“Dueling approaches over how to fix America’s housing crisis are splitting Minnesota’s Twin Cities.

In 2022, St. Paul enacted one of the strictest rent-control regimes in the country. The ordinance capped annual rent increases at 3% for most apartments, even empty ones. It didn’t adjust for inflation.

Across the Mississippi River, Minneapolis steered clear of rent control. Instead, city officials strictly focused on creating new housing. A package of land-use revisions in 2020 made it easier to build apartments, in part by removing restrictions that limited housing to single-family homes

Now, the results are coming into focus. Permits to build apartments in St. Paul plummeted by 79% in early 2022 from the year before, according to data from the Department of Housing and Urban Development. Real-estate investment activity nearly froze. Developers halted new projects as lenders pulled back.

Property values declined as investment cooled. All this compounded the existing real-estate problems brought on by the pandemic.

St. Paul officials are now walking back parts of the ordinance, voting in May to exempt new construction and properties built after 2004. Kaohly Her, the mayor-elect and herself a landlord, campaigned on re-evaluating the rent-control policy further…

In Minneapolis, meanwhile, developers kept building. Housing permits surged nearly fourfold in early 2022 from the year before. Downtown hubs blossomed as new apartments hit the market and attracted young professionals. 

During the pandemic, Minneapolis rents grew more slowly than both St. Paul and the U.S. overall. From 2022 through 2024, Minneapolis rents rose 0.7% on average to $1,506 a month, according to CoStar.”

From Wall Street Journal.