St. Paul’s rent-control task force recommends 15-year exemptions for new construction – Twin Cities
With little more than two months to go before the advent of rent control on May 1, St. Paul Mayor Melvin Carter chose 41 members of a stakeholder task force convened to suggest changes to the voter-approved city ordinance. The task force submitted its wide-ranging recommendations to the mayor’s office in June, and the final report calls for maintaining the existing 3 percent cap on annual rent increases while adding a 15-year exemption for new construction.
Beyond that, particular recommendations are more general than some members would have liked.
“No one walked away completely happy,” said Marcus Troy, a West Side renter, noting discussion groups within the task force groups formed of renters, landlords and developers were often at loggerheads. “Each of us walked away thinking the other group got a little more than they should have.”
That’s partially because the members were often divided over details, such as the degree to which a landlord should be allowed to “bank” unused rent hikes and then implement them all at once later, once a rental unit is vacant.
That system, known as “vacancy decontrol,” is common throughout rent-controlled housing markets but not currently allowed under the St. Paul ordinance.
“These are recommendations, based on ‘this is what 60 percent of the people agreed upon.’ To be honest, the group was very divided, as is the city,” said Tony Sanneh, a co-chair of the task force. “For me, the biggest takeaway was that we need to protect renters more.”
The “St. Paul Rent Stabilization Stakeholders Group” met almost weekly for 16 weeks, from Feb. 22 to June 7, and their final report was prepared by the Center for Urban and Regional Affairs, or CURA, at the University of Minnesota. The report, which spans some 301 pages of exhibits and findings, recommends:
- Maintaining the city’s existing annual limit on rent increases at 3 percent.
- Installing a provision that better spells out exemptions for a reasonable rate of return.
- Banking unused rent hikes in some form.
- A 15-year exemption for new construction, as the mayor has called for.
- “Just cause” eviction protections preventing a landlord from ending a lease without an allowed reason.
CURA will make a formal presentation to the St. Paul City Council at 5:30 p.m. Wednesday, to be followed by a public hearing on the report.
The city’s new “rent stabilization” ordinance was assembled by housing advocates and placed on St. Paul’s November 2021 ballot, where it was approved with 53 percent of the vote. The ordinance, for practical purposes, took effect May 1, giving the city about six months’ lead time to create a budget and administrative infrastructure for the new rules, which could affect as many as 60,000 housing units in the capital city.
Alarmed by a notable slowdown in new building permits, Carter has called for amending the ordinance to exempt new residential construction from rent control for 15 years. Some housing developers on the task force wanted a 30-year exemption, while some tenants and housing advocates called for no exemption at all. In the end, the group favored the mayor’s proposal.
Some property owners have also called for greater clarity and a simpler application process for hardship exemptions. The task force rejected exempting small properties with four or fewer units.
The recommendations will be reviewed by Carter’s office and the city council, with the expectation of having changes to the city ordinance take effect in early 2023. Council member Chris Tolbert, who chairs the city’s Housing and Redevelopment Authority, has begun digging in on the council’s behalf.
Tolbert said it’s his goal to protect renters from rent spikes while ensuring that property owners have ample incentive to invest in quality market-rate and affordable housing. He envisions one major ordinance amendment moving forward this summer.
“We’re not going to go piecemeal topic by topic,” Tolbert said. “We’re going to bring forward a global ordinance with the best information from the last nine months or so.”
In light of the fact that finding reliable tenants they like and trust can be costly and time-consuming, some mom-and-pop landlords voluntarily keep rents fairly stable for their low- to moderate-income tenant, knowing they can bring rents up to market rate later once the tenant moves out. That keeps the apartment an attractive investment asset for both the owner and potential buyers, without impact to the tenant.
Cities such as New York have codified the practice, known as “vacancy decontrol,” with limits on how much of an increase a landlord can implement on a vacant unit.
“Factually, landlords do better when they have tenants for longer,” Sanneh said. “But people are really worried that landlords will kick people out as a means to raise rents, if that’s the only way to raise rents.”
Some cities allow a certain level of vacancy decontrol, with conditions, such as proof that the landlord has maintained a quality apartment, or that the tenant was not pressured to move out.
In their final meeting on June 7, the St. Paul task force held a series of votes on the question of whether a landlord can hike rents to, or closer to, market rate on a vacant apartment. At first, 20 members voted for partial vacancy decontrol, and 15 voted for full vacancy decontrol. In subsequent votes, 29 of 35 voting members voted for partial vacancy decontrol, and 15 of 34 voted for full vacancy decontrol.
Beyond that, the task force acknowledged they had few details to offer that most could agree upon. They considered convening for yet another policy discussion, but most members voted against it.
“There is a broad spectrum of possibilities for what ‘partial vacancy decontrol’ could be in practice, between the rejected polar opposites of full vacancy decontrol and full vacancy control,” reads the report. “The recommendation for some form of partial vacancy decontrol received support from 83 percent of the group members who voted.”
The rent-control issue has split housing advocates worried about the slowdown in new housing production, and it has created a hornet’s net of administrative challenges at City Hall, where staff have been hard-pressed to implement a policy they had no role in crafting. Two building owners based in Bloomington and Minnetonka filed a federal lawsuit against the city in June based in part on arguments that the city lacks sufficient staff to dutifully roll out the law and hear appeals.
Historically, lawsuits against rent control around the nation have had limited traction. Under administrative rules published by the city in April, St. Paul property owners seeking hardship exemptions can self-certify rent increases between 3 percent and 8 percent. The city Department of Safety and Inspections hired two professionals in mid-June to review those applications and make determinations.
Marcia Moermond, the city’s legislative hearing officer, has begun hosting appeal hearings for property owners whose applications are rejected or who seek to raise rents between 8 percent and 15 percent. On June 21, the city began holding public hearings on a request filed by Matthew Lindquist and Jim Lindquist, who have sought an exemption for their property at 1029 Raymond Ave. The property owners are seeking a 15 percent increase.
The matter will be referred to the city council, with a recommendation from the hearing officer pending, according to meeting minutes.
Moermond’s role is likely temporary, and more staff will be hired to help with appeals. Tenants have also begun appealing increases they claim are unfair. “We don’t know what kind of volume we’re looking at. We’re at case number one,” Moermond said. “We’re building out the process right now.”