During what is now the most challenging housing economy of our time, one college town is making it harder for homeowners to keep their homes, and for renters to find reasonable rates.

Winona, Minn., recently passed a “30% rule” that restricts the amount of homes on each block that can legally be rented out to 30%. Who gets to rent out their home and who does not comes on a first-come, first-served basis. Essentially, if a lot of rental properties happen to be on your block and you want to rent out your home, too bad. If you own a home on a block with few rental properties, and you want to rent out yours, then you're in luck. Seems fair, right? 

I’ll leave out the obvious gaps in the constitutional logic of this bill, which is the subject of a lawsuit filed against the city by the Institute of Justice, in favor of talking about the risk it poses to the financial stability of the town’s residents.

Let’s be honest: plenty of residential neighborhoods, and their HOAs, tend to frown upon renting. The stigma of poorly kept lawns and code violations that tend to follow single-family rentals isn't entirely false. And in normal times, restricting renting may go unnoticed. But these are not normal times. 

Right now, people trying to sell can’t and some must rent their homes to hold onto their investment. Some who want to buy a home but can't qualify due to today's strict underwriting may be forced to rent. So, at a time like this, restricting rentals is bad policy.  

When two colleges (St. Mary's and Winona State University) are in a small town — like they are in Winona — rental demand is high. With a cap on the number of homes available for rent, cheap rentals will be a thing of the past. Landlords will drive up prices to take advantage of an area in which rental properties are scarce but necessary, and students — or their parents — will bear the cost. 

And while those college students will be forced to pay higher prices, homeowners who want to rent their property may really be out of luck. Renting is one way to pay the mortgage if you can’t sell.

I’m sure this law seemed like a good idea on face when the city council passed it, but I can’t imagine they put much thought into the problems it would cause. 

While I have hope that the Institute of Justice will win its case, a legal fix to this poorly constructed law could take years. In the meantime, the residents of the city who, like everyone else in this country, are struggling to make ends meet are losing out against an illogical and poorly timed policy.