or of the press, would that be OK?
      Because "rent control" laws remove the owner's ability to do as they please with their property and are, thus are a taking.
      Under the Fifth Amendment, the government, in this case "the voters", would have to provide just compensation to those property owners.
      All, so called, rent control laws violate the Constitution, unless the owners of rental properties are justly compensated.
      Too bad so many refuse to read the plain language of our founding document.

      1. Oh the left reads it, they just refuse to obey it if it doesn't further their goals. They use the hell out of it when it justifies what they want.

  2. Reminds me of when Berkeley banned ATM fees and Wells Fargo told the students they couldn't use ATMs anymore.

    Could I structure a lease so that rent were arbitrarily large but included discounts or rebates that I could adjust over time?

    Rent: $10,000/month, Discount $9,000/month, net $1,000/month.

    1. Just call the discount a social score benefit.

    2. "Suggested retail price" is a leftover from the wage and price controls of the seventies. Instead of "raising prices", stores just reduced discounts. Like now, when the prices may not go up, but there are no longer any "sales". We pay more for each trip to the grocery store, but the grocers have not "raised prices".

    3. Like convenience stores - there's no extra charge for using your card (that's against the TOS) but there is a discount for using cash.

  3. Now they will have to force them to build apartments that will lose money.

    1. Are you trying to relate costs and benefits? Fascist!

    2. You think you're kidding...
      "Seattle’s City Council prides itself on being an early adopter of new business mandates. Seattle was the first major U.S. city to adopt a $15 minimum wage and one of the first to require businesses to provide paid sick leave. The City Council achieved another first last week, when it unanimously enacted an ordinance requiring food-delivery app companies to provide gig workers 'premium pay' for deliveries in the city, on top of their usual compensation, and prohibiting the companies from raising fees or leaving the city in response, even if the new rule causes them to lose money." (source)

      1. "or leaving the city in response"

        i wonder what their genius plan is to enforce this?

      2. Note to self: re-read Atlas Shrugged.

      3. Seems about right: this is RevCuntLands "betters" doing it better and moving the culture "forward"

      4. So exactly what are they going to do to a company that leaves the city?

      5. I've family there. It's so sad to see its sanfransicination.

        The 15$ minimum wage has actually lowered average weekly take home pay for hourly workers. Reason had covered it extensively before they caught TDS from shikhas dirty purse she always set on the ground in the starbucks toilet stall.

        Uber eats should just say everything is Uber X Now even the food. Every ride or delivery will have minimum 20$ service fee added just so a dude in a suburban with rented rims can drop your shit off.

    3. force them to build apartments that will lose money.

      And then, as the buildings deteriorate, they will become less expensive! Brilliant!

  4. Don’t need a magic 8 ball to see future rental shortages there.

    1. "Ask again later"

    2. "Outlook not so good"

    3. fuckem. they voted for it

    4. signs point to yes.

    5. So progressives are economic illiterates, who could have foreseen THAT?

  5. "There is almost no economist consensus so complete--left to right--as that rent control is "the best way to destroy a city's housing stock short of aerial bombardment"."

    https://www.theatlantic.com/business/archive/2009/10/rethinking-rent-control/29072/

    Anyone proposing rent controls, let alone enacting them, is either an idiot or a shyster. In this case there's no question that the politicians know better, so we can be certain they're shysters.

    1. Have you seen big lefty city’s councils? It’s just as likely they’re idiots.

    2. Illian Omar will cancel all the rent, except for her tenents

    3. short of aerial bombardment

      Don't give them ideas.

  6. The 3 percent cap on annual rent increases is itself pretty strict. California and Oregon permit annual rent increases of 5 and 7 percent respectively.

    Why in the everloving fuck are you spending a pixel explaining how this is a bad idea. Let me give you the two sentence libertarian position on why this is wrong: With the exception of contract enforcement, the government has neither the moral nor the constitutional authority to interfere in the landlord-tenant relationship. Any law that sets a ceiling on rent is a gross violation of property rights.

    There is a lot more room on the page for more clickbaity shit with that summary.

    1. Comment hidden because this user is muted. Unmute

      Some blistering idiot took a shit in my thread. Is the comment as stupid as I imagine?

    2. "With the exception of contract enforcement, the government has neither the moral nor the constitutional authority to interfere in the landlord-tenant relationship. Any law that sets a ceiling on rent is a gross violation of property rights."

      EXACTLY.

  7. China has a big inflation problem and it's pushing up prices worldwide

    https://www.cnn.com/2021/11/10/economy/china-cpi-ppi-inflation-intl-hnk/index.html

    MY SPITTIN' TOBACCY KEEPS GOIN' UP!

    1. Brilliant analysis as always, Mr. Buttplug.

      But I have some bad news. Even more media organizations I had previously trusted have now descended to wingnut.com territory. I was shocked when NYT and CNN started running anti-Biden disinformation. Now the WaPo economics writer is doing the same:

      BREAKING: U.S. inflation was up 6.2% in October over a year ago. That’s the highest inflation in 31 years. Inflation was up 0.9% in Oct. alone, a much higher increase than 0.4% in Sept. and 0.3% in August. Prices are rising for food, energy, shelter, used cars and new cars.

      Why would she lie like this? Did the Russians get to her?

      #DefendBidenAtAllCosts

      1. The AP is now officially no better than Breitbart. (More like BRATFART, LOL)

        Producer prices rise 8.6%, matching September record high

        So the list of formerly respectable sources we can no longer trust includes NYT, CNN, WaPo, and AP. What's next? Hopefully MSNBC stays legit.

        1. You know, Bravo. This is the first over-the-top satire that I've read in a long time that didn't fall victim to Poe's Law

          1. You've seen SPB's posts right? It still falls under Poe's Umbrella.

        2. you haven't been paying attention, the AP and rueters sold out long ago to the DNC

    2. Is that really the best you can do? "Hurr durr, stupid rednecks".

  8. This is why straight democracy is stupid. Voters should not have a say in the contracts of third parties

    1. Also why unlimited government is stupid. And evil.

    2. "If conservatives become convinced that they cannot win democratically, they will not abandon conservatism. They will reject democracy.”—David Frum

      1. Thank God.

      2. @Chippy - so are you saying it is ok for the people of Seattle to vote a ruling that limits property rights, grants the local govt authority to enforce it, up to and including shooting the perp? Yeah, your democracy and the libertarians on this site seem much much different...

        also, why the partisan comment - are you saying the D's don't reject democracy lately?

        Or, you like this democracy?
        "If you're a libertarian, every election you're sad. Every election, if you're a libertarian, you're going to feel like you were playing Monopoly and you got up to go to the bathroom for five minutes. And when you came back, everybody made a trade and fucked you out of the game." - Drew Carey

  9. All of this could well encourage landlords to just get out of the rental market altogether and sell their properties to owner-occupiers. Rising home values in St. Paul, where prices have increased 12 percent in the last year, only make this option more attractive for landlords.

    I'm surprised the initiative didn't include any restrictions on converting apartments to condos.

    1. They have to leave some bogeymen to blame once the rental shortage in St. Paul starts impacting residents.

      1. HIGH COST OF HOUSING, UPZONE UPZONE UPZONE!

    2. Encouraging landlords to sell their rental properties to owner-occupiers may be a silver lining in this otherwise outrageous law, as people who buy/own their own homes are more likely to succeed economically.

      1. You might have cause and effect reversed on that, Bill. The successful are more likely to own their own homes. The unsuccessful either cannot afford it or know they are unstable enough that it's a bad idea.

      2. Dear fucking god you even confuse symptoms for causes. Is there any idiocy you don't subscribe to?

        What's next? Free bookshelves?

        1. Smart people like read and stuff so giving away bookshelves will make everyone smarter! Dude that's brilliant!

      3. "Encouraging landlords to sell their rental properties to owner-occupiers may be a silver lining in this otherwise outrageous law, as people who buy/own their own homes are more likely to succeed economically."

        Then, what are they going to do when there is a plumbing leak or an electrical problem? Call the previous landlord?

        There is a reason they are renters and not home owners already. They are not responsible enough and do not have the financial where with all to do so.

        1. I have a friend who didn't realize that about himself. For years he's been living in a broken-down house that he can no longer fix and that he's behind on taxes for. Every few weeks I and another friend (who's died) have been going to pick him up (because his vehicle is also out of commission) to have him stay a few nights with us so he can take a shower.

          In the last century he prepared for a career in video production that his other friends knew he could never get hired in. He was a dealer in antiques and collectibles and wound up always holding out for higher prices he could never get. Just a thoroughly unrealistic person. Also paranoid, hiding in darkness with shades drawn, and with a severe speech impediment and on psychiatric drugs.

          His other friends convinced me he could never approach reality and that the best thing was to humor him, because unrealistic hope was all he had.

          1. So you actually knew Mike Hihn?

            1. He just snorted and farted in his grave

  10. "We don't want our equity goals to be at odds with our growth goals," Goodman told the St. Paul city council at last Wednesday's meeting, reports the Star-Tribune. "The ordinance as written may actually put those goals at odds."

    Ya think?

    1. First off, a company with "equity goals" is a scam.

      1. First off, a company with "equity goals" is a scam.

        And a government with equity goals is a racket in violation of equal protection secured by the Constitution.

        1. but ... white men ... herstory ... 1619!!!

          1. Just for the record, the New York Times lies.

            (PS, the cops are just around the corner)

        2. sp agreed and a step further, a government with "equity goals" is evil.

          I don't even want a government with "growth goals." Why the government, a neutral arbiter to protect our natural rights, care whether its municipality grows or shrinks? Start thinking like that, and next thing you know the government will be seizing land from little old ladies to build a shopping mall. That might or might not ever get built.

  11. We keep getting the government other people deserve.

    FYI, just move out of St. Paul like you would go to another restaurant if you don't like the pasta.

  12. A modest proposal - If rents are too high, this is a simple supply and demand problem. Placing burdens on the developers and landlords merely constrains supply even further.

    The solution is obvious - state sanctioned mass murder reduce demand, proggie style.

    1. The obvious solution is to lower housing costs by making the community a less desirable place to live. St. Paul is doing this.

  13. And the Gov-Gun show-down begins.

    "I'm entitled to your stuff", compulsively screams the retarded left in politics with the threat of GUNS....

    So the creators say, "Then we won't create what you want!"

    So the 'fix' was the very failure; Just like every Nazi-Law ends up being.

    1. Next up; Use Gov-Gun-Force and FORCE them to create!!!!
      Otherwise known as SLAVERY and DICTATORSHIP...

      1. Too late..It’s already happening, The State of California Housing task will force severe consequences for inaction? Somehow, the state believes that counties build housing, not private investors:
        https://www.msn.com/en-us/money/realestate/new-california-task-force-focused-on-housing-laws/ar-AAQibhn

      2. You WILL bake the cake...

  14. I distinctly remember my father telling me that rent control in New York City was supposed to be an “emergency measure” designed to counter the “housing shortage“ occasioned by World War II. 80 years later, this “emergency measure“ is still with us. And ever expanding.

    Those who think that mask and vaccine mandates are valid “emergency measures“ should take note.

    1. Nothing is more permanent than a temporary government program.

      1. And nothing is more dangerous than an government agency facing obsolescence.

  15. > All of this could well encourage landlords to just get out of the rental market altogether

    This is not an unintended consequence, but a planned outcome.

    1. How do landlords get out of the rental market? Sell to a different landlord? Now you just have different landlords in the rental market. Seems like a really dumb thing to say.

      1. "How do landlords get out of the rental market?"

        Convert to condos?

        1. I suppose. But who wants to buy an apartment?

          1. Lots of people do. Mostly better off people, though, I would imagine.

          2. An apartment you buy is called a "condominium".

      2. That's just what the proponents of rent control say. They assume landlords are locked into the property and have no choice but to rent at whatever rates the politicians decide. It's like the myth that minimum wage hikes won't cause prices to rise. Hah!

        What happens is landlords on the margin get out of the rental business all together. If they can sell their rental properties they can. In extreme cases they will just abandon the properties. A friend in Berkeley took his entire boarding house off the rental market. A dozen rooms for rent that he will never rent again. Paying property taxes on unused rentals is cheaper in the long term than renting them out in a place like Berkeley.

        Then the city slowly builds up its own stable of property, run by a housing authority. So the private rental market shrinks and you end up with rental shortages.

        San Francisco has a rental shortage right now. Across the bay in Berkeley they have a rental shortage. And Saint Paul has one too that they just voted to make worse.

        1. There's always the New York solution of just letting the properties deteriorate until they're abandoned, and then collecting the insurance when they accidentally catch fire.

          -jcr

    2. Exactly. The middle class road to financial independence is very commonly real estate/rental property. Elites don't want that pathway to exist. They need the proles to stay proles.

  16. This is ridiculous. Why everyone knows that developers build housing projects mainly for the fun and to incur debt to write off on their taxes. These are the evil rich people that need to be taxed more. (Do I have this right?)

    1. Close.

  17. Rent control should have been killed by the Supreme Court when it reared it's ugly head.
    Fuck Joe Biden.
    Fuck the Supreme Court.

    1. can't erase image of Kagan & Sotomayor rolling around together on the floor thanks.

      1. They were reviewing each others legal briefs.

    2. Rent control should have been killed by the Supreme Court when it reared it's ugly head.

      It showed up in the midst of world war two, when FDR was getting away with shit like locking up innocent people for their race.

      -jcr

  18. I just bought a house in St. Paul. I had no idea this moronic law was on the ballot. Now the city is screwed.

    There are over 50% renters in St. Paul. That is because there are multiple colleges and universities in town. So selling to owner-occupiers ain't gonna happen. 3% raises just keeps up with inflation. So no capital improvements will ever occur again, in any rental property. In ten years, we will see the place deteriorating. In 20 years, we will be wondering why St. Paul is looking so much like Detroit.

    1. not with this regime, inflation is at 6%

      1. You're so optimistic. Gosh.

      2. Brandon just stated “In order to stop inflation, we need to distribute the 5 trillion in the budget reconciliation bill”. That’s some serious delusional central planning going on.

        1. Flooding the economy with spending will stop inflation.

  19. Who could have foreseen that limiting how much people can charge for a product would limit the supply of that product? Are we all supposed to be economists or something?

  20. All Rent Control laws are unconstitutional. Setting a maximum price you can charge for something you own is theft

    It is also none of your god damned business what price a buyer and a seller chooses to agree on

    1. Not unconstitutional. The US Constitution does not apply to the states except for the basic rights enumerated (or recognized) by the courts. Meaning state governments can do a whole bunch of things the Federal government cannot. Such as economic restrictions. Shit like banning taco trucks or requiring licenses to braid hair or... rent control.

      1. Is it not a taking, and therefore incorporated under the 5th Amendment?

        https://en.wikipedia.org/wiki/Chicago,_Burlington_%26_Quincy_Railroad_Co._v._City_of_Chicago

  21. "This is known as 'bad luck.'"

  22. This is why California is smarter than Minnesota. CA established a task force to hold local politicians accountable for housing, consequences for localities that do not densify and approve projects. It’s smart to wait until after housing is privately built to force state mandates or rent control.

  23. I have no way of guessing. What is the other side of this? How can anyone think that "rent control" is an appropriate and constitutionally permissible government action?

    1. Renters outnumber landlords by a wide margin.

      1. And now renters will outnumber rooms for rent by a wide margin.

        1. Excellent response! The commies will still double down on stupid, though.

  24. Get rid of rent control only when zoning laws end..And not before!

  25. “The first lesson of economics is scarcity: there is never enough of anything to fully satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics.”--Thomas Sowell

  26. "Rent control" has been tried in every geographic location and under every form of government across 5,000 years of recorded history. The result is ALWAYS the same - a scarcity of housing, and HIGHER real housing costs.

    You can't fix stupid.

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