Minneapolis rent control advocates call for 3% annual cap with inflation considerations

Campaign leaders of the successful rent control ballot initiative in Minneapolis say they want the city council to pass a policy similar to the stringent one St. Paul voters approved in November: a 3% cap on annual increases on all properties throughout the city.

In one significant divergence from St. Paul, however, leaders of the political coalition Home to Stay say that the annual cap should take inflation into consideration though haven’t yet landed on specifically how.

“There’s a lot of different ways that this could actually take shape and we are committed to working with policymakers and experts to figure out what works best for the city of Minneapolis,” said Jennifer Arnold, co-director of the tenant advocacy group Inquilinos Unidos, during a news conference on Monday.

Voters in Minneapolis and St. Paul easily passed rent stabilization ballot initiatives in November, winning about 53% of the vote in both cities.

While the question in St. Paul laid out a specific policy proposal, Minneapolis voters simply authorized the city council to enact a rent control policy. That’s because Minneapolis doesn’t allow ordinances to be passed through ballot referendums but state law prohibits cities from enacting rent control unless approved by a majority of voters in a general election.

The proposal in St. Paul, slated to take effect on May 1, is unique in that it does not take inflation into consideration, as virtually all other cities with rent control policies do.

Inflation has skyrocketed to 6.8% this year, the highest since 1982, forcing consumers to pay more for just about everything and leaving a majority of Americans feeling pessimistic about the economy even as many are seeing their wages rise. Inflation also poses a significant threat to landlords and developers, increasing the costs of building materials, maintenance, insurance and taxes.

Advocates in Minneapolis seemed likely to pursue a policy just as stringent as the one won by  their counterparts in St. Paul, but the consideration of inflation signals that there is fear even among activists that St. Paul’s policy may go too far.

Landlords and developers in St. Paul warned such a strict policy would further exacerbate the city’s affordable housing shortage by leading landlords to convert their apartments to condominiums, and scare away developers from building more housing.

Activists rejected those claims as scaremongering and sought to keep the public’s focus on the fact that 45% of renters in the Twin Cities metro area are considered “cost burdened,” paying more than 30% of their pre-tax income on rent. They also say rent control is a racial justice issue, pointing out that 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.

Janne Flisrand, a housing advocate with Neighbors for More Neighbors and landlord who rents out three units, spoke in favor of rent stabilization even though she’s been whipsawed by inflation and higher taxes.

She said her property taxes will increase 15% and her homeowners insurance is going up 20% next year, leading her monthly costs to rise 3.7%. That means if Minneapolis approved a policy identical to the one in St. Paul, her profits would diminish because she would not be able to increase rents to make up for increased costs.

Still, she noted the protection she gets from a fixed mortgage rate.

“My neighbors and tenants who rent often have less income and job stability, and they need protections as strong as the ones that I have,” Flisrand said.

What kind of policy gets passed in Minneapolis — 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.

Rent control advocates still want rent control to extend to new construction, which is typically exempted. In the days after his city passed rent control, St. Paul Mayor Melvin Carter urged the city council to look at exempting new housing from the rule.

If the rent control advocates have their way, a Minneapolis policy could cap rent increases at 3% or the rate of inflation, whichever is higher. Alternatively, the policy could add the local consumer price index to a base rate, which is how rent stabilization works in California and Oregon.