What will Minneapolis’ rent control policy look like?

Minneapolis voters gave city leaders the green light to move forward with enacting rent control, with 53% of voters approving a ballot measure on Tuesday.

But what kind of policy gets passed — if any at all — is up to a new, slightly more moderate city council and reelected mayor, who are unlikely to approve of an ordinance as exacting as one approved by a similar share of voters in St. Paul.

Mayor Jacob Frey said he voted yes on the rent control ballot initiative but said he doesn’t see it as a mandate that the city must pass a rent stabilization policy.

“What (the ballot initiative) says is people want to look at the data and consult with the experts and determine what could be or could not be an appropriate policy,” Frey said.

He said he voted for the initiative because he believes in local control but that he doesn’t support rent control “in its classic form” as in the way it was first implemented in New York City. He said there may be a policy he would support as long as it’s supported by city staff and exempts new development so as to not inhibit construction.

St. Paul allows voters to enact ordinances through citizen petition and activists used that right to pass one of the most stringent rent control policies in the country, capping annual rent increases at 3% for all rental properties regardless of the age of the property or number of units in a building.

Minneapolis doesn’t allow ordinances to be enacted through citizen petition, although the city council entertained adding a second rent control question to the ballot that would have allowed citizens to draft an ordinance to pass through referendum. Frey blocked it from reaching the ballot through veto, arguing governing through referendum leads to bad policy.

Whatever the council decides may go before voters in a future election for ratification, as advised by the city attorney’s office to avoid possible litigation. Under Minnesota law, cities may not enact rent control unless approved by a majority of voters in a general election.

While the two other ballot questions — consolidating the mayor’s executive authority and replacing the police department — sharply divided members of the council, rent control has broader support of members on the council although they vary greatly in what kind of policy they want to see enacted.

Newcomer Jason Chavez, a 26-year-old Democratic Socialist, said he wants to see the strongest rent control ordinance possible enacted and pointed to the proposal by activist group Minneapolis United for Rent Control.

Like the ordinance in St. Paul, their proposal is to cap rent increases on all rental properties throughout the city at a low rate. But unlike the fixed 3% annual increase cap in St. Paul, they propose rents should rise at the rate of inflation, which hasn’t exceeded 2.5% in recent years.

Such a stringent policy that doesn’t exempt new construction, as virtually all other rent control policies do, has drawn warnings from developers that they won’t be able to convince investors to fund new projects in the city. That could hamstring efforts to build enough housing for a growing city already facing a housing crunch.

“My priorities are never going to be developers,” Chavez said. “There’s a difference between affordable housing and public housing and luxury buildings that do not serve the people of my ward, who are struggling to make it by every single day.”

Council Member Lisa Goodman said she supports a rent stabilization policy tailored to protect people from massive increases, but that doesn’t hurt investment in the city, either in new construction or maintenance of existing buildings.

“The majority of rental property is owned by mom-and-pop local owners,” Goodman said. “They see their taxes increasing and their water and sewer bills increasing and will disinvest in their properties if we cap their rent so they can’t recoup their expenses.”

That means a policy like in Oregon or California that allows rents to rise a certain percentage plus the local rate of 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 city of Minneapolis commissioned a review of rent control policies in other cities by the University of Minnesota’s Center for Urban and Regional Affairs, which found the effects of rent control vary widely depending on the type of policy enacted.

One consistent finding is that some property owners convert their apartments to condominiums, which reduces the number of rental units. But such an effect, at some level, is OK with Goodman.

“One of the big goals is to try to increase homeownership in Black and brown communities, so some level of conversion is acceptable, but no level of disinvestment is acceptable,” Goodman said.

How the policy moves forward is still unclear given passage of Question 1, which gives more executive authority to the mayor. The city council can ask city staff to research and develop possible ordinance proposals but will no longer be able to direct them to do so.

“I expect staff to be supportive and to lend their expertise to help draft something,” said Council Member Jeremiah Ellison, who co-authored the rent control ballot initiative with outgoing Council Members Lisa Bender and Cam Gordon.

But Ellison said he’ll write the ordinance himself if he has to.

Ellison declined to say what exactly he wants to see in a rent control policy but said his priority would be to protect renters from massive hikes.

Ellison said he was glad the ordinance in St. Paul passed but indicated he would be open to something more lenient: “You don’t draft a rent control policy because of the average rent increases. You draft a rent control policy based on who’s being harmed by massive rent increases.”

Bender, who did not seek reelection, said whatever the council chooses, she thinks they should move quickly.

“I would try to implement an interim rent stabilization policy as soon as possible,” Bender said. “If you could get a 5% plus inflation cap done early next year, as an interim policy, I think that would go far to protect the most vulnerable renters in our city.”

Then, the council could study and consider enacting how a more stringent policy might affect new development and investment.

The council will have to weigh pressures from both activists and landlords, who plan to be involved in the decision-making process.

“It’s a disappointing result. But we’re also excited to have the conversation with the new council,” said Cecil Smith, who led the opposition campaign against rent control in both cities and is the CEO and president of the landlord lobby group Minnesota Multi Housing Association.