[image_credit]MinnPost photo by Corey Anderson[/image_credit][image_caption]St. Paul voters will potentially weigh in on a ballot measure that — if passed — would institute a specific cap on rent increases in the city.[/image_caption]
In Minneapolis, voters are likely to face two questions about rent stabilization in November, though neither question in and of itself would impose any changes to how rental property is regulated in the city. Instead, if passed they would give the city the ability to do so — either via the City Council or by citizen initiative.
The effort in St. Paul, however, goes further, with voters potentially weighing in on a ballot measure that — if passed — would institute a specific cap on rent increases in the city. Here’s a look at where the initiative came from, what it would do, and what landlords are saying about it.
Where did the push for a St. Paul rent control measure come from?
Housing has become increasingly unaffordable in the Twin Cities. Though the University of Minnesota’s Center for Urban and Regional Affairs found the average rent went up in Minneapolis by 2.7 percent between 2013-2018, some rent increases went up by an average of 9 percent during that time. And the pandemic has made things worse. The Minneapolis St. Paul Regional Economic Development Partnership said the metro housing market is “skewing toward higher-priced homes,” and that the share of homes for sale they deem affordable has dropped more than 15 percent since 2019. Between 2015 and 2018, homelessness in Minnesota has jumped 10 percent.
In response to those trends, housing advocates and city officials in both Minneapolis and St. Paul have explored policy options that could help people keep their homes, including imposing rent stabilization measures, which have been barred by state law for more than 40 years.
Behind the campaign in St. Paul is Housing Equity Now St. Paul (HENS), a coalition of neighborhood groups and affordable housing advocates who collected more than 9,000 resident signatures — nearly double the 5,000 needed — to put a rent stabilization measure on St. Paul’s municipal election ballot this November.
“There was a very strategic decision about making the move to go on the ballot,” said Danielle Swift, a member of the St. Paul Area Association of Realtors and community organizer with the Frogtown Neighborhood Association, one of the organizations in HENS. “That’s to avoid the fight that we see happen within political realms and going directly to the people, to be able to take the decision-making power into their own hands.”
What would the St. Paul proposal do?
The St. Paul city attorney’s office is still finalizing the ballot language, but — if approved — the measure would impose a cap of 3 percent on rent increases for most rental units in the city, starting in May of 2022.
It needs to be on the ballot because the city— like Minneapolis — needs to satisfy an exception in Minnesota law governing any rent control measure, a provision that says that charter cities in the state can engage in “controlling rent on private residential property” only if “the ordinance, charter amendment, or law that controls rents is approved in a general election.”
HENS’ proposed cap does not put a limit on the cost of rent in St. Paul; it only impacts rent increases. “We’re saying rent can start where it is; it just can’t grow faster than a certain percent,” said Tram Hoang, policy advocate for The Alliance, one of the organizations in the HENS housing coalition.
The ordinance comes with a provision that allows landlords to file a request to be exempt from the cap. There is no current list of specific exceptions, just a mechanism for the city to field requests and determine if a landlord should be able to increase rent by more than 3 percent.
HENS also said its aim is to stop large, sudden increases in rent that happen most often when new amenities come to a neighborhood, like new grocery stores or transit options. The coalition says the rent cap will help secure St. Paul’s entire rental market but will be most beneficial to renters of color and low-wage earners.
“It’s something we know happens to many people in month-to-month leases,” said Hoang. “Our goal is to make sure that, as the cost of housing increases, it does so at a rate that’s humane, that keeps people in place, that allows people to grow in their communities.”
Why 3 percent?
HENS bases its proposed 3 percent cap on research from the University of Minnesota that found that, over the past 20 years, median rent increases did not surpass 3 percent. Hoang said the data indicate to her that landlords should be able to afford unit upkeep while keeping rent increases below that threshold.
At the same time, the 3 percent limit would protect many of the most vulnerable renters, said Mai Chong, a staffer for City Council Member Dai Thao. “Three percent is the average of rent increase across the metro,” said Chong. “But, disproportionately for BIPOC (Black, Indigenous, people of color) households, they were actually receiving higher rent increases.”
City Council Member Mitra Jalali herself experienced being pushed out of a rental after multiple rent increases. After sharing notes with her neighbors, she found others forced to find new housing, puzzled by the continued rent increases. “[A rent cap] would have helped us stay there,” said Jalali.
“In all of the consensus about housing policy across communities grappling with what we are grappling with is — you need a combination of an abundance of new homes at a whole range of income levels, and then protections for people at the very bottom of the market,” said Jalali.
What do landlords in St. Paul say about the ballot question?
Both a state housing association and the St. Paul Area Association of Realtors have voiced opposition to the idea of a cap on rent increases. “The position of SPAAR, and I share this personally — I own rentals and I’m an agent and I work with a lot of other investors — nobody doesn’t want housing affordability,” said Mark Mason, president SPAAR. “We just don’t think capping rent is the best way to achieve that.”
Mason said rent control has failed around the country, even when championed by well-meaning activists and government officials who thought they could find the right regulatory formula to keep rents from skyrocketing. He pointed to escalating rents in places with rent control, like San Francisco and New York, and said the same would happen in St. Paul.
Imposing rent control would hamstring landlords facing surprise repair costs or jumps in property taxes, Mason said, resulting in those landlords leaving their units in disrepair or converting the units from rental to private ownership.
“You might get people who do [apartment to] condo conversions,” said Mason. “‘Hey, I’m done owning this 40 unit apartment, I’m gonna do condo conversion,’ which is extremely counterintuitive to what you are trying to achieve with rent stabilization. You get a lot of people who own one, two, or three properties who are like, ‘I can’t increase my rent, I can’t improve my property, I can’t maintain it properly. I’m just gonna sell it.’”
Cecil Smith, president and CEO of the Minnesota Multi Housing Association, said making life harder for landlords will also shrink future development of rental housing in the city. Choking off supply, he said, would make St. Paul’s rental market more competitive and jack up rents.
Smith suggests St. Paul avoids such pitfalls and concentrates housing affordability efforts on investing in the production of more housing and the preservation of “healthy, dignified, livable housing stock” in city communities.
What happens now?
St. Paul’s city attorney’s office is currently working to prepare ballot language. The city charter mandates that, in order to be placed on the ballot in November, the question language must be approved by the City Council and sent to Ramsey County by Aug. 20.
In the meantime, HENS, as well as City Council members who are in support of the rent cap, are campaigning to persuade St. Paul voters to approve the measure this November.
As Election Day nears, expect both the campaign in favor of the rent cap — and those who oppose it — to ratchet up. Though the Minnesota Multi Housing Association has yet to begin a mailer campaign yet, Smith said St. Paul residents should “stay tuned.”
Beware of the unintended consequences of this. I have a phenomenal retired woman who has been renting an apartment from me for many years. I haven’t raised her rent in over 5 years, nor do intend to in the future. Currently the rent I am charging her is at least $600 / month under the market price.
If this goes thru, and I am limited to a 3% annual rent increase, I will have two choices: 1. Leave the rent at its current level and get stuck with dramatically lower potential rents forever into the future, or 2. Increase her rent by $600+ / month before the effective date of this new law. Guess what I am going to reluctantly do?
You and thousands of other landlords. And if they can’t jack up the rent on the front end, they will convert to condos, which is what has happened elsewhere. The net result is less affordable housing, not more.
The crazy thing is that all the people supporting this opposed a big housing development in Frogtown (Alatus), which the mayor got approved because he understands the shortage of housing is the real problem.
Jalali is the most incompetent council member I have seen in all the years I have been in St. Paul. She was behind the ridiculous tenant protection ordinance that got struck down by the courts (which she still wanted to push!) and the proposed version of rent control here is so overly broad, I would not be surprised if it gets struck down as well.
So all the OTHER kindly old folks with landlords NOT as magnanimous as you (humble brag duly noted), should get the shaft because you’re such a good guy?
Regardless of Schumann’s situation, its imposing rent control that is going to give those kindly old folks the shaft. Rent control reduces the availability of affordable housing. With all the evictions that are coming, this economically ignorant nonsense is going to have a devastating effect on low income people.
Well no, they’ll be shafted in any case since your remedy wouldn’t have any effect until they’ve long since left the mortal coil.
No, the won’t be shafted if the rent control ordinance is defeated. That won’t fix the problem, but it will prevent further harm.
I cannot find the text of the petition.
I have the impression that rent increase limits apply only to the current renter. When the renter leaves, the owner can increase the rent to any amount for the next tenant. The new rent increases then must follow the rent limitation until that renter leaves.
Unscrupulous landlords will withhold needed repairs to make living conditions unbearable. The tenant leaves and the rent goes up. However, the cost of long- needed repairs has increased so that the landlord finds it too costly to correct the conditions that caused the original tenant to leave.
That is usually how rent control works, but in St. Paul they want to keep it in place even if there are different renters. That is the part the courts will likely throw out. Again, counselmember Jalali and the people behind this are incompetent.
Mike, you just said you don’t intend to increase your long-term tenant’s rent. But your last sentence seems to contradict your first statement. It’s a values decision whether to keep a steady tenant or force her out through rent increase.
That’s completely wrong. What this does is remove his values from the equation. Its takes away the discretion on increasing rents because the increases are limited whether they are needed or not.
The only values at work here are the cruelty and extreme ignorance of the rent control proponents. Ignoring overwhelming evidence that rent control hurts the poor and reduces the availability of affordable housing is Trump-esque behavior.
Mike, here is a thought. You could raise the rent for your beloved tenant. Then, you can rebate the amount of the increase to her. Maybe just write her a check, or give her the cash. If an attorney or accountant doesn’t like this, you can pay her for doing some service for you. If and she agree that her sweeping off the front steps for a few hundred bucks a month is a fair deal, go for it.
It would be unfortunate for you to have to do this, and I hope you don’t need to. But if you need to, just get a little creative.
Actually, it would be illegal for him to do those things with a rent control scheme in place.
The details of the Minneapolis draft proposal would anchor your “starting rent” to the year before the rent control goes into effect. There may be some detailed language in St. Paul that does the same… However what probably happens in a situation like yours is you must increase rent 3% every year – no more holding it flat for multiple years and recalibrating when it’s up for a new tenant…
Mr. Schumann… you’re statement here is simply incoherent. You claim that rent control will force you to raise a rent you haven’t raised in years? So you haven’t been raising ANY for ANY of your tenets for years… or just this one tenet? And if you can afford to operate without raising this tenet’s rent… why does a limit of 3% kill you regarding all of the others?
What missing here… and what’s always missing here with these claims is what is your revenue on your properties, and what are you’re costs? Good on you for giving this woman a break, but that doesn’t mean you’re not making money on the other rents.
Last I heard the rate of inflation this year is expected to be five percent. With the government poised to spend huge amounts of money they don’t have, inflation is likely to exceed that in the future. How can they justify a measly three percent?
This is what happens when you elect political activists instead of people with real world experience. Anybody who’s been on this planet more than a couple of decades has seen this movie before. It doesn’t end well.
And putting it the ballot helps makes the case that democracy is nothing more than two wolves and a sheep deciding what to have for lunch.
Yep, bring on that good old fashioned autocracy, there Tester. You sure you were on the right submarines? Your ideology seems to favor the other guys.
The reason we don’t have a direct democracy is because some government policies should be left to the elected officials to decide and then let the chips fall where they may come election day. I assume you’d think it was bad idea if we had a vote to see if your wealth should be distributed to your more-deserving neighbors. I’m betting there are more renters and former renters in this town then there are landlords and people sympathetic to landlords or who are otherwise ignorant of the history of rent control or the constitution in general.
Good article, Mr. Gustavo. But your readers really need to know the answers to seemingly obvious questions. Such as: If the median increase in rents over many years has been 3 percent, how is that a big problem, since that’s pretty close to the Fed’s inflation target for each year? What is to prevent the 3 percent from becoming the new automatic increase for renters? Let us know what the proponents of this measure say about that. And how could Saint Paul or Minneapolis avoid the results experienced in other metros that have used rent control? Have property tax increases on such buildings been larger than the annual 3 percent. If so, why? What will the cities do next, if supply shrinks as the landlords predict?
Thanks.
It will become automatic, because landlords won’t have discretion in years they need to increase rent. The St. Paul proposal actually compounds the problems with rent control in other places.
Why do activists think this will work here when it hasn’t in other progressive cities?
Inflation in building materials is more than 3%. City councils like to increase taxes on rental property owners over individual homeowners.
I can’t see this going well.
I think there’s a good case to be made for preventing major rent increases that shock renters out of their homes, often with little notice. But 3% is nearly the same as annual inflation, which effectively means NO rent increase for the property in adjusted dollars, no matter what other circumstances might change. As others have noted, that will have loads of unintended consequences, long-term. Unless the city plans to subsidize rents, I don’t see how they can legislate their way out of basic supply/demand.
What is the scope of the problem in St. Paul for renters? How many renters have been displaced due to large rent increases? I haven’t been able to find any St. Paul specific data, just anecdotes. Is there a better way to help people displaced by large increases than by creating a blanket ordinance for every renter regardless of income?
How will property taxes for those of us owning homes in St. Paul be affected by the ordinance? If rental property values and taxes on rental property are held down because of the cap, increases are going to have to go somewhere.
The part of the ordinance that appears to require that the city create a new department is concerning. Does the city have that ability? How much will it cost? How many staffers? Will it be manipulated by corporate landlords with the resources to appeal decisions or find loopholes?
On the HENS website you can find the proposed ordinance. This is the section that I’m referring to in my previous paragraph.
Sec 193A.05 Reasonable Return on Investment.
(a) The city shall establish a process by which landlords can request exceptions to the limitation on
rent increases based on the right to a reasonable return on investment. Rationale for deviations from
the limitation on rent increases must take into account the following factors:
(1) Increases or decreases in property taxes
(2) Unavoidable increases or any decreases in maintenance and operating expenses
(3) The cost of planned or completed capital improvements to the rental unit (as
distinguished from ordinary repair, replacement and maintenance) where such capital
improvements are necessary to bring the property into compliance or maintain compliance
with applicable local code requirements affecting health and safety, and where such capital
improvement costs are properly amortized over the life of the improvement
(4) Increases or decreases in the number of tenants occupying the rental unit, living space,
furniture, furnishings; equipment, or other housing services provided, or occupancy rules
(5) Substantial deterioration of the rental unit other than as a result of normal wear and tear
(6) Failure on the part of the Landlord to provide adequate housing services, or to comply
substantially with applicable state rental housing laws, local housing, health and safety
codes, or the rental agreement
(7) The pattern of recent rent increases or decreases
(b) It is the intent of this chapter that exception to limitation on rent increases be made only when
the Landlord demonstrates that such adjustments are necessary to provide the landlord with a fair
return on investment.
(c) The city will not grant an exception to the limitation on rent increases for any unit where the
landlord has failed to bring the rental unit into compliance with the implied warranty of habitability.
If guys like me think this is nuts, it doesn’t stand a chance. I hope.
The problem is that it sounds great on its face, and there are plenty of people on the left who are as ignorant as the Trumpers and believe in simple slogans as opposed to actually understanding issues. We have people on the city counsel who have no idea how governance actually works.
Well no, I would say the problem is that there is no solution absent government intervention that will work on a timescale that would assist residents currently in this predicament. Politics being what they are, its far more beneficial, for the political career of someone that desires to continue having one, to advocate policy that offers benefit (regardless if one’s view about the overall merit of the plan) in a timeframe of months or even years vs. decades or generations. If the folks who think this a bad idea don’t have anything to offer, short term, beyond “this is bad economics” to people in the process of losing their homes, now, they’ll keep losing this fight politically. You’re gonna have to come up with something, or all those “incompetents” will keep cleaning your clocks come election time because no one likes to be told what ISN’T possible and how their suffering is “necessary”.
Well, we really are saying the same thing here.
People prefer simple, immediate solutions to complex problems, even if those solutions are counterproductive and harmful to the people they are supposed to help. That is the essence of Trumpism, and something the purported left is is not immune to.
Sorry that actual solutions to problems are complex not easy. Sorry that actual solutions take time and aren’t immediate.
That the problems are complex isn’t the issue. That those who’ve decided quick changes are ALWAYS bad are. You CAN craft complex solutions to complex problems that work on a shorter time frame, something like a formula for assistance from the city that assists tenants about to lose their homes to rent increase, but there must be concurrent will for those ideas to succeed. In this case, I foresee ANY solution save for letting folks continue to be displaced, while continuing to mouth platitiudes and excuses about “housing supply” as being favored by the incremental crowd. It’s perfect, they get to illustrate how much smarter and pragmatic they are, pretend to be empathetic about the realities they “just can’t change”, and the desired outcome, no change at all during a time which might cause them personal consternation, is maintained.
I never said that quick changes are bad. Quick changes are great if they actually work. But as a general rule, quick changes are often simple and wrong solutions to complex problems.
And that is the case here. Rent control will accelerate displacement. Rent control will reduce the supply of affordable housing. The people it purports to help are the ones who will be hurt the most. The people pushing this are economically illiterate. They have no idea how housing works. Rent control is not just ineffective. It is harmful.
The housing supply argument isn’t about putting off solutions. Its about understanding housing. Its about doing what actually works. Its why Minneapolis adopted the 2040 plan. Its why Mayor Carter vetoed the cancelation of a housing project that the incompetents behind rent control here wanted to cancel. I have written to counsel and board members in St. Paul to get more housing built. I testified in support of the Ford Plant development. These solutions aren’t so remote if you can get past the opposition.
Absent some criteria for granting exemptions, the ordinance likely will be found unconstitutional almost immediately. That is, it will be found “void for vagueness” and for being arbitrary. City officials must have some guidance in order to implement the exemption process. They are not allowed to wing it.
“The ordinance comes with a provision that allows landlords to file a request to be exempt from the cap. There is no current list of specific exceptions, just a mechanism for the city to field requests and determine if a landlord should be able to increase rent by more than 3 percent.”
That said, I will be voting “NO” on broader grounds, including the fact that 3% is itself an arbitrary number that does not take into account the many different factors involved in establishing rents.
Agreed. The problems go beyond that.
The idea that rent cannot be raised on existing tenants has passed constitutional muster in other places. But the idea that you can’t raise the rent when tenants leave, that the controlled rent is tied to the building and not the tenants – the court is going to have a problem with that too.
Some people around here would like us to assume that the only problem we need to recognize is whether or not the people they represent, i.e. developers, landlords, etc. are making the money they want to make. All the rest will work itself out as a function of the “market”. Decades of affordable housing crises tell us this is a defunct approach.
It’s true that previous rent control regimes have been problematic with mixed results, but the “market” has been even MORE problematic and responsible for deepening and creating the crises. The idea that unfettered markets always produce the “best” results is a neoliberal fantasy that always ignores the question: “best results for whom?” While landlords, investors, flippers, and developers have clearly fared quite well in the absence of rent control… people looking for affordable housing… not so much.
By the way, do I really have to point out the fact that the affordable housing crises is nationwide? Those apposed to it would have us believe that rent control has actually created the crises… but we note that rents are out of control everywhere, not just in the 3 or 4 cities that have rent control. We have no rent control in MPLS or St. Paul for instance so how did this crises emerge here?
There is ample reason to believe that a contemporary rent control program that doesn’t simply replicate previous programs implemented in the 1970’s can work better and deliver better results without driving business under. One the great things about human beings is that we’ve developed civilizations by learning from past mistakes.
In factual terms, the supply side perspective (i.e. supply/demand) that has dominated anti-rent control mentalities for decades has never relied on a lot of empirical evidence. One recent study was seriously flawed. I don’t do this very often but the neoliberal domination of the narrative in this regard is so pervasive that it can actually be quite difficult to find good data-driven analysis. So here are three articles you can review for yourself:
https://shelterforce.org/2018/03/28/rent-control-works/
https://www.researchgate.net/publication/4981869_Time_For_Revisionism_on_Rent_Control
https://experimental-geography.blogspot.com/2016/05/employment-construction-and-cost-of-san.html
Now Mr. Terry will predictably take issue with my characterization of supply and demand theory. In a nutshell Mr. Terry maintains that S&D is the foundation of economics while I maintain that S&D is a simply one of many mechanisms that can play a role that influences prices. My position is that Mr. Terry is simply mistaken. The core feature of economies and economics is commerce. The core feature of capitalist economies is the competition for profit within the system of commerce. All economic activity and observations flow out of the competition for profit, not supply and demand. Putting supply and demand in the center of an economic model is rather like claiming a turn signal is the central feature of any automobile. My position is that S&D plays a small role if any influencing housing and rental prices because this market is too complex to be governed by such a simple calculation. And I will note that whenever you ask someone like Mr. Terry to tell us how much we need to build, and by how much that new construction will reduce prices… you don’t get a real answer, you’re just encouraged to double down on the faith and keep building until the magic happens. Or alternatively we’re told that S&D hasn’t worked because we haven’t given it a chance, as if there’s no such thing as an actual real estate market. A lot of developers, realtors, and landlords would surprised that they’re not participating in a “real” market.
In a capitalist economy or any economy for that matter, people try to grow and maintain their wealth. It’s important to remember that those opposing rent control here are not and have not for decades really concerned themselves with the problem of affordable housing… to them homeless people housing prices are just a by-product of their competition for profit. What you see here is a group and their representatives competing to protect their own best interests; while that’s not necessarily “wrong”, their pretense of looking out for everyone’s best interest is disingenuous. They will declare the nature of reality with an air of superiority, but we must remember those declarations serve a specific narrative and constituency.
I’m glad that you acknowledge that rent control has a problematic history with “mixed” results. And I have never said that the free market should remain untouched. My point is that it is ultimately the free market that determines price, and that certain interference with the free market (like rent control) is counterproductive. I think municipalities should be subsidizing low-income housing and providing incentives to include low income housing in their projects. The government involvement should be to make new housing more inclusive, not to restrict new housing
“A lot of developers, realtors, and landlords would surprised that they’re not participating in a “real” market.”
Actually, they would not be surprised at all. Ask a developer what kind of hoops – paperwork, appeals, hearings, etc. – they have to go through to get something built. Its absurd
The problem is that this crises has reached such proportions that a combination of approaches is necessary. We all know that subsidies in the current political environment are difficult to deliver, and developers complain about profit margins even in those scenarios. Subsidies AND controls are probably needed, and controls may be easier and faster to deliver in the short run. The proposition that rent control restricts new housing is spurious.
I’m sure developers complain, people always have something to complain about, but they’re complaining about market conditions, not the absence of a market. Nobody ever said making money would be easy, and almost everyone wishes it was easier.
The crisis is extreme. But rent control exacerbates the problem. It makes things worse.