What you need to know about St. Paul’s new rent control policy

In November, St. Paul voters passed the Midwest’s first rent control policy. The 3% cap on annual rent increases they approved goes into effect on Sunday.

As city leaders continue to explore substantive changes to the ordinance crafted by advocates, the St. Paul Department of Safety and Inspections released a set of rules Friday outlining definitions and processes for owners.

How did we come here? What remains to be worked out? Here’s what you need to know about St. Paul’s rent control program.

What does the policy say?

St. Paul’s is considered one of the strictest policies of its kind. It prevents landlords from increasing residential rents by more than 3% per year. The cap applies even if a tenant moves out and is not linked to inflation. And unlike most other cities with rent control programs, the ordinance does not include an exemption for new construction. Owners can request exceptions based on a limited set of criteria.

What is the status of rent control in St. Paul?

The ordinance goes into effect on Sunday, but the law could still undergo significant changes. In February, Mayor Melvin Carter convened a stakeholder group of landlords, tenants, landlords and policy experts to identify “considerations on improving and improving rent stabilization.” The group will make recommendations to city officials at the end of June. Meetings are streamed live and posted at stpaul.gov/departments/mayors-office/rent-stabilization-stakeholder-group.

City Council approved a budget of $635,000 to hire five full-time staff to oversee the rent control program until the end of the year.

What changes are proposed?

Carter wants to exempt new housing from rent caps for 15 years after construction. Other changes being considered include: adjustments to the 3% cap and the ability for landlords to increase rents by more than 3% after a tenant leaves.

Activists who crafted and campaigned for the policy argue that these changes would defy the will of voters. City Council will need to approve any changes.

Why was this law passed by the voters instead of the city council?

A 1984 state law prohibits local governments from issuing rent regulations unless approved by voters in a general election. Rent control advocates in St. Paul have devised a policy for the city to implement.

Minneapolis voted to allow its city council to enact its own rent control ordinance or submit a policy to voters. The city recently convened an advisory group to offer recommendations by the end of the year, but no specific policies have been offered.

How did St. Paul’s ordinance affect the housing market?

The short answer: it’s too early to tell.

Several developers halted housing projects after the order was passed, saying lenders withdrew funding from a market now seen as risky; Proponents of rent control have called this behavior alarmist. Some landlords have preemptively raised rents or sold their properties, fearing they won’t be able to meet the expenses.

An early study says the policy has reduced gains on home values, although local experts say it’s too early to draw firm conclusions. On the other hand, tenant advocates said they have pushed back on steep rent increases.

I’ve heard of rent control in places like New York. Why now in the Twin Cities?

The first rent control laws in the United States came during World War I to prevent profiteering. Since then, various iterations have risen and fallen in popularity, often in response to economic and social trends.

The latest interest has gained momentum as the country has seen a rapid rise in rents amid a housing shortage that followed the Great Recession. The COVID-19 pandemic has caused another recession in 2020, and rents have skyrocketed again in many US cities.

Minnesota hasn’t seen the extreme rent increases of other cities. The average rent in St. Paul at the end of last year was $1,267, unchanged from a year earlier, according to Marquette Advisors, which tracks market-rate rents. That was nearly $100 less than Metro, which saw its rents go up 2.5%.

But a 2021 study of Minneapolis by the Center for Urban and Regional Affairs (CURA) at the University of Minnesota showed that low-income renters and people of color faced significantly higher rent increases, which have far outpaced their wage growth in recent years — trends that have helped spark local rent increases. efforts.

What are the arguments in favor of rent control?

Proponents say the policy will prevent those facing steep rent hikes from having to move away from the neighborhoods they call home, allowing families to maintain community ties, stay in the same schools and to manage travel.

Advocates also point to the CURA study, noting that researchers estimate that the median rent in Minneapolis has not increased more than 3% per year for the past 10 years.

Proponents also hope the policy will deter large investors from acquiring single-family homes, a trend that a 2021 Urban Institute report has fueled the Twin Cities’ racial ownership gap, the largest in the nation. .

What are the arguments against rent control?

One of the main criticisms is that the law discourages development in towns that desperately need more housing. Some said the law would also cause some landlords to pull them out of the rental market, worsening existing supply shortages.

Others say that landlords will have less incentive to carry out maintenance work or make improvements, which will lead to a deterioration of the housing stock.

Additionally, some landlords have said they will now automatically increase rents by 3% per year — more than they otherwise might have — to prepare for potential changes in inflation or events. future.

I’m a tenant in St. Paul. What should I do if I think my landlord is illegally raising my rent?

Tenants can file complaints against landlords they believe are violating the ordinance using an online form on the city’s website. City staff will investigate these complaints and render a decision, which tenants or landlords can appeal to a hearing officer. This officer would make a recommendation to the city council, which would vote on a final decision. Owners could face criminal citations or administrative fines if the complaints are substantiated.

Tenants can also bring a private action against their landlord in court, where a judge can issue a restitution order.

I’m a landlord in St. Paul. How can I request a waiver from the 3% cap?

Be prepared to prove why you need it. Owners are entitled to “a reasonable rate of return on their investment,” which the city will generally define as the property’s 2019 net operating income adjusted for subsequent changes in the Consumer Price Index (CPI). ) – although owners can argue that extraordinary factors have affected their property.

The city’s recently released rules set out factors officials consider when considering requests for exceptions, such as increased taxes or operating expenses, or improvement projects.

Owners requesting increases between 3% and 8% can “self-certify” their requests by completing a worksheet and an online form. These forms will be available on the City’s website and may be subject to verification.

Requests for rent increases greater than 8% — using the same forms — will be reviewed by city staff, though landlords can appeal decisions.

No landlord can increase a tenant’s rent by more than 15% in one year, although justified increases beyond this limit can be carried over to subsequent years.

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