St. Paul must refine rent control policy

Opinion editor's note: Editorials represent the opinions of the Star Tribune Editorial Board, which operates independently from the newsroom.

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The 53% of voters last November who approved rent control in St. Paul put their city in a bind. Officials either could implement the strict and simplistic measure exactly as approved, or they could test their authority by making the new policy less repellent to those who provide and maintain rental housing and who grow that market through investment.

Mayor Melvin Carter made things worse by supporting the initiative as Election Day approached, even though he seemed to know that the ballot language written by housing advocates couldn't stand.

In the days since, what was billed wishfully as rent "stabilization" has in fact made the St. Paul rental market chaotic. Rental housing developers have backed away from plans. Landlords have raised rents preemptively by the new annual limit of 3%. Some have offloaded previously included utility costs onto renters. Others have sought exemptions to the cap, and the city has indicated that it will be obliging toward increases of up to 8% that are supported by a documented need.

And now the City Council is embarking on that aforementioned test of the expressed will of voters. In the coming weeks, it will consider a series of amendments, including an exemption for newly constructed units for up to 20 years and "partial vacancy decontrol" that would allow landlords to bank whatever portion of the 3% cap they don't seek in a given year and apply it when a tenant moves out.

Council Member Chris Tolbert, who introduced the amendments, opposed the ballot initiative last fall but said his hope now is that it can be made into a more workable form. Other council members will be able to suggest changes to the details or introduce further amendments. A public hearing is planned for Aug. 24.

Rent control has long been considered poor policy. It distorts the market, as price controls tend to do. Those who accept price controls in any arena are essentially deciding that the targeted problem is such that the consequences of addressing it in this manner are more tolerable by comparison.

It's still not clear that St. Paul — or the Twin Cities area in general — has such a problem with rental costs. Over the last 20 years, average annual increases in the region have been relatively low. Housing advocates have noted that those on the lower end of the income scale are hit harder by rent volatility but have not demonstrated an egregious effort by landlords, in the aggregate, to make this so.

The new cap on rent hikes in St. Paul will benefit renters in the short term during the current environment of high inflation, but not in the long term if it discourages growth in housing supply commensurate with demand. Changes to the policy are needed.

Other local and state governments around the country that have sought to revive rent control have indexed caps on increases to inflation. St. Paul went the opposite direction with its strict 3% limit.

It's an example of why complex policy is best left to the elected representatives of the people rather than to the people themselves through direct initiative. But then, the ballot question last year was partly a result of a state law prohibiting rent control without voters' approval. That law, meant to discourage new rent control policies, can now be added to the stockpile of evidence that good intentions can go wrong.

If amendments are approved in St. Paul, they won't go into effect until Jan. 1. That's based on a legal interpretation that a policy approved by ballot initiative in the city can be modified a year after voters pass it, though not until. With any luck, a detailed engagement process earlier this year by a working group of 41 people will bring unity. Elected officials in Minneapolis, to whom voters last November gave authority to consider a rent control policy, will surely be watching. We hope they've also paid heed to the impact of St. Paul's policy thus far.