One of the most restrictive rent control laws in US history has passed in St. Paul Minnesota on November 2, 2021. Rent increases are capped at 3% with exceptions for property tax increases and major improvements.
The problems with rent control are well documented and familiar. Rent control is like crack cocaine – fun at first, then the hangover. Rent control is government meddling in the marketplace and assumes that government bureaucrats are smarter than individual landlords and tenants.
Further, it discriminates in favor of existing tenants over individuals looking for apartments now or in the future. In very little time, those existing tenants benefiting from government regulated rent will be in an apartment priced substantially below market rents. This is a forced subsidy paid by landlords to the benefit of existing tenants.
However, over time, landlords will not have the ability or incentive to maintain these apartments. The existing housing stock will deteriorate faster as a result. Fewer new buildings will be built in the areas subject to rent control. A shortage of housing inevitably develops.
Rental demand for units immediately outside the rent control area will see an inordinate spike in demand with corresponding acceleration in rent prices.
Existing tenants in newly legislated rent control districts no doubt log a win. Everyone else loses. 