Rent.com just released a report on, appropriately enough, rental housing rates in America that is worth some analysis. The report claims that the average rental costs in Missouri have increased, by percentage, more than any other state over the past year. I think that would surprise many people. It surprised me.
Whether this is a good thing or a bad thing depends on why it happened. If rents are up due to increased demand to live, work, study, and invest in Missouri, then it is a good thing. If rents are up because we are not allowing enough housing to be built, it is a bad thing. Which is it? Well, we don’t know for sure, and it certainly could be both. It might be the former—increased demand—and it might be the latter—restricted supply. I think it’s unlikely that it is primarily the latter. Overall, Missouri does not have especially strict zoning rules, environmental rules, or building restrictions to limit housing. For example, the Institute has published papers on the lack of centralized planning and resulting affordable prices in the St. Louis and Kansas City housing markets. But we can always be better as a state. Our cities have made mistakes in this regard and our counties have made some questionable choices, too.
There is a downside, of course, with higher rent costs—the rent for your apartment or office is higher. For landlords, that may result in higher property taxes. Similarly, there are benefits and downsides to increases in housing prices. But, overall, I think the increases in rental rates in our two major cities are a beneficial sign. It’s important to remind people that housing throughout Missouri is affordable, including in our big cities. Perhaps some of this increase is simply that there is more “room to grow” here than elsewhere. Perhaps we haven’t done anything at all, but limited housing supply and high housing costs elsewhere have driven some people to Missouri. We don’t really know for certain.
I do know for certain that some groups will take this “fastest rental increase in the country” news as an opportunity to try to add more government mandates in the name of “affordable” housing. That is the last thing our state needs. We don’t need more “source-of-income” rules or attempts to initiate rent control (which is, thankfully, illegal in Missouri). We don’t need affordable housing mandates on developers or further expansion of the low-income housing tax credit. (Although, to be fair, developers can avoid most of that by simply not asking for a tax subsidy in the first place.)
If you think housing or rental costs are too high, one can trust the free market to help lower the cost of housing in St. Louis and Kansas City if we let it. One of the reasons housing costs (buying and renting) in the United States have risen so much recently is constraints on supply, primarily via zoning limits. In recent years, Minneapolis and Austin have both made a point to increase the housing supply by substantially reducing their zoning rules. Housing costs and rental rates have significantly decreased in both cities as housing supply has increased. If we want rental and housing costs to decrease in Missouri, zoning reform is the way forward for St. Louis and Kansas City, not new government regulations or mandates.
