Rent control is the issue no one will talk about in Minneapolis election

Rent control is the Trojan horse issue of next month's Minneapolis city election.

City Council candidates are not saying much about it. However, if the election tips the council's majority from moderate-to-progressive Democrats to progressive-to-socialist Democrats, then look for them to attempt new restrictions on the market and pricing power of landlords.

I'm against rent control on principle because the most expeditious way to keep housing costs in line is to encourage building and let competitive forces work.

While markets can become distorted, that's not now the case in Minneapolis. The slowing growth of the metro area and a spate of building in recent years has kept rent increases at a lower trajectory than in other metro areas.

Rent control could slow the region's growth even more by causing developers and their bankers to scale back new building in Minneapolis. That happened two years ago in St. Paul after voters passed a ballot initiative capping rent increases at 3%.

Initially, that cap even applied to new construction and affordable housing, but the St. Paul City Council loosened the restriction last fall.

This year, multifamily construction in the entire Twin Cities metro accounted for 52% of new construction permits through September. That's down from nearly 70% in the same period last year, says Housing First Minnesota, the building industry trade group.

In part, that's because new construction of apartments has dropped off sharply in St. Paul. Property values also fell, leading city officials to raise the property tax 15% for this year. And renters who get into disputes with landlords say the city's apparatus for enforcing rent control is inadequate.

Average rent in St. Paul rose 4% in the year ended March 31, according to market researcher Marquette Advisors. That's the latest period available. That outpaced the 2.5% growth in Minneapolis rent over the same period.

Meanwhile, no apartment complex with more than 100 units in St. Paul has been sold since the 2021 ballot initiative passed. With the exits seemingly blocked, it's no surprise that builders are hesitating about starting something new.

There's another reason that imposing restrictions on landlords in Minneapolis doesn't make sense: the city's existing policy to encourage affordable housing is working.

Since the spring, Mayor Jacob Frey, who opposes rent control, has been touting Pew research that showed the city's rent increases were limited to about 1% annually through the pandemic.

"There's a twofold solution to driving affordability," Frey said in an interview. "One is subsidy and we are doing that at record levels. The second part is absolutely supply. You can't dismiss either of those two components. It's subsidy plus supply."

The most progressive-minded members of the City Council, along with several candidates challenging moderates in next month's election, favor capping rent increases at 3% annually. They and several advocacy groups sought to put a resolution before Minneapolis voters that is similar to St. Paul's.

At a meeting in June when some of those progressives weren't in attendance, other council members nixed the ballot resolution.

In reporting this column, I experienced tremendous difficulty getting responses from candidates in favor of rent control. I didn't try them all, but I was turned down by those I did. As well, several advocacy groups that favor rent control declined my interview requests or didn't even respond to them.

One incumbent did engage. Robin Wonsley, the progressive from the Second Ward, told me that she has been and remains an advocate for a 3% cap on rent increases with no exceptions. She added she thinks St. Paul city leaders, under pressure from developers, changed the 2021 resolution too quickly for meaningful data to be captured about its effects.

"The weakened policy has enabled property owners to raise rents above the 3 percent annual cap," Wonsley said.

An analysis by Minneapolis city staffers earlier this year, which concluded that a 3% no-exceptions cap would hurt the economy and the city's tax collection, was incomplete, Wonsley said. It did not include, for instance, the effect of spending by renters with additional disposable income; or, she said, the prospect of lower spending on housing support.

Wonsley noted that low-income renters are seeing bigger increases than more affluent ones, pointing to a 2021 University of Minnesota study.

"An unregulated housing market is why we have huge racial disparities, thousands of cost-burdened renters ... and hundreds of people sleeping in the streets," Wonsley said. "Market forces are not working for these folks."

I respect Wonsley's conviction and drive. I saw it firsthand when she and Jeremiah Ellison, another progressive council member, on a cold night in January hit the streets promoting a job fair for the Public Works department. By encouraging people into the workforce, Wonsley and Ellison helped them and the economy.

Rent control, however, will hurt both.