The Disastrous Impact of St. Paul's Rent Control Policy

It's the same old, same old. Last fall St. Paul was patting itself on the back for a new rent control policy, the most onerous (to landlords) in the U.S. When it went into effect in May, the Law of Unintended Consequences kicked in and already, just months later, the mayor is trying to distance himself from it. 

St. Paul. Photo by Josh Hild on Unsplash

The policy St. Paul set in place was a rule that landlords can't raise rent by more than 3% a year. This is great for tenants, obviously, but what happens when the cost of owning property goes up 10%, 20% or more per year. Currently, we are in the middle of a rather wild inflation bump, fast approaching 10%. 

Here in St. Louis County property taxes seem to be climbing exponentially as property values get re-assessed. In an article titled The Results of St. Paul’s Rent Control Experiment Are In—and They’re Disastrous, John Miltimore points out one of the major flaws in this new legislation. It has no exemption for new construction. Therefore St. Paul's new housing construction is suddenly on hold with new building permits down by 80%. This will not alleviate the housing crisis they are experiencing. 

The mayor is fighting to insert an exemption clause, but housing advocates will have nothing to do with it. Building contractors are now struggling with another aspect of the problem which is financing. Banks want to support projects that will be successful. The new ordinance adds another layer of risk  and as most of us learn (too often the hard way), risk aversion is the name of the game. My personal guideline in these kinds of situations is, "When in doubt, chicken out."

Miltimore writes, "As anyone who has ever taken Economics 101 can you tell you, the solution to the high cost of housing isn’t price controls. The answer is to increase the supply of housing."

A little further on the author cites an anecdote from economist Thomas Sowell's Basic Economics regarding the destructive results of rent control policies around the world by citing a Swedish economist who once quipped that rent control “appears to be the most efficient technique presently known to destroy a city—except for bombing.”

In July the Wall Street Journal carried an opinion piece on St. Paul's housing woes titled St. Paul's Rent Control Backfire. The subhead reads, "Building permits fall, and so will the supply of affordable housing."

Here's what I don't get. Economics is a science, too. There are laws or basic principles that form a foundation for all economic theory. Like the law of gravity, you disregard these rules at your own risk. Unfortunately, K-12 education these days seems incapable of recognizing the importance or value of a good sense of how economics works, why mounting debt is grinding and why failing to think long term about one's life and choices can be devastating.

Here in Duluth, it's been said that "Duluth's housing restrictions are Hermantown's best friend." (Hermantown is the community up over the hill.) This appears to be a similar tale. Bloomington, Minneapolis and other sibling communities will be beneficiaries of St. Paul's mistake. No matter how good your intentions are, reality will bite you if you're not grounded on a foundation that is firm.

Cities That Love Women

Yesterday a friend from Italy sent me an article from his country's Greenhouse Chronicle titled, Minneapolis: The City That Loves Women. The article draws inspiration from on an annual Forbes study that ranks the nation's top fifty cities as regards to how they are for working women. I made an attempt, using Yahoo's Babelfish, to translate the article in order to share it here. The translation is a distinctively difficult when you use translation software, but one can discern the gist of it.

Tasks that, if a Scandinavian decides to emigrate, a place to the caldino chooses. Swedish, Finnish and instead Norwegian, when they caught up l' America in the 1800's, rather than to place itself in Florida under the palms, followed the callback of the tundra. And they salted up here in the Great semiArctic North, because, as I say to woman the commander of the first district of police of Minneapolis, Kris Arneson “for some reason our luterani garnishments work better under zero”.

Hmmm... Luterani garnishments?

Well, I got enough of the story to realize that Minneapolis-St. Paul received the honor of being selected as the best place for women to live and work in 2010, displacing the Big Apple, NYC, which this year stands at a bewildered eighth. Twin Cities business publications were eager to make hay with this distinction. The Twin Cities Business Journal in a story titled, Forbes: Twin Cities best place for working mothers, staff write Tara Bannow reported,

In rounding up the 2010 winners, the magazine factored in the cost of living, crime rates, unemployment rates, school systems and health care, among other items.

One reason Minneapolis beat out New York, which took the number one spot last year, was the list’s new emphasis on women’s earnings.

With only 216 crimes per 100,000 residents per year, Minneapolis’s violent crime rate is lower than any other U.S. city. That means fewer murders, rapes, robberies and assaults.

At 6.4 percent, the city’s unemployment rate is the second lowest in the country.

Way to go, Minnesota.

Just in case you're interested, here's how the top ten shook out:

1 Minneapolis-St. Paul
2 Washington, D.C.
3 Boston
4 Pittsburgh
5 Baltimore-Towson, Md.
6 Denver
7 Hartford
8 New York Metro
9 Seattle-Tacoma
10 Buffalo-Niagara Falls

On the other hand, what if you like getting soil beneath your fingernails and you don't care much for the big city life? For the record, there are still some decent rural areas around... I wonder if Forbes has ever done a piece on rural areas that love women? It sure is pretty out here today.

Media Manipulation

The image of Francis Schaeffer in yesterday's (and now today's) post requires additional comment. I took that photo in the 1980's during a large anti-abortion rally in St. Paul, MN. Dr. Schaeffer had been in treatment at Rochester's Mayo Clinic and had been invited up to the Cities to be one of the keynote speakers for the event. He had been an outspoken critic of the Roe v. Wade decision as a symbol of the culture's continuing devaluing of life. The rally was organized by an interdenominational coalition and took place in a park with baseball diamonds across the street from an abortion clinic. There were 5,000 people present, with speakers from a range of faiths including Jewish rabbis.

In his book and ten-hour film series titled How Should We Then Live, Schaeffer gave some attention to the power of the media to manipulate. What I found particularly fascinating was that the St. Paul Pioneer Press, the city's primary news vehicle, did not even mention this event. At the same time, the following day's paper included a front page story on the actions of eight protestors in Boston against nuclear warheads.

How strange, I thought. Silence. It's a form of shunning.

The newspapers have a right to ignore a story under their nose. But the people in response have an obligation to understand that what is happening in the world today, the things of real significance, have to be ferreted out by other means.

With the advent of the internet, the power brokers in network TV and news media have seen an erosion of power. And in many circles a loss of respect. It's about time.