St. Paul, Minneapolis poised to enact first rent control policies in Midwest

By: - November 2, 2021 10:50 pm

Tram Hoang, campaign manager for Keep St. Paul Home, speaks at a press conference with elected officials and other supporters of the rent control ballot initiative. Photo by Ellie Leonardsmith and courtesy of Housing Equity Now St. Paul.

St. Paul will be the first city in the Midwest to enact rent control after voters easily passed one of the most stringent policies in the country on Tuesday. Across the river, voters cleared the way for Minneapolis to follow suit by approving a ballot measure that authorizes the City Council to draft a rent control ordinance.

Voters in the Twin Cities — facing a housing shortage and rising rents — sided with tenants and sought to rein in landlords while rejecting the pleas of opponents, including realtors, developers and two building trades unions that spent millions to defeat the measures.

“Passage of this proposal marks a significant step towards addressing the affordable housing crisis in St. Paul and puts our elected leaders on notice that renter protections and housing stability are essential priorities for voters,” said Tram Hoang, campaign manager for the Keep St. Paul Home campaign that led the ballot initiative.

The ordinance in St. Paul caps annual rent increases at 3% per year and is unique in applying to all rental properties across the city, regardless of size or age of the building.

Virtually all other rent control policies exempt new buildings, and opponents — including developers and unions representing carpenters and operating engineers — warn it will hamstring efforts to add more housing.

Unlike rent control policies in other states and cities, the St. Paul measure does not vary from year to year with inflation. In California, which instituted rent stabilization last year, landlords may increase rent up to 5% plus the local rate of inflation. In Oregon, which approved rent stabilization in 2019, landlords are limited to raising rent no more than 7% per year plus the rate of inflation.

The ballot initiatives succeeded despite an opposition campaign that raised more than $4 million, which dwarfs all other city races, including the higher profile campaigns for and against the Minneapolis public safety ballot initiative. The campaign advocating for rent control in St. Paul — Keep St. Paul Home – raised just $206,000.

“Clearly, we’re disappointed,” said Cecil Smith, president and CEO of the Minnesota Multi Housing Association, a landlord lobby group that spearheaded the campaign to block rent control in both cities.

“But we’re also excited to have the conversation with the new (Minneapolis) council … And we’ll be there for that conversation,” Smith said.

Rent control moving forward in Minneapolis depends on the support of the new city council and Mayor Jacob Frey, who has said he does not support rent control.

If the City Council chooses to draft and pass an ordinance, it would likely go before voters again in a future election for ratification as advised by the city attorney’s office.

Minneapolis voter Marina Gorzig said she wouldn’t have supported the proposal in St. Paul but voted for the Minneapolis initiative.

“That was definitely the one I had the hardest time deciding on,” said Gorzig, an economics and political science professor at St. Catherine’s University, outside her polling place at Brackett Park in Minneapolis on Tuesday.

She said she worries that the policy in St. Paul will lead to a reduction in rental properties, with landlords selling off houses and converting apartment buildings to condominiums, as has reliably happened in cities with rent control.

Gorzig, who owns rental property herself, said she ultimately decided to vote in favor of the Minneapolis initiative because she believes in local control but hopes the City Council will come up with a less restrictive ordinance that’s less likely to scare off new development.

“From my perspective, the more effective policies are going to be coming from the supply side,” Gorzig said. “Let’s increase the supply of housing versus limiting how much people can raise rents.”

The proposal in St. Paul won with the support of voters who hope to rein in rent increases, which have ticked up about 3% on average in recent years, as well as people who just don’t like landlords.

“I’m not a big fan of landlords,” said Jim Fitzsimons.

Fitzsimons, 57, said he and his wife Amy decided to support rent control after reading a story about how someone’s rent went up $400 before the election and wanted to prevent price gouging of renters who have nowhere else to go.

The St. Paul City Council — a majority of whom said they would vote against the initiative — has just six months to enact the ordinance, which includes developing a process by which landlords can seek an exception to raise rents beyond 3% in any given year.

Under the ordinance, landlords may only seek increases beyond 3% if they see their property taxes rise or need to make repairs to bring the apartments up to code. Renovations and other improvements beyond ensuring the health and safety of a rental house or apartment would not qualify for an exemption. The St. Paul policy also does not allow landlords to raise rents beyond 3% after a tenant moves out.

The push for rent control comes amid a yearslong housing shortage that’s pushed rents to historic heights in the Twin Cities and inspired grassroots efforts to increase housing development and enact policies favorable to renters, who now make up just over half of households in both cities.

Rent control is among the hardest renter protections to pass, however, since in Minnesota it must be approved by a majority of voters in a general election.

Even as St. Paul and Minneapolis are much more affordable than coastal cities and states that have enacted rent control, there are plenty of people struggling to make rent every month in the Twin Cities, too.

Forty-five percent of renters in the Twin Cities metro area are considered “cost burdened,” paying more than 30% of their pre-tax income on rent. Black, Native and Latino renters, who have lower incomes on the whole, are even more likely to be cost burdened, with well over half paying more than they can afford in rent.

While landlords and developers are largely opposed to rent control, some did support it.

Nan Kafka, 66, of St. Paul inherited a duplex, which allowed her to rent out a unit at significantly below market rent. She decried investors who finance properties on the backs of renters.

“Large-scale property owners, especially out-of-state and foreign investors, completely load properties with debt, which demand increases in rent, and it’s not sustainable,” Kafka said on the Green Line after she voted.

Proponents of the policy argued the lack of loopholes will help St. Paul avoid parallel rental markets, which inflate rents in non-regulated apartments to compensate for rent controlled units.

Mayor Melvin Carter gave only a tepid endorsement. He tweeted he would be voting yes “not because the policy is flawless as drafted — we can and must make it better, quickly — but because it’s a start.”

Changing the ordinance significantly may prove impossible, however. The city’s charter says the City Council isn’t allowed to repeal the ordinance within the first year of being approved.

The mayor and City Council could use that language to justify making the ordinance better, as Carter says he wants to do, but it will likely invite legal challenges from landlords who would look to force the city to repeal the ordinance completely rather than changing it, by arguing any alteration would subvert the will of the voters.

Correction: Due to an editing error, Jim Fitzsimons’ name was misspelled in an earlier version of this story. The story also erroneously identified him as a landlord. He has never been a landlord.

Henry Pan contributed reporting.

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Max Nesterak
Max Nesterak

Max Nesterak is the deputy editor of the Reformer and reports on labor and housing. Previously, he was an associate producer for Minnesota Public Radio after a stint at NPR. He also co-founded the Behavioral Scientist and was a Fulbright Scholar to Berlin, Germany.