Comments about Minneapolis and St Paul rent control initiatives

15 Replies

Wondering what thoughts people have on the very different rent stabilization initiatives on the ballot in Minneapolis and St. Paul?

Do you know if there has been any specifics to a rent stabilization initiative in Minneapolis @Bruce Runn ? My understanding was that for the ballot it is a vote to allow the council to craft their own policy without having to have the ordinance be voted on by residents? 

I'll start off by saying that I think Saint Paul proposal definitely went too far. I'm not in favor of rent control in general based on what I've read up about it being enacted elsewhere but not including a vacancy decontrol so landlords can raise rent to market when a tenant leaves, or exempting new building supply from the rent stabilization policy were the two most frustrating inclusions to me. Also I believe they put a hard cap at 3% and did not tie to inflation at all. If new building supply is not exempt I'd expect less development which would exacerbate the affordable housing supply issue. Vacancy decontrol makes sense because as a landlord myself, I would like to have the ability to not raise rent on my tenants but if they decide to leave, rerent at fair market value. With no vacancy decontrol, I think my hands would be tied to increasing rent at the maximum allowable number (unless they put it around 7-10%, I wouldn't go that high) each year so I don't fall behind the curve. 

I will say that as a left leaning person I used to believe that rent control could be fine if properly implemented, and most landlords opposition to it was strictly out of greed. Having read up on it more, I don't think it's a particularly helpful solution to our affordable housing issues, and I definitely do not trust the Minneapolis City Council to craft a reasonable ordinance regarding it. My thinking is that they will go the opposite way (similar to St. Paul), where they say rent stabilization hasn't worked because the regulations are not strict enough, ignoring the warning signs that history has given us in other cities/states.

For me personally, I'm not too concerned about it because I think like any business you just need to grow and adapt, changing strategies if need be. One effect it would have is that the subset of value-add deals due to rents being well below market value would be tougher to pull off, especially if they don't include vacancy decontrol. With that being said, I prefer to buy vacant units so I don't have to terminate leases or drastically hike up rents upon purchasing a place, not to cast judgement on those who do so (a lease is a contract, once that's fulfilled you don't owe the tenants below market rent, nor should they expect that), but that is my personal preference.

@Evan Kraljic you have nailed it!  Even my friends on the extreme left are deeply concerned by what's on the ballot for St.Paul, for the exact reasons you site.   Here's some extra credit homework for anyone interested in reading more: 

If approved by voters, St. Paul’s rent control ordinance would be among the strictest in the world | MinnPost

twin city sidewalks: Diving Deep on Rent Control and the Housing Shortage (tcsidewalks.blogspot.com)

Personally, I rather like capitalism, and I don't appreciate the over-reach contained in the St.Paul initiative.  However, we have to do something!  Homelessness and increasing rents threaten everyone's quality of life.  (Love the late Senator Paul Wellstone's quote that "we all do better when we all do better.) 

We have to give both sides what they need to succeed: Tenants need decent affordable homes and developers/landlords need to make a profit for their risk and labor.  Problems continue so long as sides of a debate are blind to the legitimate needs of the other side.  So, looking for common-ground, I'd say the solutions lie in combining (1) super modest rent stabilization laws that won't handcuff and bankrupt developers and landlords but instead focus on anti-gouging; (2) enhancing rent-assistance programs; and (3) streamlining development, with crackdowns on NIMBYism.    

So I say "vote no" to ballots in St.Paul and Mpls (agreeing with Evan's distrust of Mpls city council), then go back to the drawing board with a wider coalition willing to roll up their sleeves and work on this urgent problem!

People love to toss around the false narrative that 97% of “climate scientists” believe global warming is a problem. ON the other hand, it is tru that 95% of economists have said that rent control doesn’t work and is bad for the poor. Why do people keep trying it? Do they not have computers or google? It takes less than 5 minutes to google most expensive rental markets versus rent control markets, or average rent before rent control and after. Maybe they’ll see the stories of single people living in 4 bedroom apartments 10 years after their family moves out because a 1 bedroom would cost more today. Or people who have an apartment in NY they just use for visits because it’s cheaper than a hotel. 

To the few that just “feel like it works” regardless of what the experts say. Why don’t you start with food? How come you don’t push for food price controls waaay before rent control?

The the “prevent gouging” advocates. You can’t gouge someone on rent. If you charge more than “market rate” the tenant can move somewhere else. Fast rising rates or high rents don’t necessarily high profits and certainly don’t mean gouging. Does anyone accuse Mercedes of gouging its customers?

@Bill Brandt   

I agree rent control is a well-known bad idea - that's kind of my whole point. I also agree "Fast rising rates or high rents don’t necessarily high profits and certainly don’t mean gouging."  It's a matter of definitions. I've seen new owners come in and double rents with 30 days notice. That is my definition of "gouging." And if that's the only way a new owner is able to afford to buy a building, then they overpaid in my humble opinion. 

Further, this idea that if tenants don't like it they can just leave is a generalization I mostly support, but there are the slippage through the cracks that needs protecting.  In a tight market, where exactly are they supposed to go to?  This is were enhanced rental assistance may be helpful.  

A new owner can’t just double the rents to make the building a good deal. They can only double the rents if the current renters are paying 1/2 or less of “fair” market rent. Another case where people who like to use the word fair one way would never use it this way  

Do I have the right to live on the beach in Hawaii? What if I can only afford $500/mo? Should there be rent control so I can afford it? You can make the same argument about living anywhere in San Francisco or New York.  

Real estate is a scarce item, it has to be rationed one way or another. I just prefer prices doing the rationing to the government picking winners (who get to stay in an under market rent property) and losers (who can’t find anywhere to live because someone else is paying 1/2 of what it’s worth.)

Con: If this has become an "initiative" it will get passed. I can't think of a single municipality that this has come up as an initiative where it didn't eventually pass. 

Pro: What I did when they started this rent control initiavie nonsense in Oakland I simply started renting out to Section 8 tenants. Why? Because if a person has their rent subsidized by the government here in the ultra-liberal tenant friendly bay area, the tenant is NOT subject to rent control. Even during Covid I have been able to raise rents in my Section 8 rentals out here.

@Brian Garlington you make excellent points: First, if this initiative is shot down they will keep working on it.  That's precisely why it's so important to let voters know their worries are being seriously considered, but that there exist better alternatives than rent control.  

Second, your solution, namely, Section 8 or rental assistance, is one of the best ways to alleviate homelessness, and does so far better than rent control over time because it addresses the legit. needs of both sides.   

@Bill Brandt   you're point is 100% valid that landlords cannot double rents unless the market demands that rate. But the natural cycles for real estate will always leave some tenants behind - always. There's a much longer explanation for this that I won't get into, but suffice it to say it's inevitable. So what does a compassionate society do when it happens? Hopefully not rent control.  Rather, as I laid out earlier, it needs to be a combination of solutions focused on balancing the reasonable interests of all sides.

Also while I do agree Bill that some people can vote with their feet - in real life that proves far more difficult than it sounds.   But maybe more importantly, cities do better to keep those low-wage workers living in their cities and working at the restaurants and pubs. But who is willing to ride 2, 3 or 4 hours in order to work 6 to 8 hours each day?  At some point the commuting formula just breaks down. So, it's not about catering to the whimsy of folks who just want to live in world class cities, it's about keeping the critical elements of a vibrant city all getting what they need so they continue to stick around and contribute. 

I understand that the wealthy may want to “trap’ low income people in their city where all they can afford to do is eat/sleep/work. But, IMHO the same thing happens to these workers that happens to students that are admitted to colleges that they didn’t really qualify for. While they would thrive and do better than average in a different location. The caring/feeling experts get to feel good about themselves letting these poor people stay in their city. 

Even section 8 which I see as a necessary evil and has its uses becomes a trap. If you earn a very low amount we give you $20,$30,$40,000 worth of free housing. Earn a few bucks more and we take away $10k or $20k. Get married, we take away another $10-$20k. Don’t you understand we’re here to help you stay poor. 

I don’t have any good answers, I assume there aren’t any or someone smarter than me would have already come up with them. I just dislike the politician that steps in like they’re a genius that just thought of this great new idea no one has thought of before. Add that to the fact that they never say ooops, that didn’t work let’s reverse course.  They just double down on more of what didn’t work. 

Originally posted by @Heidi Pliam :

Further, this idea that if tenants don't like it they can just leave is a generalization I mostly support, but there are the slippage through the cracks that needs protecting.  In a tight market, where exactly are they supposed to go to?  This is were enhanced rental assistance may be helpful.  

They are supposed to go where they can afford to live. There is no god-given right to live wherever you want to.

I guarantee there are 1000’s of affordable cities/towns if you’re working as a retail clerk/waiter/waitress. 

My brother in law lives in Canby, MN and you can rent a nice SFH downtown in a super safe area in town for less than $500. Want to live in an old farm home with a few acres and you can drive 5 miles in to town? $200-$300/mo. Sometimes including utilities.

Plenty of retail jobs and lots of good paying extra work in spring/fall on the farm or driving truck/tractor. Ask me how I know. :-). 

Ps. “Everyone” is super friendly and willing to lend a hand to someone in need. 

FACT: At no point in 10,000 years of recorded human history, has handout programs elevated a society or diminished dependency. 

This "experiment" has been attempted in multitudes or manners, ages, forms, functions and in every case, ended identically, with mass poverty, pain & suffering of the common person, and rampant corruption. Why is it that there is collective amnesia in the U.S. during this "golden era" of "information age"???? How ironic is it that we are more stupid, more cut off from history, more divided and ignorant than ever before. 

I expect the same outcome that has always happened at every iteration, the corrupt and elite class will find considerable gains, the lower class will seemingly reap rewards and it will only cost their complete surrender unto the enslavement existence, and the middle class will be slaughtered and battle on. Is there any reason to expect anything different? 

And for any speaking of politics, this is NOT a politics thing, it is a results thing. We hire persons to be in executive decision making positions, not based upon their knowledge, life time area of study, no, we use who tweeted the coolest thing, or they talk well....... And than we act surprised when we face miserable results. 

We had a saying on the farm; only an idiot get's angry when a cat don't fetch. 

I see the powers that be continuing to do whatever seems to win next election, regardless of actual impact. Until people with back-bone stand up, support the concept of intelligent management vs "popular" management, turning off ___ politics and just talking to their neighbor, being an actual community again, choosing leadership by results. If we, as beings, continue to choose leadership based on what's "cool" or trending, well maybe we deserve exactly what comes of it. 

OK, so let me reframe.  I'm not trying to argue moral or philosophical high-ground, just strategy. When has it ever worked to tell someone to "just leave if you don't like it" when they're the ones holding all the cards?  The left owns both City Councils and Mayors offices here in the Twin Cities.  I obviously share most of your views on rent control as a failed policy. Thus, our mutual opportunity is to try and stop the current rent control initiatives by presenting meaningful alternatives, such as the ones suggested earlier in this thread.  And if you're own strategy is to "just leave" if rent control passes, then perhaps would you like to sell to me at a nice discount?  I've already got my backup strategies if this version of rent control get adopted.

  

Originally posted by @Heidi Pliam :

OK, so let me reframe.  I'm not trying to argue moral or philosophical high-ground, just strategy. When has it ever worked to tell someone to "just leave if you don't like it" when they're the ones holding all the cards?  The left owns both City Councils and Mayors offices here in the Twin Cities.  I obviously share most of your views on rent control as a failed policy. Thus, our mutual opportunity is to try and stop the current rent control initiatives by presenting meaningful alternatives, such as the ones suggested earlier in this thread.  And if you're own strategy is to "just leave" if rent control passes, then perhaps would you like to sell to me at a nice discount?  I've already got my backup strategies if this version of rent control get adopted.

 

 Excellent point and I can't strongly enough second that "just leave" is a non-answer at best. 

Some recent information came into my knowledge base stating that this is a done deal, it will be happening in both Minneapolis and Saint Paul, at least as rent controls pertain to rent increases, with a stepped goal from there. In response tonight my wife (also a RE professional) and myself played a game of "if ___, than ___" because there is ALWAYS options and opportunities, the only question is what and how. 

We play this game in a kind of thought vomit manner, no fences, just seeing how many we can throw out there and the more absurd the more fun and interestingly enough it's often the crazy absurd that leads to something really unique, innovative and effective. We noticed a common theme in out practice today of for charge services and add-ons, a separation of the components of leasing a property to empower additional revenue streams to off-set rent restriction areas. For example, parking passes and garage fee's. Or no appliances or appliance "rent" which here in TC you may scoff but I assure you in other areas this is a common practice, and yet another opportunity to capture revenues free of any rent-control initiative at this moment. 

Adapt or dig ones proverbial grave, that's the cold hard truth of things today.