Let's not relive the rent control nightmare others endured

The 1972 film "Across 110th Street" is currently featured in the Criterion Channel's Neo-Noir collection. The film was shot on location in Harlem and has some great footage of gritty, 1970s New York.

The plot involves three men who steal a large amount of cash from the mafia and try to avoid capture or retribution. One of the robbers hides in an abandoned apartment building and neither the cops nor the mobsters can find him.

Wait, what? Abandoned apartment buildings were so common in 1970s New York that it was not too obvious as a place to hide?

There were thousands of abandoned buildings in which to hide in rent-controlled New York City in those times. An April 12, 1976, article in the New York Times headlined "Housing abandonment spreads in Bronx and parts of Brooklyn" describes a decadelong crisis in which up to 50,000 apartment units had been abandoned by landlords every year in New York.

Another article appeared in the New York Times on June 12, 1977, headlined "End rent control, New York City urged." It reported: "The Temporary Commission on City Finances urged yesterday that New York City's rent control and stabilization programs be phased out over the next decade and said that such a move could increase local property-tax collections. … The 21-member commission … said that the existence of the rent control and stabilization systems had depressed the quality and thus the property tax values of a major portion of New York City's housing stock."

Housing costs are tied to supply. When demand for housing exceeds supply, costs rise quickly. In a market where creating new supply is easy, developers will add new units to meet the demand and increase their profits. This stabilizes rents. Developers can also overbuild and increase vacancy to the point where rents decrease.

But in markets where it is difficult or unprofitable to add new housing, demand pushes rents upward.

In St. Paul it is extremely challenging to add new units. There is very little land zoned for multifamily use, which increases land costs. Height restrictions make it difficult to fully utilize the expensive land. Parking requirements had long been another huge expense and barrier to creating new housing until the City Council removed them this month.

Many of the older buildings that should be naturally occurring affordable housing are occupied by young professionals who could afford new apartments were they available.

Unless St. Paul makes more land available for multifamily development, we will continue to have a shortage of affordable housing. We have seen a small building boom in recent years as low interest rates and rent increases made the development of new housing possible. St. Paul could see further housing gains spurred by the recent removal of parking minimums.

On the other hand we could implement the proposed rent stabilization law on the November ballot in St. Paul. That measure would end new construction in the city and further consolidate housing stock in the hands of a few large companies as small landlords give up when lenders cut off funding for multifamily acquisition and refinance.

This is not an exaggeration of what's possible, as the June 12, 1977, New York Times article attests: "The rent [stabilization] laws have discouraged new construction … and have spurred the withdrawal of mortgage finance institutions from most of the rental market. … The press release [from the Temporary Commission on City Finances] describes a 'domino' pattern in which inadequate controlled rents are followed by 'premature decay' and ultimately the 'abandonment of housing which is no longer economically viable.' "

The New York rent stabilization law, according to the New York Times article, allowed 7.5% increases annually; the proposed St. Paul law provides for 3%. The current inflation rate is 5.3% — well above the proposed cap. It would become the strictest rent control law in the world by including new construction and vacant units.

How long would it be before rent levels in the regional housing market outpaced the St. Paul market to such an extent that there were 100 applicants for every St. Paul vacancy as renters vied to be chosen to occupy the coveted "stabilized" units? But as St. Paul landlords collected significantly less rent than property owners in neighboring communities how motivated would they be to maintain their buildings? When costs exceeded revenue would the city bureaucrats grant rent increases in excess of the 3% cap?

When prices stagnated or declined how long would it be before tax collections fell to the point the city had to cut services, as happened in New York? Or will we pile ever more tax burden on homeowners?

Well-intentioned people championed rent control and stabilization in New York. It was not their goal to decimate the housing stock and the tax base. That was an unintended consequence.

St. Paul voters need to carefully consider unintended consequences and vote "no" on this question in November.

Will Rolf, of St. Paul, is a Realtor.