Providence developers are already putting apartment plans on hold over the rent stabilization measure mayor-elect David Morales has promised to sign into law — the same capital flight that gutted building in St. Paul, Minnesota, after its strict 2021 rent cap (Realtor.com).
What makes this moment pivotal is the timing: the capital that funds Providence's housing is moving before a single unit is regulated. Builders told the Providence Journal they may abandon plans for new apartments, and some already have builds on hold while the race tightens (Providence Journal). That is exactly the flight dynamic that followed rent control in St. Paul and San Francisco — and it is happening in a city that already earned an F grade for housing affordability and homebuilding this year. This article weighs the market signals, the cautionary precedents, and whether Morales's populist campaign tone can still give way to the pragmatism the city needs.
The money has already started to leave
The signal from builders predates the election result. When the Providence Journal called developers this fall, several said rent stabilization could make them abandon plans to create new apartments, and with the race tight, some had already put builds on hold (Providence Journal). That hesitation is rational economics, not politics: a cap tied to the unit rather than the tenant, with no market-rate reset on vacancy, rewrites the underwriting assumptions every construction loan is built on.
The stakes are concrete because the ordinance is unusually restrictive. A municipal fiscal note estimated it would have covered roughly 48,000 of the city's estimated 80,000 rental units (Uprise RI). Where California's Costa-Hawkins law lets owners reset rents to market on turnover, and Oregon's 2023 cap runs as high as 10%, the Providence proposal tied rent to the unit rather than the tenant, forbidding a market-rate reset on vacancy — the most binding design choice available (Uprise RI). Renters already carry the burden: the median earner spends nearly 46% of an $85,000 income to afford the median-priced $572,000 home, one reason the city flunked this year's affordability and homebuilding report card with an F grade (Realtor.com).
The cautionary tale of St. Paul
No precedent cuts closer to what Providence is considering than St. Paul, Minnesota — the only recent direct comparison for its vacancy-control rule. In November 2021, St. Paul voters approved a strict 3% annual cap with universal vacancy control, meaning landlords could not reset rents to market between tenants. The response was immediate: developers pulled permits, paused projects, and reconsidered sites, with several postponing plans indefinitely in the weeks after the vote (Rental Housing Journal).
Ryan Companies, the developer behind 3,800 housing units at the former Ford site's Highland Bridge project, pulled applications for three buildings there because the market-rate units that subsidize affordable housing could no longer find financing. "If our banking partners won't loan us dollars to build the buildings that are planned as market-rate because they can more safely lend their dollars elsewhere, we will not be able to build the market-rate projects," north region president Tony Barranco told the Star-Tribune (Rental Housing Journal). Within months, the city council stepped in, and the rules today look nothing like what voters passed — rent can now reset on "just cause" vacancy, and new construction earned a 20-year exemption (Uprise RI).
The production numbers confirm the retreat. Residential permits in St. Paul rose to 1,204 in 2023, then fell sharply to 404 in 2024 and 357 in 2025 — a collapse the Federal Reserve Bank of Minneapolis tied in part to developers identifying rent stabilization as a barrier to financing, even as it cautioned that high interest rates and rising costs played a role too (Uprise RI). By contrast, Providence permitted 857 residential units in fiscal 2025 with no rent cap in place — evidence of the building activity a restrictive cap would now put at risk.
San Francisco: caps do not cure affordability
San Francisco shows that even a city saturated with rent control cannot suppress rents when supply stays flat. An estimated 76% of its rental stock built before 1980 is covered by rent control, with annual increases typically held near 2%, and a state cap covers roughly another 15% (Reason). Yet median rents are up 26% amid the AI boom — the same double-digit spike that drove Mayor Daniel Lurie to declare a rent emergency and push for even tighter controls (Reason).
The lesson is the mechanism, not the politics: when rent control lets tenants hold below-market units indefinitely and caps come down hard on the small slice of the market that must absorb new demand, the uncontrolled share absorbs all the pressure. In San Francisco that leaves under 10% of units free to rise as the market bears — and the boom has pushed double-digit increases through that narrow channel. Traditional economic theory predicts exactly this outcome: rent control raises the price of uncontrolled units by freezing demand in place. Building more housing, not imposing more price controls, is what relieves the squeeze (Reason).
A vindictive tone toward builders and opponents
Morales, a 27-year-old Democratic Socialist endorsed by Sen. Bernie Sanders, made history as the first challenger to unseat an incumbent Providence mayor in a primary, capturing over 52% of the vote (Realtor.com). His campaign rhetoric toward the business community has been openly combative. Criticizing Smiley's veto of the ordinance, Morales told the Brown Daily Herald that Smiley was "a mayor that would rather cater to corporate interests than the actual needs of working people" (Brown Daily Herald).
That framing matters because housing policy is built on trust between City Hall and the capital that finances construction — and private capital responds to signals beyond the statute itself. Developers weigh not just the 4% cap but the administration's appetite to amend, enforce, and negotiate. A campaign that casts builders as adversaries is a signal in itself, and it compounds the St. Paul dynamic: even after that city's council softened the cap, developers spent years re-evaluating whether to stay. The message the business community hears today will shape whether Providence's 857 permitted units from fiscal 2025 become shovels in the ground or blueprints left in a drawer.
The best hope: that the rhetoric was for the campaign
There is a genuine best-case scenario for Providence, and it rests on the gap between campaign language and governing reality. It is plausible that Morales's most forceful statements were populist positioning for a primary electorate — and that once in office, facing the fiscal note, the 48,000 covered units, and the developers who hold the city's supply pipeline, the administration will come to the table.
The template exists. St. Paul's mayor asked the city council within months to amend the strict cap after developers and lenders warned it was choking off private capital, and the city ultimately carved out new construction and loosened the vacancy rule (Uprise RI). Providence's own ordinance already contained the seeds of a pragmatic settlement — a 10-year baseline exemption for new construction that could stretch to 20 years for projects meeting prevailing-wage and apprenticeship standards (Uprise RI). If the administration holds to that exemption, allows market resets on vacancy, and pairs stabilization with aggressive supply-side permitting, it can both honor the affordability mandate voters endorsed and keep the building pipeline alive.
The alternative is the cautionary path, and it is a steep one: a strict cap with no market reset, enforced by a combative City Hall, in a metro that already scores second-worst in the nation for affordability and construction. This market does not wait for ink to dry — it has already begun responding. The 857 units Providence permitted in fiscal 2025 sit at a fork, ready to become either shovels breaking ground or blueprints gathering dust. Providence's best hope is not that rent control never arrives; that ship has sailed. The hope is that Morales governs the way St. Paul's leaders eventually had to: with a modest hand, builders at the table, and new supply treated as the true answer to the rents voters want tamed. Choose wrong, and the city watches its future walk out the door with its developers. Choose right, and it proves a populist campaign need not become a self-inflicted wound.
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