St. Paul’s housing policies show mixed results

Minneapolis has received national attention for its 2040 housing plan.

But St. Paul is also a laboratory for housing policy. The capital city has experimented with rent control and loosening zoning rules.

And a new data dashboard from the Federal Reserve Bank of Minneapolis helps track how those policies are playing out in St. Paul. It illuminates how housing supply and costs are changing rents, production, affordability and stability.

The story that emerges from the data is mixed and doesn’t cohere into a simple narrative.

Here are three key takeaways.

1) Zoning reform is starting to increase housing supply

St. Paul’s 2023 zoning changes (allowing duplexes, triplexes, etc.) are already showing early signs of boosting development, especially near universities.

While still modest, this reform is seen as a step toward easing the housing shortage by allowing denser housing

“It’s a smaller process to add four units here, and five units here, and six units there, relative to adding a 60- to 70- to 100-unit apartment building,” said Libby Starling, senior community development advisor at the Minneapolis Fed. “At the same time, allowing the gentle density in more places does increase the overall housing supply of the city.”

2) Rent control reduced development

The 2021 rent stabilization policy stipulated that property owners could not increase rents more than 3 percent year over year unless they went through a process of justifying the need.

It discouraged developers and investors, leading to a sharp drop in large apartment construction permits.

“At the same time the rent stabilization occurred, there has been a drop off in new construction,” said Starling. “We had a lot of conversations with developers and owners of property who felt like there had been an overall chill in the willingness of capital to invest in the city.”

Despite that shrinking supply of housing, which ordinarily might lead to an increase in rents, rents in St. Paul have fallen about 10 percent (inflation-adjusted) since 2020.

Starling did not have a simple explanation for why that’s the case.

But it is possible that rents might have fallen yet farther if rent control weren’t in play, given the totality of factors.

3) Property tax burden shifting from landlords to homeowners

Falling apartment values have led to landlords paying about 27 percent less in property taxes since 2022.

Meanwhile, homeowners are paying more, with median annual property taxes rising sharply from about $3,400 to more than $4,200.

This suggests a redistribution of the tax burden tied to housing market changes.