Minneapolis renters attended a Minneapolis City Council meeting last spring to support adoption of a rent stabilization policy. (Jerry Holt, Star Tribune/The Minnesota Star Tribune)

A year and a half after Minneapolis voters asked city leaders to begin work on rent control, a staff impact analysis is recommending against implementing the 3% annual rent cap that a working group of landlords and tenants recommended.

The 67-page report released Friday maintains that rent stabilization would not effectively address the cost burden for renters spending more than 30% of their income on housing, a problem that has worsened as rent increases have outpaced incomes and demand for affordable housing surpassed supply.

The report concludes that the cost to the city from imposing the 3% rent cap — including declines in building and property taxes, and significant enforcement costs — could outweigh the benefits, "which would impact a small percentage of renters."

City Council Member Jamal Osman, an advocate for rent control, said he disagrees with the staff analysis and questioned whether research supporting rent control was sufficiently considered. He said most of his constituents have been asking for rent control, with the exception of some mom-and-pop landlords.

"What is disappointing is that [Mayor Jacob Frey], before any of these studies have been done ... came out and said he does not support rent stabilization," Osman said. "So what does that say to the staff that have been looking into it?

"They actually came out and made it sound like the worst thing we can do."

Frey, who declared his opposition to rent control prior to the 2021 ballot measure giving city leaders the authority to regulate rents, declined an interview request Friday. In a statement, he said: "This report and countless others makes clear that rent control is counterproductive to our shared housing goals."

The resolution that established the work group also called for a full economic analysis of the effects of rent control. When the city failed to find an external party willing to do it, staffers with the city's Community Planning and Economic Development, Regulatory Services, Finance and Assessing departments and the City's Attorney's office worked together on the report. They consulted with external sources, including officials with St. Paul and the Federal Reserve Bank of Minneapolis.

City Council members will have a chance to discuss the report Tuesday at the Business, Inspections, Housing and Zoning Committee meeting. If the council decides to pursue a rent stabilization ordinance this year, it would need to be done in time to go on the ballot for voter approval in November. Most Minneapolis residents are renters.

Among the findings in the report:

A rent stabilization policy would run counter to many city policies designed to promote the development of new housing.
Rent control may benefit some existing renters, but others may face greater housing instability because it could motivate landlords to raise rents by the maximum amount allowed each year.
Rent control could disincentivize landlords from making improvements to their properties, causing living conditions to deteriorate.

"Now is a particularly risky time to adopt a policy that staff anticipate would impede the development of new rental housing units," according to the report. "The city and surrounding market are still recovering from the economic impacts of the COVID-19 pandemic, and there are existing reasons to be concerned about the pace of needed development."

Council Member LaTrisha Vetaw said the report accurately reflects the concerns her constituents have expressed about landlord accountability.

"[When] people come to me in my ward about housing stuff it's usually the living conditions, like my landlord isn't fixing this fast enough, or I have a hard time with the management company," she said. "It hasn't really been about, 'I can't afford my rent, my rent keeps going up.' "

Vetaw wondered what side effects rent control might have on homeownership opportunities, and said she was concerned about how homeowners of color would fare if a large part of the property tax levy was shifted from rental properties to individual households.

The report recommends waiting for the outcome of a lawsuit challenging the constitutionality of St. Paul's rent control policy. In the meantime, the report says, Minneapolis should continue investing in "known effective strategies" to assist low-income renters — including guaranteed basic income, a current pilot project, and Stable Homes Stable Schools, which provides funding and services for families at risk for homelessness.

Other affordable housing development measures are also cited, like the Inclusionary Zoning policy and Affordable Housing Trust Fund.

According to the University of Minnesota Center for Urban and Regional Affairs, the cost of rent vastly outpaces income for Minneapolis' lowest wage earners, who are disproportionately Black, Indigenous and other people of color.

Council Member Jason Chavez said he would look into the literature that informed the staff analysis in preparation for Tuesday's meeting.

"The Minneapolis City Council unanimously approved a work group that recommended a strong rent stabilization policy," he said. "I was shocked to hear that staff recommends no policy. Ultimately, this council gets to decide if we will honor the majority of residents who voted in favor of authorizing the City Council to regulate rents or not."