The Swedish economist Assar Lindbeck once noted, “Next to bombing, rent control seems in many cases to be the most efficient technique so far known for destroying cities.” On November 2, voters in both Minneapolis and St. Paul approved measures that will ultimately lead to the destruction of those cities.
In Minneapolis, voters gave the city council a green light to draft a rent control ordinance. Voters in St. Paul went even further, approving what many are calling the nation’s most stringent rent control law. Among other provisions, the law caps rent increases at 3 percent regardless of inflation. Unlike rent control laws in other cities, there is no adjustment for inflation and new construction is not excluded.
St. Paul, like most cities, is experiencing a severe shortage of housing affordable for low- and moderate-income families. Rent control is going to make the problem worse, much worse. Existing landlords will find ways to avoid this unjust limitation on their profits. Many will sell their properties and get out of the rental business. Others will convert their buildings to condominiums and remove housing from the rental market. Developers will be hesitant to build new rental housing knowing that their profits will be limited by government fiat. The ultimate result will be a degradation in both the quantity and the quality of housing in St. Paul. Rent control leads to the destruction of the housing market.
Though there is not universal agreement among economists regarding the destruction caused by rent control qualities, it is the one issue in which the vast majority of economists concur. In a survey of members of the American Economic Association, 93 percent agreed that a “ceiling on rents reduces the quality and quantity of housing available.” Despite overwhelming evidence against the long-term consequences of rent control, voters focused on the short-term benefits.
Rent control will benefit some renters—those who are fortunate to find housing. They will have housing below market rates. But a large number of renters will be unable to find housing at any price. And when the housing needs of existing tenants change, they will find it difficult, if not impossible, to find suitable housing. Their short-term benefit will ultimately limit their long-term opportunities and happiness.
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