Rent Control Update
Last week St. Paul’s City Council held a public hearing on rent control, to receive both the rent control task force recommendations and public comment. I testified to our ongoing and deep concerns about the initiative in that it will actually slow down or even stop both new development of housing and investment in current properties. The issue remains divisive, though there is strong support across the community for the need for more affordable housing. The challenge continues: how to do that?
The taskforce submitted its recommendations, most notably the 15-year exemption for new construction. The 3% annual cap remains unchanged, and other recommendations like vacancy decontrol were not well-clarified. The full report is available online.
My thoughts: As you know, the Chamber has been an outspoken opponent to the rent control ordinance. I remain convinced that rent control will hurt the people it’s intended to help, and will halt more investment. I’ve written about it in former blog posts. I also recommend you read again Bill Lindeke’s blog post on its impact on property taxes – which, as we know, translates directly back to costs of housing.
Our ask of the City Council:
Lindeke said it best in his Twin City Sidewalks posting, “Why the 3% cap stops new housing construction.” Here is an extended passage from his article:
Whether or not it’s possible [for landlords] to make money with a 3% rent cap in place is irrelevant. It’s about the financing . . . It’s also not really about whether developers make money. . . Ask anyone who does economic development, and they’ll tell you that developers have trouble getting financing for new housing in Saint Paul as it is. It will become impossible to get loans to build when the city has become three times as risky as anywhere else in the country. The people who finance construction have plenty of choices about where to [finance] build[ings]. When it comes to building new housing, St. Paul will basically be redlining itself.
The last several years have seen unprecedented rental housing development in St. Paul. New construction and renovated buildings – with both market rate and affordable rents – can be seen throughout the downtown and the west side river flats, along the University Avenue light rail corridor, on Snelling Avenue south of I-94, and now coming to Highland Bridge. This list does not even include the Sears site or the former Hillcrest golf course. Alarmingly, the rent control initiative is placing all these projects at risk.
The math is straightforward. This year alone is a striking example of how this ordinance must be improved to take inflation into account. Three factors are immediately before us:
I’m not speaking in hyperbole here: rent control has caused property values to fall by 6-7% already, permits are down by 55%+, costs are up 18%+, inflation is at 8.8%, some existing property owners are selling, and future investors are moving on to more welcoming markets.
This impossible burden is weighing on the hearts and minds of good people who hear the very real testimony of people needing stable housing and who fear the problems will only get worse.
See you in the trenches.
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