St. Paul City Council passes sweeping overhaul of rent control ordinance
New construction and affordable housing will be exempted from the ordinance
Activists told the council they’ll remember them voting to gut the ordinance. Photo by Max Nesterak/Minnesota Reformer.
Less than five months after St. Paul’s citizen-authored rent control ordinance took effect, the City Council voted 5-2 to roll back the provisions that made it one of the most stringent policies in the country.
As part of a package of amendments passed by the council on Wednesday, low-income housing will be exempted; new construction will be exempted for 20 years; and rents may rise more after tenants move out.
The ordinance’s signature 3% cap on annual rent increases technically won’t change, but the council voted to make inflation an explicit reason for landlords to be granted an exemption under their “right to a reasonable return” on investment.
The council also approved new rules requiring landlords to inform tenants if their apartment is covered by rent control, and for tenants to be notified when their landlords apply for exemptions in order to give them time to appeal the increase. The changes will take effect on Jan. 1.
Council Members Nelsie Yang and Mitra Jalali voted against the amendments.
“I will not vote to take rent stabilization away from my constituents who need it the most,” Jalali said.
The vote follows weeks of heated debate over the future of the ordinance that developers say has scared away investors and led new construction to crater amid a severe housing shortage. Renters, meanwhile, complain the city has been too permissive in granting exemptions to the 3% cap to virtually every landlord who’s requested one.
Mayor Melvin Carter says he supports the changes, though he faces pressure from renters and renter advocates to veto the amendments and make less drastic changes to the ordinance. Despite a well-funded opposition campaign, 53% of voters approved the ordinance last November, making St. Paul the only city in the Midwest to regulate rent increases.
On Wednesday, activists told the council they’ll remember them voting to gut the ordinance when they’re up for re-election next year.
“The ordinance goes directly against the democratically passed policy and completely subverts the will of the people, sowing distrust, disdain and contempt for this elected body,” Sean Lim told the council on Wednesday.
Council members and city staff frequently voiced their frustration with the policy that was drafted and approved without their input and over the objections of most council members, who have advocated for more construction and government subsidies over administratively burdensome price controls.
“I think what we have is not necessarily perfect, but .. I think it is a huge improvement,” said Council Member Chris Tolbert, who authored much of the package of amendments.
While some renters accused the council of bowing to the interests of developers, the amendment exempting new construction for 20 years will bring the city’s rent stabilization policy more in line with those of other cities and states.
Before the ordinance even took effect, developers announced they were halting projects, and Carter called on the council to exempt new construction from the ordinance as quickly as possible.
“We can’t get financing,” Ryan Companies Vice President Tony Barranco said. “The reality is there is no money for housing with this ordinance in place.”
Many renters and advocates say they don’t believe that policy prevented new development, while others have since come to support a new construction exemption, albeit a less generous one. The mayor’s 41-member rent stabilization task force — made up of renters, activists, landlords and developers — recommended a 15-year exemption for new apartments going forward. The amendment passed by the council goes further by exempting apartments already built and less than 20 years old.
St. Paul’s current rent control ordinance doesn’t allow landlords to raise rents beyond 3% a year even after tenants move out.
The council approved an amendment authored by Council Member Jane Price to remove that restriction, called “vacancy decontrol,” arguing it would also encourage landlords to invest in their properties. Key renter advocates, including union powerhouse SEIU and the progressive ecumenical group ISAIAH, came out strongly opposed to the policy, leading to a compromise amendment that the mayor said he would support.
The policy approved by the council allows landlords to increase rents by as much as 8% plus inflation after a tenant moves out. The policy only applies when tenants move out on their own accord or are evicted for “just cause.”
The council did not make any changes to the city’s exemption process that allows landlords to “self-certify” that increases up to 8% are justified for a “reasonable return on investment.” Exemption requests are automatically approved but may be audited, like a tax return, and tenants have the opportunity to appeal.
Landlords may seek rent hikes as high as 15% but must submit more documentation for city staff to review.
Under another amendment passed on Wednesday, landlords can’t add new utility charges to circumvent rent increase caps, which some landlords have employed to get around rent control.
While only a fraction of St. Paul landlords have sought exemptions, one affordable housing developer, Dominium, raised rents by 8% on all its units in St. Paul. Tenants are appealing the increases and say the policy saved them from even higher increases, with Dominium raising rents 12% on its apartments outside St. Paul.
Under the affordable housing exemption passed by the council, Dominium will no longer be subject to the ordinance and so won’t have to submit paperwork to increase rents beyond 3%.
Dominium tenants showed up in large numbers to urge the council not to exempt low-income housing.
Stephanie Ericsson Hinton told the council in August she mostly lives on Social Security and has to spend 75% of her income on rent after Dominium raised everyone’s rent.
“We elected you to protect us,” Hinton told the council. “There’s a word for people who take advantage of chaotic situations to steal. Looter. Dominium is looting us.”
Tweaking the law isn’t over. Jalali said she plans to bring a new amendment to limit the exemptions for low-income housing. A previous amendment Jalali brought forward that would have removed all exemptions for low-income housing did not pass.
Council President Amy Brendmoen said she plans to bring an amendment requiring workers on new housing construction to earn a “prevailing wage,” which would be a boon for union laborers.
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