Rent Control Is Fashionable Again. It's Still a Bad Idea.Even supposedly well-designed rent control policies come at the expense of new supply while creating a class of renters opposed to necessary zoning reforms.
CHRISTIAN BRITSCHGI | 12.10.2021
Another housing development in St. Paul, Minnesota, is on hold after losing its financing partner this week.
On Monday, the St. Paul Pioneer Press reported that developer Alatus had a previously-committed equity partner renege on its commitment to invest $23 million in a proposed 304-unit project in the city's Frogtown neighborhood. Two other investors who had proposed preliminary financing terms for the project—in which half the units would be rented out at below-market rates—have also walked away.
The reason? St. Paul's newly-passed rent control ordinance, which Alatus' principals say is making their once-eager investors skittish about doing business in the city.
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"Rent ceilings do nothing to alleviate this [housing] shortage," wrote economists Milton Friedman and George Stigler in a now-famous pamphlet for the Foundation for Economic Education in 1946 in response to San Francisco politicians considering extending wartime rent caps. "Indeed, they are more likely to perpetuate it: the implications of rent ceilings for new construction are ominous."
Friedman and Stigler's warning is coming true in St. Paul, where the Alatus project is only the latest development put on ice since city voters approved a rent control ordinance capping rent increases at 3 percent a year with almost no exceptions.
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Source:
https://reason.com/2021/12/10/rent-control-is-fashionable-again-its-still-a-bad-idea/
