Developers pause St. Paul projects after rent control vote

Less than 24 hours after St. Paul voters approved one of the country's most stringent rent control policies, Nicolle Goodman's phone started to ring. Developers were calling to tell the city's director of planning and economic development they were placing projects on hold, putting hundreds of new housing units at risk.

"We don't want our equity goals to be at odds with our growth goals," Goodman said in a presentation to the City Council Wednesday. "The ordinance as written may actually put those goals at odds."

Voters' decision Tuesday to cap annual rent increases at 3% sent developers into a frenzy, prompting some with stakes in Minnesota's capital city to pause projects or reconsider sites for future housing.

Unlike most cities with rent control, St. Paul will not exempt new construction, which opponents argue will force lenders and developers to look outside the city for spots where they feel more confident that they will recoup investments and earn profits.

"We, like everybody else, are re-evaluating what — if any — future business activity we'll be doing in St. Paul," said Jim Stolpestad, who has worked on developments in St. Paul for 30 years as founder of Exeter, the company behind major projects like Grand Avenue's revamped retail corridor and new luxury apartments in the Cathedral Hill neighborhood.

It's a sobering prospect as major redevelopments, including the Hillcrest Golf Club and Boys Totem Town sites, enter critical planning stages. At the Highland Bridge site, where construction is well underway, Ryan Companies was scheduled to submit three building plans to the city this week — but Tony Barranco, Ryan's north region president, said Wednesday those reviews have been postponed indefinitely in light of the referendum's outcome.

Ryan Companies warned before Election Day that the rent control ordinance could prevent them from finding investors for the 760 affordable housing units the city pledged to bring to the former Ford site.

"If our banking partners won't loan us dollars to build the buildings that are planned as market rate because they can more safely lend their dollars elsewhere, we will not be able to build the market rate projects" that help subsidize affordable housing, Barranco said.

Supporters of rent control, led by a grassroots coalition that petitioned to put the ordinance on the ballot, say developers are making empty threats.

"This happens in every city where new regulations are passed … because they want to scare the city into changing the ordinance," said Tram Hoang, campaign manager for Housing Equity Now St. Paul, which led the ballot measure push

Ramsey County Commissioner Trista MatasCastillo, who voted for rent control, said she believes St. Paul's population and need for development will ultimately win out.

"I don't think development will stall," she said. "But there will be some kinks that need to get worked out."

Since Election Day, questions about how rent control will work in St. Paul have been top of mind for developers, organizers and elected officials alike.

"We look forward to bringing stakeholders together very soon to improve upon and implement this policy, in the interest of ensuring that our growth and equity goals are never seen as opposing interests," Peter Leggett, Mayor Melvin Carter's spokesperson, said in a statement Friday.

Stefanie Sokup, vice president of marketing at Real Estate Equities — which owns five apartment and senior living complexes in St. Paul and another 18 in surrounding suburbs — said the company has been working with lawyers to try to figure out what rent control will mean for their business. The theme of the week, she said, was "confusion."

Sokup said she understands the need and concerns about affordable housing, but said the policy that passed is the "wrong solution" and may lower investment in St. Paul and the region. It could also push more development to the suburbs, she said, creating a shortage of affordable housing where it is needed most — near public transit.

"Ultimately, we feel this is going to hurt the people we are trying desperately to help," Sokup said. "They rushed to pull at people's heartstrings and strike a chord with people who saw housing as an issue. The plan wasn't thoroughly thought through."

In surrounding suburbs, leaders are watching closely to figure out what St. Paul's rent control ordinance — in addition to a successful Minneapolis ballot measure that gives the City Council power to enact rent control there — will mean for them.

Maplewood Mayor Marylee Abrams said St. Paul's policy and the ambiguity around its rollout could mean more development interest in her community and, potentially, "all Ramsey County suburbs."

The lack of details, she said, could push developers to look elsewhere.

"It is so ambiguous. It's more of a concept. It's really not clear how it will operate," Abrams said.

Roseville Mayor Dan Roe said it's unclear if they'll see increased development interest. Most of the multifamily housing that's been built in Roseville in recent years has been subsidized and affordable, usually occurring on redevelopment sites that get government assistance for environmental cleanup.

"There are so many factors that it's hard to say if we are going to benefit from these rent control measures in Minneapolis and St. Paul," Roe said.

In Woodbury, which has experienced a yearslong building boom of market-rate housing, City Planner Eric Searles downplayed the notion of competition between cities and suburbs.

"We believe vibrant and substantial downtown cores are beneficial to the entire region," Searles said. "Now, we are going to closely watch the outcomes for the next couple of years."

Staff writer Zoë Jackson contributed to this report.

Katie Galioto • 612-673-4478

Shannon Prather • 651-925-5037