Minnesota state law already makes it difficult for cities to enact rent control ordinances. Councils and mayors can’t pass such rent restrictions on their own; instead, they must await a vote of residents, either by charter amendment or referendum.
Minneapolis and St. Paul did just that in November: Minneapolis by authorizing the council to craft an ordinance and St. Paul by approving a citizen-drafted one.
But on Tuesday, a state Senate committee approved a bill that would not only remove the voter-approved pathway for rent control, but make the change retroactive to Nov. 1 of last year. That would cancel the rent-control approved by voters in both cities. While the bill, Senate File 3414, is unlikely to pass the DFL-controlled House, it speaks to the concern among Senate Republicans that the ordinances could impact housing construction.
After passing through the Senate Housing Committee, the bill was advanced by the Senate Local Government Committee Tuesday. Its next stop would be the Senate floor.
“We all know rent costs too much. We all know buying a house costs too much. That is partially because of supply and demand,” said Sen. Rich Draheim, the Madison Lake Republican and chair of the housing committee who sponsored the bill.
But rent control ordinances, especially St. Paul’s, which doesn’t exempt new construction, will make supply problems worse, he said.
Draheim mentioned anecdotal reports of property owners imposing large rent hikes ahead of the implementation of the ordinance, so that future 3 percent hikes — the number codified in the ordinance — will be off of that higher base. Draheim also cited Census Bureau statistics that show requests for housing permits has fallen 80 percent in St. Paul since the passage of the referendum. In Minneapolis, which hasn’t drafted an ordinance yet and where new buildings could be exempt from caps, permits are up 68 percent.
This comes at a time when there is an estimated 50,000 housing unit shortage in the state, and Draheim cited St. Paul Mayor Melvin Carter’s testimony to the housing committee that the city is short 11,000 units from what it needs. Carter has proposed amending the St. Paul ordinance to exempt new construction and buildings and renovations less than 15 years old.
The Senate bill was endorsed by the Minnesota Realtors and Minnesota Multi Housing Association, which represents apartment owners and managers.
Paul Eger, the senior vice president for government affairs for Minnesota Realtors, said there have been numerous announcements of developers pausing or canceling multi-family projects in St. Paul because of the ordinance and its lack of exemption for new construction. Eger said that is evidence of people in the industry “acting rationally.”
But the bill was met with criticism from a dozen residents of the two cities, most of whom were active in the signature gathering and campaigns in favor of the ordinances.
“There were over 30,000 people who voted in this last election. That is no mistake. That is no coincidence and that was not an accident,” said B. Rosas, who worked on the Keep St. Paul Home campaign. “Taking away your right to organize your community is not only irresponsible but it goes against democracy.”
“It is the industry’s job to adapt to market conditions, not to threaten cities with disinvestment in order to pressure elected officials to go against the will of the voters,” said Tram Hoang, director of policy and research at the Housing Justice Center.
Minneapolis city council member Robin Wonsley Worlobah told the committee that renters in the city are “cost-burdened as a result of our profit-driven housing market.”
“What the voters did not ask for is elected leaders like yourselves to preempt them, nor did they ask you to undermine them,” she said.
North Minneapolis resident Tahiti Robinson told the committee that she worked on the rent control measure in response to difficulties her son had finding affordable housing.
“I was feeling optimistic when I saw that my vote to change the charter to allow rent-stabilization was successful,” Robinson said. “But now I am very concerned that my vote will be nullified.”
DFLers on the local government committee agreed with those testifiers, as well as the state’s city government organizations, that it is bad policy to retroactively cancel votes of residents.
“The problem I have with this bill is it is thwarting the will of the people when so many young people are increasingly cynical toward the democratic process,” said Sen. Steve Cwodzinski, DFL-Eden Prairie, who is a retired government and history teacher.
Even some of the Republicans expressed concerns about the part of the bill that makes it retroactive. Sen. Torrey Westrom, R-Elbow Lake, asked Draheim if he would consider removing that section. Sen. Scott Newman, R-Hutchinson, said he would vote to move the bill out of committee but wasn’t certain how he would vote if it reaches the Senate floor.
Local Government Committee Chair John Jasinski, R-Faribault, said the state needs to act if local government actions affect more than those who live inside their borders.
“If it has an impact on the overall health of our state, then maybe we should step in,” he said.