The extremely strict proposal would eliminate sharp rent increases, but could stifle housing construction and worsen the city's housing crisis.
Bill Lindeke describes the details of St. Paul's proposed rent stabilization ordinance, which, if passed by voters in November, "would place unprecedented restrictions on the construction of new housing," leaving "an open question what it would do to the city’s housing market."
As proposed, "[t]he law would cap rent increases for all of the city’s 65,000 rented homes at 3% per year, but includes a complicated list of factors that allow landlords to apply for a variances — things like property taxes, maintenance issues, capital improvements (only if needed to bring a building to code), and a few others." According to Shane Phillips, author of The Affordable City, "historically, rent control policies have sometimes made housing crises worse by reducing the size and quality of the housing supply." Consequently, most of today's rent stabilization programs are "explicitly designed to ensure that the housing supply keeps growing."
Lindeke points to three issues with the St. Paul plan that could exacerbate the city's housing crisis. First, the policy does not exempt new construction, which could discourage developers from building in the first place. Second, the plan does not account fo inflation, yet "[a]lmost every other program is pegged somehow to the consumer price index (CPI) or enlists a committee that sets annual rates based on local conditions." The third factor is the unusual step of controlling rent on vacant units, rather than for each individual tenant, creating a situation "rife for potential corruption" and discrimination.
"if the HENS proposal passes, it would put St. Paul on its own," says Lindeke, and "will almost certainly cause other problems that would make the housing crisis even worse."
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