How Minnesota Messed Up on Rent Control

Economists don’t need any more evidence that rent control is bad and new housing is good. But they’ll take it.

The latest example comes from Minnesota, where the Twin Cities gifted us with a natural experiment: A referendum in St. Paul imposed a draconian version of rent control — a 3 percent maximum increase, even on vacant units and new construction — while Minneapolis made it easier to build housing.

The Wall Street Journal just ran a story on the results. From 2022 to 2024, rents in capitalist Minneapolis went up only 0.7 percent, versus 1.8 percent in rent-controlled St. Paul and 3.3 percent nationally.

Also, multifamily development plunged in St. Paul because investors and lenders shunned projects that could not make money. Across the river in Minneapolis, housing permits nearly quadrupled in early 2022.

“Downtown hubs blossomed as new apartments hit the market and attracted young professionals,” the Journal wrote.

The article illustrated the data with real-world examples of people moving to downtown Minneapolis while market-rate projects in St. Paul were canceled.

The Journal story wasn’t perfect, however. It claimed, “The development boom did less for lower- and middle-income residents, who can’t afford the new housing that is aimed primarily at the higher-end.”

But lower earners can afford the housing that higher earners vacate upon moving into the new buildings. The Minneapolis Fed documented this effect, called filtering. The working class certainly benefited from rents in the city rising only 0.7 percent despite going up almost five times as much nationwide.

The Journal cited a curious statistic to back up its assertion that the new supply has “done less” for lower-income renters: “Eviction filings in Minneapolis were up around 68 percent from December 2024 to November this year compared with the prepandemic average, according to data from Eviction Lab. They were 61 percent higher in St. Paul.”

What?

The eviction rate rose by about the same percentage in rent-controlled St. Paul as in free-market Minneapolis. If anything, that suggests rent control did not curb evictions and new development did not increase them.

Moreover, eviction rates are affected by numerous factors. The Journal made no attempt to show a cause-and-effect relationship involving rent control, new housing supply and evictions.

We do know that rent collection fell during the pandemic and never fully recovered. Maybe the eviction moratoriums and the “cancel rent” campaigns played a role. In any event, nearly all evictions are for nonpayment of rent. Evictions likely rose in Minneapolis and St. Paul because more tenants didn’t pay, not because of rent control or lack thereof.

It’s possible that the reporter or her editor was trying to give the other side of the story. But if there is no other side, you can’t just invent one.

On the whole, the article provides a reality check on the foolish notion that the way to keep rents down is to make it illegal to raise them. Minnesotans soon realized this: Last spring, two years into its failed experiment with rent control, St. Paul exempted properties built after 2004.

Then, St. Paul and Minneapolis elected new mayors who oppose rent control. The socialist candidate in Minneapolis lost.

I emailed the Journal story to an urban planner I know in Minnesota.

“I hope it creates momentum for the city to continue to undo the voters’ misguided referendum. I know quite a few people who voted for it when it happened,” she replied. “There was so little information, and to a liberal-minded person it sounded like a good thing. None of those people would vote for it today with a better understanding now that it’s not a tool that works.”