File this under lessons never learned: Voters in St. Paul, Minn., last week approved a ballot initiative, 53% to 47%, to impose strict rent control. The cap on increases will be 3% a year, “regardless of change of occupancy,” and with no exceptions for new construction or mom-and-pop landlords.

What happened next should be no mystery. One developer has “already pulled applications for three buildings,” a representative told the St. Paul Pioneer Press. Another “lost a major investor” in “an apartment building he’s trying to...

St. Paul Mayor Melvin Carter in April.

Photo: eric miller/Reuters

File this under lessons never learned: Voters in St. Paul, Minn., last week approved a ballot initiative, 53% to 47%, to impose strict rent control. The cap on increases will be 3% a year, “regardless of change of occupancy,” and with no exceptions for new construction or mom-and-pop landlords.

What happened next should be no mystery. One developer has “already pulled applications for three buildings,” a representative told the St. Paul Pioneer Press. Another “lost a major investor” in “an apartment building he’s trying to get off the ground.” Who could have foreseen it, other than basically every economist with a pulse?

If a city’s housing supply can’t grow to meet demand, the natural result is that prices go up. Artificial caps then produce shortages and other distortions, such as dilapidated properties that landlords don’t have an incentive to renovate. The St. Paul initiative says the city will create an appeals process to let developers break the 3% cap if it’s necessary to provide “a fair return on investment.” Got it? File forms in triplicate, and maybe you’ll be allowed a “fair” profit, however that’s defined.

A culprit here is Mayor Melvin Carter, who said before the election that he’d vote yes on the initiative and then work to “make it better.” His administration wants the City Council to pass a “clarifying amendment” to exempt new construction from the 3% cap, on the theory that the ballot measure “is silent” on that issue.

Is that legal? “We can’t make changes that are substantive,” the City Council president told the Pioneer Press, “and I think this would qualify as substantive.” Experience is a harsh teacher, but at least other cities curious about rent control can learn from St. Paul’s self-destructive example.

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