On Rent Control

How much should a home cost?

After 2017’s City Council races in Minneapolis and Ginger Jentzen’s strong showing, rent control has re-entered the housing discourse in the Twin Cities again, despite the fact that it is preempted at the state level. It’s my belief that the preemption and much of the opposition to rent control is based in a certain inflexibility of thought when it comes to the tools available to help Minnesota make its way through our housing crisis.

That basis of opposition seems appropriate considering the greatest weakness of rent control is the inflexibility that comes with it. In New York style rent control, renters in controlled units don’t want to move out, even as their personal situation changes. Landlords become reluctant to put money into controlled units where the rent doesn’t increase with investment. Apply these two factors across a wide spectrum and you can petrify a housing market. That’s where the conversation stops usually, understandably so. It’s a bleak image, but it fails to recognize the bleak reality and immediacy of a market that is failing people right now.

Rent control is so often spoken about in market terms. How will it affect The Market? How will The Market react? It’s a myopic train of thought. Rent control by definition does not care about the market, it is designed to disconnect people from the market. Rent control is a form of decommodification. It’s designed to treat a person’s housing as something unaffected by the hustle of other people trying to make money. You do not start a blaze with a fire extinguisher.

Rent control is not a market solution, it is not a replacement for a strong push for increased supply. Increasing supply is, in the best case scenario, a medium to long term solution, and with the Twin Cities’ population growing each year, supply not only needs to satisfy growth, but also exceed it to relieve the pressure on existing residents. So yes, obviously, more supply, as long as we’re operating within capitalist constraints, supply-side economics is how to keep the housing environment healthy. Rent control is for the here and now. It’s for the people who are a part of this community, but have detached from the larger market in a professional sense. The elderly, the disabled, the disenfranchised all require protection or we will lose essential parts of our communities as those people are displaced by rising rents.

The question we should be asking is: what kind of protection can we offer people without dealing damaging results to others? That means New York style rent freezes are probably out of the question, as they’re the embodiment of housing environment petrification. As long as we’re dealing with market forces, the market would have a conniption over that. What rent control could look like is a throttle on rent increases. As an example, if we’re looking at elder protection, tie that throttle to something like social security payments. Another way to incorporate rent control into a housing environment that’s dealing with market forces is to use an old Republican trick: throw working people a bone in the form of rent control but make it temporary. Tie rent control’s existence to vacancy rates, then people get the immediate protection they need and they get to keep it until decision makers and the market can get their act together and put, and keep, housing in a healthy place for everyone.

As long as state level preemption exists discussions on rent control are going to be an exercise in blowing hot air, but if we’re going to discussing theoreticals anyway I think it’s short sighted to limit our toolkit by saying no to any form of rent control.

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12 Responses to On Rent Control

  1. Patrick March 8, 2018 at 10:13 am #

    It’s also important to be self-reflective about one’s economic situation when considering this question. I’m an upper middle-class person who owns a home, so it would be very easy to for me to be against this and think the markets can sort things out. It doesn’t take much reflection to see that’s not the case, as renters are regularly priced out of their homes. We need to attack this on the supply side, of course, but we also need to deal with this emergency right now. Living wage laws are a big piece of the puzzle, but I personally believe that rent control is worth considering.

    I know that someone will reply and say that the prevailing economic wisdom is that rent control is bad, which is true. But it also says that school vouchers would increase competition and innovation in education, but we don’t see many urbanists pushing to dismantle the public school system. We need to look beyond economism, even if it’s not damaging to us personally.

    • Tom Basgen
      Tom Basgen March 8, 2018 at 8:58 pm #

      Hell yeah.

  2. RW March 8, 2018 at 10:56 am #

    what does “new york style rent control” mean?

    Rent control in NYC means an apartment where a person has been continuously living since 1971. There are only about 25,000 of these units left in NYC. As the people in these apartments die off they will cease being rent controlled and there will be no rent controlled apartments in NYC.

    Rent stabilization is what occurs in 50% of the apartments in NYC. In a rent stabilized apartment the landlord can increase the rent by 20% every time a tenant moves out. If the landlord upgrades the apartment, these upgrades can also be used for additional rent increases for the next tenants.
    When the rent on a rent stabilized units hits $2700/m through this process of tenant churn and upgrading, the landlord can convert it into a non rent stabilized apartment.

    The language seems important in this debate. Rent control seems to be a blanket term covering both types, leading people to think that 50% of apartments in NYC are strictly rent controlled. In fact, only about 1.5% of NYC apartments are rent controlled, and the larger percentage is rent stabilized.

    • Tom Basgen
      Tom Basgen March 8, 2018 at 9:01 pm #

      Good point about the language because “rent control” in my discussions with friends and family really invokes that older style of price freezing rent control in NYC. Another reader also brought up the point about language. If you were just spit balling what would you replace the term Rent Control with?

  3. Spiderleggreen March 8, 2018 at 12:00 pm #

    I didn’t vote for Ginger because of her use of the words Rent Control. You can spout great, innovative, ideas that will change this world, but that doesn’t mean you’ll have the wisdom to get it done. In terms of actually getting something accomplished, I think the language used will be vital. Persuading a majority of the legislature, plus the governor to change this preemption isn’t going to happen with rent control as the moniker. I don’t know what that word is but it can’t be a word that shuts the ears of most of people. Ultimately, you can’t govern if you don’t win. That means convincing more people that your ideas and plans are in their best interests. Language plays an crucial part in the convincing.

    • Tom Basgen
      Tom Basgen March 8, 2018 at 8:59 pm #

      Just as a spitball exercise what would you use for your terminology?

      • Spiderleggreen March 9, 2018 at 1:42 am #

        There is much more to successfully advocating on this issue than just the right words. It’s about persuading enough people that this must be addressed, in this way. Well, it seems that the States preemption is getting in the way some possible solutions. That means broadening your appeal beyond Minneapolis. Understanding the way people on the other of the spectrum see the issue can help you frame the issue in a way that doesn’t needlessly create opposition. You don’t have to convince the people at the far end, but by broadening your appeal you may sway people in the middle. None of this is surefire. In the end, retaining the governorship and taking back the House would be a big help.

  4. Janne Flisrand
    Janne March 8, 2018 at 1:07 pm #

    I love this question: The question we should be asking is: what kind of protection can we offer people without dealing damaging results to others?

    Thanks for asking it, Tom.

  5. Monte Castleman
    Monte Castleman March 9, 2018 at 6:27 am #

    There’s probably not any magic number where you can prevent rent increase to existing tenants to the extent desirable while also not making the supply side problem worse. What about indexing allowable rent increase to construction inflation, rather than social security cost of living or general inflation.

  6. Matt Steele March 9, 2018 at 1:57 pm #

    Beyond all the other negatives about rent control or rent stabilization is how it deals with different rates of inflation over time.

    Anyone who has taken Econ 101 has learned about the Fisher Equation where r = i minus pi, where r is the real interest rate, i is the nominal interest rate, and pi is the inflation rate. This applies to something such as a rent as well.

    So, in a high inflation environment, the real effect of rent control or a restriction on the nominal increase in rent is variable over time and possibly negative in real terms for the landlord.

  7. Alex Schieferdecker
    Alex Schieferdecker March 11, 2018 at 8:50 pm #

    In theory, I guess you could have a rent stabilization regime like New York’s in which the rent increases are enough to keep developers and landlords in the market, but low enough to discourage dramatic change. But I’m pretty damn skeptical that it would repeatedly succeed at threading that needle.

    The big rent control study that came out last year of San Francisco was fairly conclusive. Rent control does greater harm than it does good. Under no circumstances should MSP seek to implement it, or the problem we have today will be frozen in time and compounded for future generations.

    But I thought the SF study also made some interesting broad-based suggestions about alternatives. The most interesting to me was an insurance program for rent increases. The study didn’t suggest details, but you can imagine a kind of program where landlords submit their rental prices each year online and the city covers some portion (diminishing every subsequent year) of the rental increases from the 50th to 90th percentiles. A program like that wouldn’t provide an incentive landlords to hike the rent massively and take advantage of the government subsidy, and would allow neighborhoods to change over time. But it would also lessen the blow for residents in fast-changing neighborhoods.

    I personally don’t know of a rental increase insurance program out there, and have no estimate on how much it would cost. But its societal costs would probably be a lot less than rent control or rent stabilization.

  8. Anon March 12, 2018 at 4:27 pm #

    I am a landlord. Rent control won’t hurt me because I’ll just sell my properties and invest in something else. The poor aren’t so flexible; they will be left with the short supply of dilapidated housing which rent control never fails to create. There are better options to address the short term need. For example, we could expand Hennepin County’s Emergency Assistance Program which helps tenants cover rent. We can build public housing or create economic incentives to create new affordable housing. We can up-zone South Minneapolis. Prudent housing policy must be based on data and informed by history. The poor deserve better than an ideologically-driven rent control policy with a 100% failure rate.

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