Minneapolis panel backs 3% rent control, issue headed to City Council

More than a year after Minneapolis voters approved a path toward rent control, a working group of landlords and tenants on Tuesday voted to cap rent increases at 3% annually with few exceptions.

The development prompted renter advocates to declare victory, but the arguments over rent control are far from over.

A sizable minority of the panel backed a softer plan, and that plan is poised to head to the City Council alongside the 3% plan, underscoring stark disagreements over how to keep big cities affordable in a period of rising costs and concerns over homelessness.

The 3% plan is backed by renters and housing advocates on the panel, while the bulk of landlords and developers supported the less restrictive plan, which would cap rent hikes at between 5 and 7% annually, plus a cushion for inflation.

Ultimately, the question will go to Minneapolis voters, perhaps as soon as the November 2023 election.

The current process is a result of a 2021 ballot question approved by voters. That gave the City Council authority to come up with a specific rent control policy to put to voters.

A more prescriptive plan the City Council had approved to go to voters was vetoed by Mayor Jacob Frey, who generally opposes rent control — yet another wrinkle in the issue's uncertain future.

After 10 weeks of deliberations, the Housing/Rent Stabilization Work Group on Tuesday voted on two plans that had essentially split the 25-member group.

The 3% plan, which makes exceptions only for properties with fresh improvements, won a majority, with 14 members supporting it.

The other plan, which would allow landlords a number of flexibilities, received 11 votes.

According to facilitators who ran the working group's meetings, as well as city staffers involved in the process, both plans will be part of a final report that will go to the City Council early next year.

However, a side skirmish appears to be brewing over that idea. Supporters of the 3% plan maintain that theirs should be the only one formally recommended.

The 3% plan is similar to one approved by voters in St. Paul in 2021, then one of the strictest city rent control policies in the nation.

Faced with a sudden drop in rental housing construction amid backlash from developers and landlords, St. Paul leaders have since loosened the policy.

Supporters of the 3% plan for Minneapolis tout its simplicity and argue it's the strongest way to protect tenants most vulnerable to being priced out of housing altogether. It would create a special body, perhaps including new elected positions, to play a part in enforcing the rent cap.

Yolanda Roth, who works for Take Action Minnesota and served on the group as a property owner, said the result of Tuesday's vote showed the plan can draw support beyond renters. She described herself as a "small landlord."

"This rejects the idea that you cannot save for retirement, take care of your tenants and offer a home that is livable and affordable," Roth said after Tuesday's vote at a news conference that carried the vibe of a victory rally. "It's been stressful. It's been intense. But we ... won!" she shouted, interjecting an expletive.

The second plan was backed by a contingent of the working group that included several members opposed to the concept of rent control. It didn't include any of the panel's six renters.

In discussing their plan Tuesday, several members said they hoped to come up with a framework that would least harm property values and remain "palatable" to the City Council. In addition to including several exemptions, such as for new construction and affordable housing, their plan relies on self-certification for enforcement and supports calls for more direct subsidies for low-income renters.

After the vote, the Minnesota Multi Housing Association, a group representing landlords, criticized the 3% plan.

"A majority of the work group appears to have disregarded that policy's abject failure and significant damage to the St. Paul housing market," read a statement from the group, which had a representative on the working group.

Once the working group's final report is sent to the City Council next month, the council is expected to study the issue and how it fits within the city's long-term vision to increase housing.

Members of both factions of the working group Tuesday said they plan to pressure the council to side with them.

Council members will look to finalize a plan by August, the deadline for language to be submitted for the November ballot. They'll also have an eye on Frey. If they can't find a plan he supports, they'll have to muster a veto-proof supermajority for a plan to reach the voters.

Frey, who had not yet reviewed the work group's plans, issued this statement Tuesday: "Our goals as adopted are to increase housing and provide greater affordability. Time and time again, constraining housing supply has been shown to increase rent and limit mobility. That's not an impact we want in Minneapolis. We need more housing options, not less."