The Business Lane Continues…

Last week I talked about “the business lane” as we address our priorities and challenges: public safety, a potential St. Paul sales tax proposal, proposed family leave mandates, housing in a rent control environment, our unsheltered population, all of which impact our success in welcoming and supporting business development. Today I want to talk about two more of these topics: proposed family leave mandates and housing in a rent-controlled environment.  

Read more in “It’s Our Business”….

First off, the proposed family leave mandates. Amanda Duerr gave us all the heads up last week that Paid Family and Medical Leave (S.F. 2) had its first Senate committee stop, in the Jobs and Economic Development Committee. This past Thursday Governor Walz released the second of four parts of his budget recommendations, $4.1B in proposals that included the creation of a paid family and medical leave program. The current paid leave proposal being advanced by DFL lawmakers would offer up to 12 weeks of partially paid time off for family reasons. It also would provide up to 12 weeks of medical leave. The program would be funded by a payroll tax (currently proposed at 0.7%, up from 0.6% earlier this month), which would be shared by employers and employees. In addition, the Governor’s budget recommendations call for giving workers up to 48 hours of “sick and safe” time each year. Both proposals are moving through the legislature. The MN Chamber has put together a good one-pager on the proposal.
 
I have a couple of concerns. First, is the tails. The long-term implications to budgets at all levels – government and businesses. Using one-time surplus money to initiate programs with ongoing budgetary commitments is a dangerous game at best. Second, is the “mandate” rather than “incentive” approach. Large companies have strong benefits packages that rival anything the government could require (often better), and the smaller companies already provide as many benefits as they can afford.  Charlie Weaver of the MN Business Partnership is referenced in this Star Tribune article as saying, “just do no harm.” Employers are in the best position to design benefits packages that serve the distinct needs of their employees. And companies serious about retaining employees already understand the importance of investing in people. A mandate like this could do some serious harm.
 
Next is housing in a rent-controlled environment. Last week I spoke on a panel about rent control and I shared my observations about how it’s going so far in St. Paul. Lest I get too hyperbolic, let’s stick to numbers that I shared: from 2020 to 2022, St. Paul’s multi-unit housing permits issued (per HUD data) went from 2036 to 937.  During the same period, Maplewood’s permits increased from 8 to 148.  People, housing development is still happening. It’s just moving out of St. Paul. I also reference a Jan 2022 NMHC survey (National Multifamily Housing Council): the survey indicated that apartment market conditions have generally improved. That said, in rent-controlled markets, 58% of national developers surveyed are reducing or avoiding investment; and of those, 26% are specifically avoiding Minnesota.
 
I absolutely am on the side of those most vulnerable to affordable housing shortages. And I believe rent control is hurting – not helping – our renters. My opposition to rent control has three faces:

1. In a time when the housing shortage is critical (98,000-unit deficit in Minnesota today), rent control drives down supply.  It’s already happening in St. Paul.
2. When costs are increasing with inflation and the ability for a property owner to pay for those costs is capped, something’s gotta give. And that’s the “extras” like security, property improvements, care for infrastructure.  This is a drive to Class C housing that benefits no one.
3. Those most in need of housing, at the lowest levels of the income scale, are most harmed. They’ll still have nowhere to go, because new housing options are not being created. And if others aren’t moving “up” as financial positions improve,  they can’t move “in.”

What are your thoughts on this? I’d love to know!
 
See you in the trenches.
B