Tenants say landlords are skirting St. Paul rent control with new utility charges

By: - July 5, 2022 7:16 am

Leya Charles and her neighbors banded together to challenge new utility charges that will raise their rent about 6% on top of a 3% rent increase, the maximum allowed under St. Paul’s new rent stabilization ordinance. Photo by Max Nesterak/Minnesota Reformer.

Some St. Paul landlords, facing soaring inflation and energy costs, are trying to get around the city’s new rent control law by charging tenants for utilities that used to be included in the rent.

It’s leading to rent increases of more than 10% for some renters in a city where landlords may only increase rent 3% a year following passage of a voter-approved ordinance that went into effect May 1.

It’s not a legal workaround, according to a spokeswoman for the city. But the ordinance drafted and approved by voters last fall doesn’t explicitly mention utilities, setting up one of the first tests of the city’s interpretation of the law and its ability to enforce it.

The fight over utilities is likely just the beginning of many more clashes in St. Paul’s approximately 70,000 rental units, with landlords looking for ways to pry open the lid on the hard rent cap and tenants trying to keep the lid tightly on.

Josh Musikantow and his roommate found out last month that they were going to have to start paying separately for gas, trash and water — an additional $106 per month on average, according to the landlord’s calculations.

Rent was also going up 3%, their landlord Matt Lindquist, who recently purchased the building, told them.

Taken together, the cost of their two-bedroom, basement-level unit in the St. Anthony Park neighborhood is going up 14% this year, the biggest price hike they’ve faced in the 10 years they’ve lived there.

“It was a complete surprise,” Musikantow said. “No one living here thought it would be more than 3%.”

Musikantow and his roommate, Jason Pape, both work as desk attendants at condo buildings in Minneapolis and aren’t sure how they can afford the increase. Musikantow figures he would pick up a side job; Pape thinks he would have to quit college.

The two circulated a petition among their neighbors asking Lindquist, the landlord, to reconsider the new utility charges.

Before they even turned it in, they received an email from Lindquist. Sorry for the confusion, he told them, but their unit was going to be renovated. They would have to move out when their lease expires at the end of August.

“I don’t know what we’re going to do,” Musikantow said. “It’ll be very difficult to find a place.”

Lindquist’s dad, Jim Lindquist, responded to an email seeking comment. He said they are raising rent 3% for tenants renewing their leases, while tenants with new leases would be responsible for trash, water and gas.

“What I am asking for regarding utilities is not regulated by this ordinance nor considered rent,” Jim Lindquist wrote.

He did not respond to follow-up questions about why Musikantow and Pape were told they would be charged separately for utilities and why their lease was not being renewed after they challenged the new charges.

Landlords are allowed to increase rent more than 3% a year if they apply for an exemption from the city and are able to show the increase is justified to provide a “reasonable return.” For increases up to 8%, landlords’ applications are automatically approved but subject to an audit — like a tax return.

However, the city’s rules don’t allow for landlords to circumvent the 3% cap on rent by shifting responsibility for utilities onto the tenant, according to St. Paul spokeswoman Suzanne Donovan. Nor can landlords rewrite a lease when it’s renewed to include these charges if they increase tenants’ costs by more than 3%.

That view is shared by tenant advocates like Margaret Kaplan, an attorney and president of the Housing Justice Center who helped craft the St. Paul rent stabilization ordinance.

Kaplan says tenants always pay for utilities like water, trash and gas, whether or not they’re charged separately or included in the rent.

“(Utilities) are part of the cost of living in the unit, and therefore, they should be included under what is considered a rent increase,” Kaplan said.

Kaplan said her non-profit has heard from a number of tenants about additional utility charges. In all of those cases, they’ve talked with the landlords and resolved the dispute before having to take it before a judge.

Musikantow and his neighbors aren’t the only tenants to face new utility charges.

Leya Charles and her husband say their one-bedroom apartment was going to go up more than 10% after their landlord, Kleinman Realty Company, said tenants would be charged separately for trash, water and heating gas in addition to a 3% rent increase.

Not all the tenants would be responsible for the shared utilities under the company’s proposal, Charles said. Tenants who signed one-year leases before the company came up with the new policy would be exempt, with the cost being split instead among long-term renters on month-to-month leases.

“So we’re paying for their water and our water,” Charles said. “It’s just not fair.”

Charles has rented her apartment across from the St. Paul Cathedral for seven years and never faced large rent increases before Kleinman bought the building in July. Before the increase this year, she and her husband paid $1020 per month plus electric and cooking gas.

Kleinman did not respond to a request for comment.

Charles says in February she contacted a tenants’ advocacy group, HomeLine, which helped her and her neighbors organize themselves to negotiate with the landlord over the new charges.

“Their response back was basically ‘Nope, we’re not negotiating with you… you need to pay everything. Otherwise, we’re sending you an eviction notice,’” Charles said.

At that point, the city hadn’t yet published its rules around the rent control ordinance, so it was unclear if the new utility charges were allowed.

Eventually, Charles said Kleinman agreed for the next year to charge single residents $40 per month for the building’s shared utilities and $60 per month for couples. For Charles and her husband, it amounts to about a 9% rent increase total — about half what they first expected.

“But it does make me feel uncomfortable that they only are committing to that for like a year,” Charles said.

She and some of her neighbors filed a complaint with the city in May after the ordinance took effect for violating the rent stabilization ordinance. They’re hoping the city will tell Kleinman they can’t add on the new charges.

“We’re kind of at a standstill,” Charles said. “I feel like there’s nothing else we can do to fight it.”

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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.