Senate Republicans are pushing to close what they call a loophole in Minnesota law to ban cities from implementing any form of rent control.
The effort is in apparent response to a proposal by three Minneapolis City Council members to put rent stabilization on the November ballot.
Under current state law, cities are only allowed to create rent control ordinances if approved by voters in a general election. If it makes it to the ballot in November, Minneapolis voters would be deciding if the city should adopt a rent stabilization ordinance with the details of the policy to follow.
Senate Housing Finance and Policy Chair Rich Draheim, R-Madison Lake, authored the bill, which eliminates the provision allowing cities from controlling rents by amending their charters. It passed out of the committee on a voice vote on Thursday and will next go before the Local Government Policy Committee.
“I think we can all agree that the rents cost too much for the incomes that we have in most areas,” said Draheim, who works as a realtor and owns rental property himself. “The data shows that rent control is not the answer.”
Ranking Minority Member Sen. Kari Dziedzic, DFL-Minneapolis, also expressed concerns about rent control but voted against moving the bill forward, saying she needed more information.
Minnesota Multi Housing Association CEO Cecil Smith, whose organization represents 1,800 landlords across the state, said rent control would have “disastrous” consequences: Developers would be less inclined to build new units; current landlords wouldn’t be able to afford to make necessary repairs and many would convert their apartments into condos; households in rent-controlled units wouldn’t want to move even if it might benefit them.
In the broader housing market, rent control in some units could increase prices elsewhere. Smith also said rent control is an imprecise way to help low-income residents struggling with rent increases, and may end up benefiting middle and high-income earners.
“There are more efficient and effective ways to assist lower-income individuals and families who have trouble finding housing they can afford,” Smith said. “In some ways, though not intended, rent control benefits an initial group of renters at the expense of others.”
Minneapolis Council President Lisa Bender, who’s pushing for rent stabilization, was previously opposed to rent control, believing it was administratively burdensome and ultimately ineffective. But her views have shifted over the years after hearing stories of price gouging from constituents and seeing new approaches to rent stabilization in California and Oregon.
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.
Rent stabilization is also more palatable given that the city has loosened restrictions on development, Bender said.
“We have made it easier to build needed housing in our city, and in that context, I think making sure landlords can’t do large rent increases with no notice is really important,” Bender said.
The University of Minnesota’s Center for Urban and Regional Affairs is currently conducting a study for the city on how different rent stabilization policies would affect the Minneapolis rental market. It will provide a report on its findings to the City Council in the coming months.