Does Rent Control Make Housing Affordable?

St. Paul, Minnesota, recently enacted a new rent control ordinance, capping yearly rent increases at 3 percent, but is it actually progress in housing affordability? A St. Paul native and real estate pro weighs in.

Once upon a time, there was a quirky little parochial town called St. Paul, Minnesota — not to be confused with its twin, Minneapolis. (I also call it home.) The city of St. Paul plans on fixing the affordable housing crisis with a new rent control ordinance.

The ordinance was voted into law in November, and it made the national news more than once because of how unusual it is. The ordinance passed easily because more than half of all residents pay rent. Many property owners are not eligible to vote in St. Paul; only St. Paul residents can vote in city elections. Some of the property owners are corporations that are not in St. Paul or even in Minnesota. There are also individuals who own property in St. Paul but live in nearby towns and suburbs.

People who are currently paying rent in St. Paul had nothing to lose by voting “yes” for rent control, and they were smart to do so. They will benefit from the ordinance more than anyone else, including future renters.

Even though the ordinance passed and the mayor claims to have voted for it and it is now the will of the people, the mayor believes he can change the ordinance before it goes into effect in May. It is very possible that we will need to vote for changes to the ordinance.

This is the 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 percent limit based on the right to a reasonable return on investment.”

The ordinance is pretty simple and goes into effect in May 2022. It should be noted that property taxes in St. Paul are set to go up 11 percent in 2022, and ironically, some of the funds are going toward affordable housing. The county will also increase our property taxes; the two increases combined will raise housing costs for all.

The city portion of property tax is high considering we don’t even have working public drinking fountains, bike-sharing or July 4th fireworks.

The 3 percent cap includes all rental properties. Luxury properties are included and so is new construction. Some construction projects have been put on hold as investors back out. If a rental unit is vacant and then rented out again, the 3 percent cap still applies.

There will be some exceptions when properties need repairs or are being upgraded or renovated. No one knows how that is going to work but there will be a process for getting city approval for raising the rent. I can’t think of many processes in St. Paul that work but I suppose it could happen.

It doesn’t matter who the tenant is — the 3 percent cap still applies. My wealthy neighbors who rent luxury apartments and condos left the polling place with smiles on their faces.

I believe that we should all have the right to affordable housing, food, education and health care. Housing is not affordable for many and I don’t understand how this ordinance will make it affordable.

A reduction in rent, housing prices or even property taxes would make housing more affordable. A 3 percent cap on the increase in the price of natural gas would also make housing more affordable.

Capitalism is the reason why we can’t have affordable housing or affordable medical care. It is why some folks can travel into space while their workers live in vans close to fulfillment centers.

Once someone figures out how to build affordable housing and profit from it, there will be affordable housing on every corner.

Higher wages and more housing could end the current affordable housing crisis. If caps were put on health insurance premiums, maybe wages could go up and the wealthy could still afford space travel.

There is one bright spot: Because of the ordinance, some of the corporations that are buying up our housing might not want it anymore. Many of us would like to see less corporate ownership and more owner-occupants.

The Saint Paul Area Association of Realtors (SPAAR) has formed a task force to work on affordable housing. The goal of the Task Force is to brainstorm and discuss ideas to address housing affordability and work with local governments and other stakeholders to implement solutions.

There are lessons to be learned from the unusual rent control ordinance.

Teresa Boardman is a Realtor and broker/owner of Boardman Realty in St. Paul. She is also the founder of StPaulRealEstateBlog.com.





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