Reject efforts to add rent control

Opinion editor's note: The Star Tribune Editorial Board operates separately from the newsroom, and no news editors or reporters were involved in the endorsement process.

Slightly more than half of the households of Minneapolis and St. Paul pay rent. Though rent increases have skipped along modestly for most of them for years, renters with lower incomes have faced bigger jumps both in percentage terms (sometimes egregiously so, anecdotally) and in proportion to the growth in their incomes. Economic and racial equity, especially these last few years, have developed into intense matters of concern. Not to mention that inflation in the U.S. has been running hot.

Into this environment come ballot questions in both cities leading the way to limits on how much rents can rise. Given the factors above, the idea may seem appealing. Nonetheless, voters should reject both initiatives — in St. Paul because the ballot question tells voters exactly what it would do, and it's worrisome; in Minneapolis because it doesn't, which is worrisome; and in both cities because any short-term benefits are likely to be undermined in the long run by the larger forces of economics.

Before we proceed, a few words about language. Depending on who's speaking, you'll hear the proposals described — for both historical and marketing reasons — as either seeking rent stability or rent control. Stability for renters is indeed the aspiration, but control is the means of pursuing it. The latter term applies no matter the result, so it's the one the Editorial Board will use in this discussion.

Further, some background. Economists have long considered rent control one of the least successful public policies. Simply put, it discourages investment, leading to less new rental housing where it's most needed and less upkeep for existing units. It gives landlords an incentive to convert rental units into owner-occupied housing. It's market distortion. It's friction.

The biggest horror stories stem from strict rent control policies long since repealed. Those implemented around the nation in more recent years have been more lenient. This second wave often caps increases based on the Consumer Price Index plus a generous cushion, with exemptions for new or newer construction, and with allowances for the baseline rent on units to be reset to market rates when they turn over.

St. Paul's proposal might be described as a third wave running in reverse. It places a tight 3% annual limit on all rent increases, without consideration of inflation. It does not exempt new construction from annual caps and does not allow resets.

Is a policy like this really needed in the Twin Cities? Advocates make a point of saying that a 3% limit would not affect most landlords, whose typical rent increases have held below that. They say the policy is designed to help tenants least able to absorb rent increases, including those under the umbrella term BIPOC — Black, Indigenous and people of color.

On this matter, the information voters have at their disposal is imperfect. A report by the Center for Urban and Regional Affairs (CURA) at the University of Minnesota, commissioned by the Minneapolis City Council, finds that people in the groups advocates seek to help have indeed faced higher cumulative rent increases, but it does not detail the data, and voters could infer from it that incomes are as much the issue as rents. In any case, it's Minneapolis data, and St. Paul voters would have to extrapolate.

The CURA report also provides a comprehensive overview suggesting more nuance than is typically assumed regarding the effects of rent control policies. Nonetheless, it acknowledges "considerable debate in the empirical literature about whether the majority of benefits from rent stabilization go to the neediest households."

The number of localities with rent control policies in the United States approaches 200. Advocates in St. Paul say they've developed a proposal that learns from shortcomings elsewhere. Yet if returning to stringent policies that seem more likely to invite consequences is really what it takes for rent control to work effectively, St. Paul residents should ask whether they really want to be on the cutting edge of that experiment.

The Minneapolis proposal differs from St. Paul's in that it only seeks permission for the City Council to pursue a rent control policy. If it is approved, voters may or may not get a further chance to weigh in directly, an aspect of the charter amendment that may invite legal action. (The reason rent control is on ballots at all is a Minnesota law requiring a citywide vote in a general election before implementation.)

It's possible the end result in Minneapolis may be less aggressive than the proposal in St. Paul. However, advocates say they'd push for identical policies. In any case, it's hard to imagine how the Twin Cities could benefit from disparate rent caps, or why such policies in the central cities would not drive investment to suburbs that don't have them.

Additionally, both cities would need to set up structures to enforce any new rent policies and to allow landlords to appeal for relief. In both cases, that language is to come later.

It's reasonable to look at disparities in housing affordability and ask: If not rent control, then what? At their core, rents are a matter of supply and demand. Simply put, the Twin Cities area needs more housing supply, and rent control is a policy that defies that.

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Rent control is the only ballot initiative this year for voters in St. Paul. For Minneapolis voters, it is one of three ballot questions, each of which proposes a change to the city charter. The Editorial Board previously has recommended that Minneapolitans approve a charter amendment on the structure of city government and reject one regarding the structure of public safety efforts. Endorsements for mayoral, City Council and other races will appear in the coming days. All of the board's endorsements are collected at startribune.com/package-opinion-endorsements.

The precise ballot language of the rent questions follows:

St. Paul (City Question 1)

Whether to adopt a Residential Rent Stabilization Ordinance

Should the City adopt the proposed Ordinance limiting rent increases? The Ordinance limits residential rent increases to no more than 3% in a 12-month period, regardless of whether there is a change of occupancy. The Ordinance also directs the City to create a process for landlords to request an exception to the 3% limit based on the right to a reasonable return on investment. A "yes" vote is a vote in favor of limiting rent increases. A "no" vote is a vote against limiting rent increases.

Minneapolis (City Question 3)

Authorizing City Council To Enact Rent Control Ordinance

Shall the Minneapolis City Charter be amended to authorize the City Council to regulate rents on private residential property in the City of Minneapolis, with the general nature of the amendments being indicated in the explanatory note below, which is made a part of this ballot?

Explanatory Note:

This amendment would:

1. Authorize the City Council to regulate rents on private residential property in the City of Minneapolis by ordinance.

2. Provide that an ordinance regulating rents on private residential property could be enacted in two different and independent ways:

a. The City Council may enact the ordinance.

b. The City Council may refer the ordinance as a ballot question to be decided by the voters for approval at an election. If more than half of the votes cast on the ballot question are in favor of its adoption, the ordinance would take effect 30 days after the election, or at such other time as provided in the ordinance.