Rent control is another electric and highly polarizing issue for the residents of Minneapolis. I am a renter and I have significant concerns over rental cost increases. The cost of rent impacts me directly each and every month. I get it. Rent is very expensive. The question is what should we do to deal with this problem of high rents? Rents have increased dramatically over the last ten (10) years, often outpacing inflation. It has gotten more and more expensive to live in the City of Minneapolis. All the while thousands of new apartments have been constructed within the borders of the city.
The question is do we want rent control in our community? A program that the majority of housing experts say does not work effectively and that has many unintended negative consequences. Rent control certainly hasn’t worked in New York City (NYC). In fact many rental properties in NYC are no longer well maintained because of some the negative incentives caused by this policy. In addition rent control has reduced the stock of available apartments in NYC to the public. The reason being is that when someone moves out of a rent controlled apartment – they just don’t move out and let the apartment go back to the landlord to rent again. Rather they hand off the rent controlled apartment to people they know from work or family – so that individual gets the benefit of the lower rent. Thus there often becomes a significant pool of subleased properties that are no longer available to the general public.
There is no doubt we must do something to slow the price increases on rents in the city. One program I would look at is a more robust approach by the city in trying to give those people who aren’t earning within certain parameters a monthly rental stipend. This could be done on a much more wide ranging basis in our city. This could help defray the cost of increasing rental costs while allowing the laws of supply and demand to function properly.
Additionally everything we can do to cut the cost of construction in Minneapolis can go towards making rent more affordable for renters. The idea being that if a building costs less to construct than the building owner needs to come up with less equity to build the project – which in turn corresponds to a smaller mortgage on the building and less debt service. Since the owner of the building can charge less rent and make the same amount of profit, it gives them the opportunity to reduce rents and become more competitive in the marketplace.
Another scenario being actively discussed is if the city put a cap on rental increases by landlord’s each year – it seemingly could solve many problems. However the inverse side of the issue is that if an owner’s increases are capped each year – than they are very likely to increase the rent by the full maximum allowed each year. This is versus making a rental increase decision each year based on the conditions in the market. The reason being is that the owner is likely to be concerned about inflation and cost increases the following year. If the owner for example doesn’t increase rents by the maximum allowed this year – they may get squeezed the following year if costs increase dramatically.
Rent is the biggest expense many people face every every month. It is a huge burden. However I know that rent control is not a cure all and it just hasn’t worked in other parts of the country. It is time that we put our heads together on the city council and come up with some additional programs to assist renters. Renters comprise a sizeable portion of our city’s population and we must recognize the challenges that they face. Creative solutions by the city council that are market driven are the best way for us to address the undeniable problem of rising rents.