Nothing learned, but much is lost

Following Marxist ideologues has consequences.

I don’t understand how rent control is even legal.  Owners retain possession of their property, but the restrictions on how much money they can make from their business is limited. No matter the quality of the product or service they provide, landlords are regarded suspiciously.  As a minority, landlords are beholden to mob rule.  Who wants to be a landlord under these conditions?  The more people are punished for being a landlord, the fewer people will choose to be one.  Rent control is the first step towards total government takeover of the housing market.  

Rent Control Backfires Again in St. Paul

Voters put on a 3% cap. You’ll never guess what developers did next.

Wall Street Journal Editorial Board, November 11, 2021

File this un­der lessons never learned: Vot­ers in St. Paul, Minn., last week ap­proved a bal­lot ini­tia­tive, 53% to 47%, to im­pose strict rent con­trol. The cap on in­creases will be 3% a year, “re­gard­less of change of oc­cu­pancy,” and with no ex­cep­tions for new con­struc­tion or mom-and-pop landlords.

What hap­pened next should be no mys­tery. One de­vel­oper has “al­ready pulled applications for three build­ings,” a rep­re­sen­tative told the St. Paul Pi­o­neer Press. An­other “lost a ma­jor investor” in “an apart­ment building he’s try­ing to get off the ground.” Who could have fore­seen it, other than ba­si­cally every economist with a pulse?

If a city’s hous­ing sup­ply can’t grow to meet de­mand, the nat­ural re­sult is that prices go up. Ar­ti­fi­cial caps then pro­duce short­ages and other dis­tor­tions, such as di­lap­i­dated prop­er­ties that land­lords don’t have an in­cen­tive to ren­o­vate. The St. Paul ini­tia­tive says the city will cre­ate an ap­peals process to let de­vel­opers break the 3% cap if it’s nec­es­sary to provide “a fair re­turn on in­vest­ment.” Got it? File forms in trip­li­cate, and maybe you’ll be al­lowed a “fair” profit, how­ever that’s de­fined.

A cul­prit here is Mayor Melvin Carter, who said be­fore the elec­tion that he’d vote yes on the ini­tia­tive and then work to “make it bet­ter.” His ad­min­is­tration wants the City Coun­cil to pass a “clar­ify­ing amend­ment” to ex­empt new con­struction from the 3% cap, on the the­ory that the bal­lot mea­sure “is silent” on that is­sue.

Is that le­gal? “We can’t make changes that are sub­stan­tive,” the City Coun­cil pres­i-dent told the Pi­o­neer Press, “and I think this would qual­ify as substan­tive.” Ex­pe­ri­ence is a harsh teacher, but at least other cities cu­rious about rent con­trol can learn from St. Paul’s self-destruc­tive ex­am­ple.    

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The consequences of rent control are entirely predictable, so only a poorly educated and naive population is surprised that things can go wrong, and when they inevitably do, the “corrections” will be a doubling-down of the same sorry policies.  

From Toronto: 

The Unexpected Consequences of Rent Control

Rent controls have created two markets. For Tenants who stay put, they'll pay below market rents. For new tenants, they can expect to pay even more because of a shortage of rental units. This shortage happens because more and more people are moving to Toronto each year. For those who do come, and for those who are already living here, they can't afford to buy, so they must rent.