As has been previously noted on this site, the city of St. Paul has amended its draconian rent control law. In an editorial, the Wall Street Journal notes that “according to data from the Department of Housing and Urban Development, there have been only two hundred (200) residential building permits in Saint Paul through April 2022, compared to 1,391 at the same point in 2021.” In short, economic reality bit St. Paul.
Dramatically reduced housing production was easy to predict since it always happens when rent control is enacted. St. Paul voters believed that somehow their city would be the exception. It wasn’t. Rent control disincentivizes housing production. When production is disincentivized, less is produced. This is true of every value, including housing.
In the months leading up to the city’s referendum on rent control, developers warned the public about the consequences if the measure was approved. Housing advocates dismissed those warnings as idle talk from greedy developers. One advocate said, “It’s not that the developers are going to unbuild the buildings that they have.” This illustrates the evasion that is necessary to advocate for rent control.
It is true that developers won’t unbuild the housing that exists. However, when rent control is imposed, landlords frequently convert their buildings to condominiums or otherwise remove that housing from the rental market. In terms of the supply of rental housing, it is essentially the same as unbuilding it. At the same time, developers are less willing to build new housing. Production is curtailed while the supply dwindles.
At a time when the demand for affordable housing far exceeds the supply, passing laws that disincentivize the production of more housing is, as the Wall Street Journal notes in its editorial, “among the dumbest policies known to man.” Yet, cities keep passing rent control. Economic reality bit St. Paul, and it will bite any city foolish enough to enact rent control.
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