Construction of new housing collapsed in the Minnesota city as builders took their business elsewhere.
In 2022, policymakers in Minneapolis and St. Paul, Minnesota, moved forward with rent-control measures aimed at curbing what they described as unfair profiteering.
I warned that such steps would stir up bigger problems down the road.
Did I prove to be correct? My follow-up video looks at what actually happened.
In St. Paul, officials pressed ahead with rent caps, insisting that limiting how much rents can rise would stop “unfair profiteering.”
But what exactly is “profiteering,” and how does that differ from ordinary “profit”? Who gets to decide what counts as “unfair”?
The lure of profit is what draws people to invest in ventures and to undertake construction. If enough capital flows into building new housing, rents would eventually stop climbing so rapidly.
That is a basic characteristic of markets.
Research consistently shows that rent control tends to shrink the available housing stock and, over time, pushes prices higher.
Yet activists often ignore these findings.
“We don’t need more studies,” one person in my video declares. “We need action.”
St. Paul’s approach was notably stringent—its ordinance contained no provision to adjust for inflation.
“It’s just going to shut down construction,” warned Mercatus Center economist Salim Furth. “Why would you enter a market where it seems like the government is actively trying to hurt you?”
Fortunately for builders who were frustrated in St. Paul, there exists a nearby “twin city”—Minneapolis—so they could move a few blocks away and pursue projects there. And they did: construction activity picked up in Minneapolis.
Minneapolis politicians had likewise considered rent control, but they exercised caution about adopting it. That prudence proved wise, given the collapse of new housing activity in St. Paul.
Yet Minneapolis City Council Member Aisha Chughtai remained unconvinced. She advocates expanding rent control, telling me, “You don’t have a city” if people “can’t afford to live there.”
I challenged her: “The way you keep a city alive is by people constructing apartments and houses. That’s what eventually drives prices down… Builders are still starting projects in Minneapolis—permits were up… But in St. Paul, approvals dropped by about 60 percent because of rent control. You won’t attract more units by pressing this.”
Her reply was a moment I hadn’t anticipated after half a century of interviews: 17 seconds of quiet, followed by, “Guaranteeing housing for people and making sure that they can stay in their homes matters more than anything else.”
Chughtai describes herself as a socialist. I pressed her to name a precedent where that approach had truly worked.
After another long pause, she insisted, “I’m doing a fine job of representing my community.”
Maybe a reader would wish socialists would devote a bit more time to studying economics or history.
Rent control once did major damage to New York City, in part by making it unprofitable for landlords to maintain properties.
“They don’t take care of their properties,” murmurs Furth. “They don’t send a plumber promptly when water starts leaking.”
Or, in darker episodes captured by documentaries such as The Bronx Is Burning and Decade of Fire, landlords who could not profit resorted to arson against their own buildings.
So what is unfolding now in St. Paul, four years after its well-meaning but misguided rent-control policy took effect?
The pace of new construction became so weak that officials rolled back much of the rent-control regime.
In neighboring Minneapolis, where Chughtai’s allies have ascended to leadership, the city council never adopted rent control, and the mayor has pledged never to pursue it.
One might expect politicians to draw lessons from St. Paul’s missteps. Yet my newly elected socialist mayor, Zohran Mamdani, has just frozen rents on a million New York City rental units.
That stance invites incredulity.
Today, an estimated 57,000 NYC apartments sit vacant because the existing rent-stabilization rules render repairs financially unviable for landlords.
The late economist Walter Williams warned that, short of air raids, rent controls can be the most effective weapon to dismantle a city.
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