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Are rent controls the solution to the affordable housing shortage?

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Originally a Bible college, the property now boasts affordable housing.
The former Bible college has been converted into a permanent home for Bear Creek Christian Church and 43 units of affordable housing in Rochester, Minn. While there's little or no rent control in Minnesota, some housing experts think rent controls help address housing inequality and affordability.
Jerry Olson for MPR News 2018

Some elected officials are pushing the idea of controlling rents as a way to mitigate the shortage of affordable housing. MPR's Kerri Miller explored the issue Wednesday with Matt Murphy, executive director of New York University's Furman Center, which fosters research and debate on housing, and Peter Dreier, founding chair of the urban and environmental policy department at Occidental College in Los Angeles.

There's little or no rent control in Minnesota. But many people are finding Twin Cities rents unaffordable. The average rent for a two-bedroom apartment in Minneapolis is $1,840, according to Apartment Trends, a publication of Marquette Advisors. The average rent for a studio in St. Paul is nearly $1,000.

Rent control is one way to try to make apartments affordable to more people. Whether it's an effective and smart tool to employ is debatable, of course. Landlords contend that rent control can discourage maintenance and investment in existing apartments and stifle the building of new ones.

The demand for apartments relative to the supply has been rising. And that is driving up rents, while wages for most Americans have stagnated, Dreier said.

"Around the country, there's what's called the housing wage — what you need to afford the typical rent. In California, the housing wage is $35, $40 an hour," said Dreier. Nationally, it's close to $25 an hour. "Renters really have their backs to the wall. That's why you're seeing a big increase in demand for rent control and other protections for tenants."

Dreier said that almost all the rental housing that's been built in the last decade has been luxury housing. He said developers don't want to build affordable housing. He also said that zoning laws often make it difficult to build housing that low- and moderate-income people can afford. He noted that Minneapolis city leaders hope to change that by allowing higher density housing in neighborhoods that have been limited to single-family homes.

Communities should not fear controlling rents, despite protests from the business community, Dreier argued. But he noted few have adopted such policies. "There are 20,000 local governments in the 50 states and only 180 cities and suburbs have any form of rent control at all. And they're all in California, New York, New Jersey, Maryland and Washington D.C.," he said. "Most cities in America don't have any form of rent control and tenants are having a hard time paying the rent."

Oregon recently passed a statewide rent control law. The median rent in Portland increased nearly 5 percent in 2017 to $1,879 per month.

According to an NPR report, the measure limits rent hikes to 7 percent each year, in addition to inflation. There are exemptions for subsidized rents and new construction. And there is no cap on rent increases after tenants leave an apartment of their own volition.

In New York, state lawmakers have passed legislation to keep more apartments under rent control and established new caps on what landlords can charge tenants. But the New York rent control measure provides limited relief to people already paying more than 30 or more percent of their income for rent, Murphy said.

"Rent stabilization or rent control doesn't reduce their rent to an affordable place, where they can spend money on other goods," he said. "But what it does over time as the market [rate] increases, it mitigates that potential to be displaced."

Drier said it can cost $300,000 to $400,000 to build an apartment unit, with the cost varying by geography and the size of a project. He said most rental housing getting built is aimed at the "luxury" market. It is "almost impossible" to build housing for low-income people without a government subsidy of some sort, he said, adding that government support for affordable housing has not kept pace with the need.

"If you had a combination of government subsidies and changing zoning laws, you could build more affordable rental housing not only for janitors and factory workers but also for school teachers and nurses," he said. "But that would require dramatic changes in terms of the level of government subsidy for housing. And it would require dramatic changes like Minneapolis has just enacted but no other city in America has."

Murphy noted that funding for the Section 8 rental subsidy program falls far short of meeting the needs of qualifying renters. In New York City, he said there are more than 100,000 people on the waiting list forSsection 8 vouchers.

There is a long waiting list in the Twin Cities, too. People with vouchers often to hunt a long time to find an apartment where they can use a Section 8 vouchers. 

"The problem is that there aren't enough affordable housing units to use the vouchers," said Drier.

Boosting the supply of affordable housing requires multiple approaches, Murphy said. Existing affordable housing needs to be preserved while new housing gets built, both for market-rate and low-income renters. 

"It's not one approach," he said. "It's this package: a zoning change that is combined with a low-interest rate loan that is combined with a tax credit at the federal government level that creates the amount of capital that's actually needed to confront that $300,000 to $400,000 per unit building cost."

Murphy said that is what happens in Minnesota, with the help of organizations such as the Minnesota State Housing Finance Agency.  

One caller to the show, Elizabeth of St. Cloud, said she makes a little bit more than minimum wage and struggles to pay the rent on her two-bedroom apartment. She'd like to see developers build more apartments with fewer amenities and costly add-ons. She figures that would mean lower rents.

"I see a lot of apartment complexes being built around where I live, and they're all nice luxury apartments," she said. "I don't need a pool and a fitness center. I just need a comfortable two-bedroom apartment for me and my daughter."

Jane, a Minneapolis landlord, said most of her tenants have been good. But she's had enough troublesome renters to make her and her husband question being landlords. 

"Very often is it's been an incredible nightmare," she said. "People violating their leases and having criminal activity, trashing their apartments, not paying their rent for six or eight or nine months at a time, and not leaving after evictions."