Rent control

America's Most Controversial Rent Control Law Is Getting a Hasty Makeover

A collapse in new development activity followed St. Paul voters' approval of a strict, vaguely written rent control ordinance. City and state officials are scrambling over how best to fix the new law.

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As a controversial new rent control law in St. Paul, Minnesota, nears its implementation date, politicians are scrambling to define the terms of the vague new policy, mitigate its worst effects, or even overturn it entirely.

Tomorrow the St. Paul City Council will discuss the details of implementing Question 1, a brief, voter-passed ordinance that caps annual rent increases at 3 percent and which includes none of the typical exemptions or allowances for new construction, vacant units, or inflation.

The policy isn't scheduled to take effect until May 1. Nevertheless, its strictness has seen developers flee the city almost immediately after its passage in November 2021. Thousands of planned new housings units have been put on hold or canceled, and the number of new multifamily building permits issued by the city has plunged.

St. Paul's ordinance does allow landlords to request exemptions to that 3 percent cap pursuant to their "right to a reasonable return on investment." But what counts as a reasonable return on investment and how they'd go about requesting that exemption go undefined in the text of the initiative. Even some basic terms, like what counts as "rent" subject to that 3 percent cap, aren't spelled out.

That lack of definitions has been a major source of frustration for both rent control critics and proponents.

The latter group complains that landlords are trying to subvert the law by jacking up utility costs or charging separate fees for repairs and property improvements. Some state legislators have pointed to the vagueness of the law as a reason for repealing it entirely.

"They don't even have their terms defined. They don't even have what rent is defined yet," said state Sen. Rich Draheim (R–Madison Lake) last week. "Does it include utilities? Does it include parking? Does it include internet? Lot of questions."

Draheim made those comments at a hearing for the Minnesota Senate's Committee on Local Government Policy, where his bill nullifying St. Paul's rent control ordinance and banning all other cities from imposing rent control in the future was being discussed.

At that hearing, Draheim and other opponents of rent control stressed the damage that St. Paul's rent control policy was doing to new development in the city.

The senator referenced Census Bureau data showing that new multifamily building permits had fallen 80 percent year-over-year in the months after St. Paul passed rent control. In neighboring Minneapolis, new multifamily permits are up 60 percent. Nationwide, 2022 is looking like a blockbuster year for apartment construction. Cecil Smith of the Minnesota Multi Housing Association said at the same hearing that developers had canceled or suspended their plans to build around 3,100 units in St. Paul since the ordinance passed.

On the St. Paul City Council's Wednesday agenda is a pair of ordinances intended to clear up ambiguities in the new law and provide some certainty for property owners and tenants. The first ordinance would establish basic definitions for terms like "rent" and "rental unit." The other would direct St. Paul's Department of Safety and Inspections (DSI) to articulate what a reasonable rate of return for landlords will be and establish a uniform process for requesting exemptions.

The latter bill would still require some rule-making from DSI, which city staff say will last into April.

That leaves more time for even larger changes to St. Paul's rent control policy. The city's mayor, Melvin Carter, has asked the council to exempt rental properties less than 15 years old from the 3 percent rent cap. That exemption wouldn't kick in until January 2023.

State-level rent control policies passed by California and Oregon in 2019 include an identical 15-year exemption for new construction. The idea is to allow developers price flexibility so as not to deter new supply.

There's reason to believe that even a rent control law that includes an exemption on new construction will still reduce some developers' incentive to build. Obviously, all new, unregulated development becomes old, rent-controlled housing stock over time.

California and Oregon policies also include a number of other exemptions to their state-level rent control laws. They allow property owners, up to a point, to add inflation to allowable rent increases. They both allow landlords to raise rents as high as they want between tenants and have higher caps on rent increases: 5 percent in California and 7 percent in Oregon.

A city-assembled stakeholder group has discussed making those exemptions to St. Paul's law, but no one has offered a formal proposal yet. Activists who got rent control on the city's ballot last year are deadset against even an exemption for new construction.

They've also criticized the idea that rent control is causing the collapse of development activity in St. Paul.

"It's the industry's jobs to adapt to market conditions, not to threaten cities with disinvestment," Tram Hoang of St. Paul's Housing Justice Center said at the Senate committee hearing last week. She said that supply chain issues and a labor shortage are the real reasons developers are delaying construction.

It seems that developers are adapting to market conditions by not building housing. It's true that lots of market factors go into when and where developers try to build. But the fact that new building permits are up in neighboring Minneapolis suggests rent control is playing a bigger role in reducing supply than rent control advocates would like to admit.

The chances are slim that St. Paul's rent control initiative will be overturned in its entirety. The MinnPost reports that Draheim's bill faces long odds in Minnesota's Democrat/Farm Labor-controlled House of Representatives. Even some Republican senators questioned whether it was right to retroactively overturn the will of St. Paul voters.

Rent control advocates have stressed that point as well.

"We cannot spread the message that community building is the problem," said B Rosa, an activist with the Housing Equity Now St. Paul, at the committee hearing on Draheim's bill. "Taking away the right to organize your community is not only irresponsible, it goes against democracy."

In this case, rent control advocates' version of building community seems to be coming at the expense of building buildings.

NEXT: Progressive Lawmakers Ask Joe Biden To Do Their Jobs for Them With Executive Orders

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  1. The activists are right on this one. It may be a mind numbing stupid law, but overturning it without even letting one election go by for voters to get a say on who represents their will on this issue is a anti democratic idea that undermines the will of the voters.

    There is a difference between representatives and rulers. Reason needs to remember that that difference has nothing to do with what policies a person prefers.

    1. Not really. This was an immoral law that violated the rights of both landlords and tenants. Yes, it was passed by "the people" - and that just makes it another example of the Tyranny of the Majority , the primary weakness of democratic forms of government. The bill to preempt local rent control laws, however, is an example of intentionally anti-majoritarian controls that keep the perils of "pure" democracy in check.

      Yes, there is a difference between representatives and rulers but it's not as much as you seem to think. What matters are the rules that get made and whether they infringe on the liberties of real humans, not just on who makes the rules.

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      2. Your saying that the end are more important than the means, or to phrase it differently that you'd cut down all the laws in England to get at the devil, then be surprised that there are no laws left to protect you.

        Do you remember California? Where the voters passed an initiative that uber drivers were contractors not employees, and the legislature and courts both tried to overturn it. It's the same situation as this city. Just one policy is agreeable while the other is not.

        1. Well, yes, the ends are more important than the means. The means are only ever useful to the extent that they can achieve the ends. (This does not mean that the ends justify the means but means that fail to achieve their ends have no justification at all.)

          Means that do achieve their ends (which in this case would be just and moral laws that maximize liberty for all) should be supported. Means that fail to meet those ends must be abandoned, replaced, modified or balanced until the ends are achieved. That is very different from your Thomas More misquote.

          Your analogy to the California Uber initiative is, however, exactly on point. That was another unjust law imposed by "the people" based on the whims of a largely uninformed majority over the objections of the minority actually affected by the law (notably including the very people the initiative was supposed to "protect").

          1. You have that one backwards. The previous poster referred to an initiative to exempt drivers from being considered employees automatically.

            1. Ah, my apologies. CA has so many initiatives, it's hard to keep them straight.

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      3. two wolves and a sheep are voting on who's for lunch...

      4. I think the voters need to learn the impact their decisions have on their community. Swooping in and protecting the community from the reality of what they voted for will only encourage them to vote in support of other ill-conceived laws ignorant of the effect they will have.

        It's an important lesson I think they need to learn.

        It's important to point out that likely not one in "The Rent is too Damn High" group actually owns property, let alone rents out their own property to others.

        Will the city limit property tax increases to under 3% a year for rental properties? Probably not, because that's as bad an idea as limiting rent increases to 3% - BTW, inflation is currently at 7%.

      5. But can you do that retroactively? Rather than imposing a constraint on the edicts that can be enacted, deciding afterward that one passed by voters should have been subject to a constraint that wasn't there at the time?

        1. But there is a constraint that was there at the time, the Fifth Amendment to the US Constitution:
          "... nor shall any person... be deprived of life, liberty, or property without due process of law;
          nor shall private property be taken for public use, without just compensation."

          In Chairman Mao's China, "just compensation" to a landlord (or other class enemy) was a bullet through the head, but that has never been part of US political or legal culture.

    2. "We cannot spread the message that COMMUNIST building is the problem," said B Rosa, an activist with the Housing Equity Now St. Paul, at the committee hearing on Draheim's bill. "Taking away the right to DICTATE your community (By Gov-Gun Force) is not only irresponsible, it goes against democracy."

      Wow.............. And that is EXACTLY what's wrong with Democrats...

      Deep inside they think the USA is about "Democratic" Nazism and some imaginary right to pull out Gov-Guns on anyone and everything because they won the Prom King vote.

      Bow down and worship your Gun-Toting Prom Kings and Queens...

      1. National Socialist (German) Workers' Party

        Most of that seems familiar - - - - - -

    3. "anti democratic idea".....

      Funny; I didn't know the USA was a Democratic Nazi Nation...
      As a matter of fact I'm sure it's a Constitutional REPUBLIC!!!!!!!!

      Article IV, Section 4:

      The United States shall guarantee to every State in this Union a Republican Form of Government

      That day LEFTY-PROPAGANDA redefined the USA by Constitutional Ignorance and Championing Nazism...

    4. Fuck the voters. They have no right to set prices, set wages or set rents on other peoples property.

      1. And neither should the government. If we had a decent Scotus these laws should have been nixed years ago.

        1. +10000000000000000000

      2. Henry Hazlitt remarked that people have those rights that other people are willing to respect. And wrote an article to that effect. It is a hard truth. The Housing advocates think in collectivist terms, and that the renters have more right to the property than the owners. Never mind what the 5th Amendment says about "takings". Great on the first day, but a Swedish economist observed that rent control is the fastest way to destroy the condition of the housing stock, short of war. - It will now entirely be on the tenants to try and maintain the condition of their homes.

        BTW, I recall a long time ago that St. Paul Housing advocates sought to ban condo conversions. What happened? Is that still on the books?

      3. "They have no right to set prices, set wages or set rents on other peoples property."

        Exactly.

    5. "The activists are right on this one. It may be a mind numbing stupid law, but overturning it without even letting one election go by for voters to get a say on who represents their will on this issue is a anti democratic idea that undermines the will of the voters..."

      Irrelevant: A5, "takings".
      Unconstitutional regardless of 'the voters"

    6. The majority voting themselves the property of an individual or company is not ‘the will of the people,’ it is theft. If ten of your neighbors voted to turn your backyard into a public park without compensation, I doubt you’d be happy. Do the voters have a right to tell a restaurant how much to charge for a hamburger or a soda? What’s the difference?

    7. Rent control is a great idea that always succeeds whenever it is tried. That's why we need rent control everywhere. Fix rents by government edict forever. Don't allow landlords to raise the rent one penny.

      That will ensure that developers build lots of rental properties, which will lower rents.

  2. They should just pass a law making developers build more .

    1. We need more regulations in order to de-regulate!

    2. Pass a law commanding the tide to go out.

      1. "Pass a law commanding the tide to go out."

        We could call it the TIDE act, for "Truth In Daily Ebbs", because we all know laws with catchy names are better!

        1. excellent!

    3. Outlaw homelessness - problem solved!

      Hey, it worked for private healthcare insurance under Obama, remember?

  3. "It's the industry's jobs to adapt to market conditions, not to threaten cities with disinvestment,"

    Let us fuck you up the ass however we want to; just try a different kind of lube or something...

    1. Pretty much, yeah, but in your analogy the rent control law in St Paul is glass in the vaseline.

    2. they did adapt...they left for someplace that wasn't so ridiculous. now the brainiacs that drove them away can expand their meddling and encourage MORE folks to exit. money goes where it's treated well.

      1. This. This reaction is an adaptation to market conditions. The market in your Utopia sucks ass, so the developers are going somewhere else.

        1. Similarly, the reaction to state-set prices for ag goods is for the farmers to keep the goods and for the rest of the population to starve.
          Lenin, Stalin, Hitler (near the end of the war, the potato crop was diverted to make syn-fuel), Mao and Maduro have proven it to be a universal result.

    3. It's the community's job to attract development, a concept few in St Paul understand.

      1. Gonna disagree.
        There is no 'job' for 'the community' there, other than to fuck off.
        Perceived demand (the 'market') will tell developers all they need to know without any involvement by 'the community'.

  4. This guy doesn't even understand the words he uses.

    It's the industry's jobs to adapt to market conditions, not to threaten cities with disinvestment

    This was my first reaction, but Britches nailed it.

    It seems that developers are adapting to market conditions by not building housing.

  5. "That lack of definitions has been a major source of frustration for both rent control critics and proponents."

    Well, who are the amateurs who wrote this stupid ordinance?

    "Activists who got rent control on the city's ballot last year are deadset against even an exemption for new construction."

    Oh, I see. Looks like one side has no room to bitch.

  6. Not only are leftists idiots, they're twats too.

  7. This is why stuff like this shoudl NOT be on the ballot. This wasn't some idiot AOC who passed the law, it was the voters. A part of me says to let the voters deal with what they enthusiastically voted for.

    Voters are idiots. We know this. While each individually may be experts in their particular field, when it comes to economic in general they're idiots. "Rent control" sounds like it might control rent. It *sounds* like it might help the poor. But it doesn't. Voters don't think through the measures, they just don't. Both sides. They go by what their voter information guides say at most, or the mailers they get from the Democrats or the Republicans. Voters are not rational. They have in inner bias against rational voting. This is not a slam against voters, it's just that they're not economists or statisticians. it's that their is literally no incentive to be informed. Their vote is literally one out of a million.

    California has a history of shit like this. People who have no idea what an actuary is are voting on what insurance rates should be. But the California initiative system arose out of early progressive efforts to rein in a a neo-feudal authoritarian system that had granted extraordinary powers to railroads and corporations.

    So citizen referendums do serve the purpose of providing a check on the state. But they should not be used for basic legislation. Let's keep that limited to the elected representatives. Where to draw the line can be unclear, but what is definitely clear is that voters should NOT be voting for what they think prices should be in a market economy. That road leads to madness.

    1. PoPuLaR VoTe!

    2. I don't know what the answer is. Minneapolis has got the government they deserve. And in my opinion, after watching the BLM riots and the city council there, it seems pretty clear to me that in the absence of the voters, the council would have had little qualms about passing a law through the legislative proces.

      This is the same city council who went crying to the police chief when the crime started climbing through the roof after #DefundingThePolice.

      I don't know how St.Paul differs from Minneapolis, but given that they're "the twin cities" I have to assume they're the "twin ideologies" as well.

    3. A very good comment from Brandybuck! Kudos...
      "keep that limited to the elected representatives" -- Otherwise known as a Republic....

      Add in the Constitutions and presto; the USA could be saved from self-destruction.

      1. Ask brandyshit about Trump.

    4. These are the same types of people who think enforcing a no-fly zone over Ukraine is as simple as just telling the Russians not to fly there, and them stopping their sorties

    5. I’ve lived in California for 30 years. In that time I’d venture to say that the proposition process has been a net benefit, since voters on average are more reasonable than the Assembly, and have undone some egregious laws. But there have been some major misses, like the bulletin train (although that mistake was exacerbated by the courts, who eliminated the voter-approved cap on spending).

  8. A collapse in new development activity followed St. Paul voters' approval of a strict, vaguely written rent control ordinance. City and state officials are scrambling over how best to fix the new law.

    I have an idea. It's simple. Anyone wanna hear it?

  9. I guess just admitting they made a mistake and repealing it is out of the question...

    1. sorry vern, we don't do that. well, we did once with prohibition, but the preferred technique for the nanny staters is jiggering and expanding their frankesteins monsters

    2. I kinda see the point made above about how the voters put this shit on the ballot and passed it, and now they should get to live with it for a while. Let it play out until someone else puts something on the ballot to repeal it.

  10. The surprising thing is that new multifamily housing starts aren't down 100%.

    1. Some might have been too far along to cancel, but they can always be converted to condos if the law remains, that way the builder can cash out and move on...

    1. My beard is 8 inches and growing, and I'm tempted to buy one anyway, just in case I decide to shave.

    2. Awesome indeed.

  11. Let the Marxist activists that created this law step into the development gap they created, I'm sure they can do it rather than just whining about what everyone else must do to support their delusions.

    1. Beware what you ask for!
      The SF city government is stepping in: Using taxpayer money to compete with developers.
      Let the lefty shits 'step in' only on their own dime.

  12. THIS is the result of allowing folks that have only signed the backs of checks issue edicts to those who sign the fronts. you see front signers can always decide to leave. and, no surprise, many did and are.

  13. What a beautiful chance to compare more socialism to less socialism.

    A twin cities scenario is the ideal place to make the differences clear. We can just watch the changes in St. Paul to that other city I can't spell and see what the result of economic dictatorship is.
    Don't change a thing, leave that law in place just as it was passed by the people. You're not against democracy are you?

    1. Predicted result: Higher rents, higher property costs, more homelessness. Basically, they can achieve San Francisco levels of disfunction without the cushion of Big Tech wages.

  14. Hilarious!

    The road to Hell is paved with Good Intentions.

    How hard is it to understand?

    The more laws you put on Landlords, the higher you raise taxes and make it difficult to get permits then the less construction you'll have.

    Look at any major Blue City that is drowning in homeless, crime and drugs and you'll find laws like this.

    Oakland, San Francisco, NYC, Houston, Los Angeles, NOLA, DC, Chicago, Detroit, St. Louis, San Antonio, Atlanta etc etc.

    The landlords will just go elsewhere and SELL OFF THE HOMES meaning LESS RENTALS.

    This lady is a moron:

    "It's the industry's jobs to adapt to market conditions, not to threaten cities with disinvestment," Tram Hoang of St. Paul's Housing Justice Center..."

    1. There isn't a single cost that my landlord incurs that isn't, eventually, a cost that I incur.

      When my local school district wanted to raise property taxes the other year (FOR THE CHILDREN! [not the teacher's union]), two of the other three renters in my building voted in favor. When I asked them why, they said:

      "We don't pay property taxes, we rent!"

      1. Did you ask them if it hurt every single time their mothers dropped them on their heads, or just the first couple?

        1. Well, one of them was probably abused by his mother, and the other one was organizing 'get out the vote' meetings for her Cherokee chieftess, Elizabeth Warren.

          So, I don't know if either of them could have given me a number.

      2. Voting to raise taxes to support an educational system they clearly benefitted from not at all. Amazing.

  15. City and state officials are scrambling over how best to fix the new law.

    My suggestions (the first consultation is free):

    1. Repeal the law.
    2. Let landlords charge whatever they want, and compete with each other for tenants based on price, value, amenities, location, etc.
    3. Let renters decide where they want to live, based on what they can afford.
    4. Let property owners decide on the best economic use of their property, including whether to build new apartments, refurbish existing apartments, or tearing down old apartments and building something else.

    1. OMG.... Did you just propose people 'own' themselves instead of being owned by [WE] mob lobbyists???? Say it isn't so..... 🙂

      Well said... +100000000

  16. "We cannot spread the message that community building is the problem," said B Rosa, an activist with the Housing Equity Now St. Paul, at the committee hearing on Draheim's bill. "Taking away the right to organize your community is not only irresponsible, it goes against democracy."

    You can organize your community once you own every building in it, commie.

    1. If their choice is to build a "community" in which there's no place to live, that's their choice as well. When the "market conditions" make a particular kind of activity untenable, then divestiture is the appropriate form of adjustment for any rational company to make.

  17. "It's the industry's jobs to adapt to market conditions, not to threaten cities with disinvestment," Tram Hoang of St. Paul's Housing Justice Center said at the Senate committee hearing last week.

    Never heard of this woman before, but fuck her. Crushing government regulations are not "market conditions", for fuck's sake. And it's obviously not a "threat" when you simply decide not to chain yourself to rules that will make it impossible to earn a return on your investment.

  18. "...City and state officials are scrambling over how best to fix the new law..."

    Simple: Enact a new, even more idiotic law.

  19. One fix I guarantee they will not consider is requiring everyone who voted for the controls to become a renter, and live on the streets without a blanket if there are no apartments open.

  20. Something Democrats don't seem to understand....

    When a person preforms an act of charity they CHOOSE to SACRIFICE themselves for another for that act out of empathy.

    When Government preforms so called 'charitable' acts they ENSLAVE others by the point of Gov-Guns for that SACRIFICE....

    So; It seems while the DNC pretends they are against SLAVERY they are actually pushing SLAVERY like nobodies business. Just as it is with Racism, Sexism and Wealth-inequality ( And one would have to be a complete ignoramus not to see this is 100% true by the 'effects' already established. )

    The DNC dictionary.....
    Slavery is when legislation DOESN'T allow people to keep their labors.
    Racism is when legislation DOESN'T specify a skin color.
    Sexism is when legislation DOESN'T specify a gender.
    Wealth-Inequality is when legislation DOESN'T specify a 'wealth' lottery winner.

    Are Democratic Voters actually 'thinking' or just 'following' indoctrination?

  21. Let the the city die first then ban rent control.

    Massachusetts voted for a "cage free" egg law that would have left grocery store shelves empty this past January if the legislature had not stepped in to save voters from themselves. The egg industry was not willing to change its practices to suit Massachusetts alone. I wish the legislature had kept out of it for a while to teach voters a lesson.

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