Chart of the Day: Supply and Demand in Action

Editor’s note: This is another addition in’s long-running, “Chart of the Day” series, including a recent story on the Orange Line.

I’m going to say something that is apparently controversial: Building more housing acts as a form of rent control.

A recent Financial Times article (which mostly focuses on the upzoning efforts in Auckland, New Zealand), includes this graphic comparing the change in housing stock and rents in various Midwest cities. Once again, the data show a pretty clear negative correlation between the two. That is, as more housing gets built, rents go down.

Two line graphs and a scatter plot detailing the change in housing vs the change in rents since 2017. The line for Minneapolis far outpaces the next highest one for Omaha, then Columbus, Kansas City, Cincinati, and Indianapolis. The order is reversed on the second, with Minneapolis as the only city with declining rents. The scatter plot has the net increase in dwellings on the X axis and change in rents on the Y axis. Both are in increments of 20, with plots relatively following a slope of y = -x.
Image credit: Financial Times

As a bonus, Minneapolis rents haven’t just fallen relative to inflation, they’ve fallen in nominal terms as well.

a line graph comparing the nominal changes in rent since 2017 (100%) between Minneapolis, Columbus, Indianapolis, Cincinnati and Milwaukee, with Minneapolis around 95%, Milwaukee at 110%, and the others around 130-140%
Image credit: Financial Times

For those curious, the data from Auckland show that rents have been flat since zoning changes took effect in 2016.

Of course, rent control and other tenant protections are important for the same reason new construction is: People have to live somewhere. Despite the drop in rents, current and future residents are still much more likely to get priced out of an existing home than forced out by a new one. Unfortunately, rent control is DOA in Minneapolis, and St. Paul’s has more holes than a sponge. So while building more housing alone isn’t the best solution to the housing crisis, it is still a solution, and it’s one that people should take more seriously.

Editor’s addendum: This article comes in the context of two recent developments that will impact residential construction in Minneapolis and St. Paul. On November 4th, a Hennepin County judge ordered Minneapolis to suspend its 2040 comprehensive plan, which made numerous changes to zoning and regulations that encouraged more and denser housing, and revert to the prior comprehensive plan (see the City’s notice here). Meanwhile, in St. Paul, City Council approved a zoning code overhaul on October 18th that will allow duplexes in all current single-family residential zones.

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