Federal judge rules against landlords challenging St. Paul rent control

A federal judge has upheld St. Paul's rent control law, nearly a year after two apartment building owners filed a lawsuit claiming it was unconstitutional.

In a 51-page order issued Monday, U.S. District Judge Nancy Brasel attributed many of her conclusions to what she described as the "long history" of courts upholding rent control measures.

St. Paul's law is the first rent control policy in the Midwest. Voters approved the ordinance in fall 2021, and it took effect the following spring. The policy caps residential rent increases at 3% per year, though landlords can seek permission from the city to raise rents more if they can prove the need.

The lawsuit was filed against the city last June by the owners of two St. Paul apartment buildings: Woodstone Limited Partnership and the Lofts at Farmers Market LLC. Woodstone, managed by Bloomington-based StuartCo, is in St. Paul's Highland Park neighborhood; the Lofts, managed by Washington-state-based Weidner Apartment Homes, is in Lowertown.

They argued that St. Paul's rent control law violated rights granted by the United States and Minnesota constitutions, including the Fifth Amendment's taking clause and the Fourteenth Amendment's due process clause, as well as state and federal laws.

In addition to the city, the lawsuit named the St. Paul City Council, Mayor Melvin Carter and Angie Wiese, Department of Safety and Inspections director, as defendants.

In the months that followed, elected officials in St. Paul made substantial changes to the rent control ordinance, exempting thousands of new and affordable units from it. The Lofts, which was developed in 2012, is no longer subject to rent control since one of the amendments exempted new construction for 20 years.

Still, the building owners said the process to request rent increases above 3% is overly burdensome. They argued the law will not accomplish its stated goals of improving St. Paul's housing shortage and providing stable housing to cost-burdened tenants.

"These predictions may come true, but a poor policy decision is not a due‐process violation," Brasel wrote.

The property owners also said the law caused them harm in the form of lost property value and lost rent, and that it violated existing contracts that allow more substantial rent increases for short-term lease extensions.

Brasel wrote that while "no doubt, Plaintiffs raise valid concerns," their claims do not rise to the legal standards established by previous court rulings.

Citing a 1982 U.S. Supreme Court opinion, she added: "In the rent‐stabilization context, the Supreme Court has 'consistently affirmed that States have broad power to regulate housing conditions in general and the landlord‐tenant relationship in particular without paying compensation for all economic injuries that such regulation entails.' "

In a statement Tuesday, St. Paul City Attorney Lyndsey Olson said: "We are obviously pleased with the Court's ruling yesterday. We will continue our critical work to ensure safe, affordable housing options for every family in our city."

Tenant advocates also celebrated the decision.

"We're very happy at the outcome of the case," said Margaret Kaplan of the Housing Justice Center, which attempted to help renter groups join it. "[The decision] is very thorough. I think it is quite comprehensive. And it reaffirms something that has been our position all along — that it is permissible and constitutional, both under the federal and state constitution, to have a rent stabilization ordinance."

A spokesperson for the Minnesota Multi Housing Association, a landlord and developer trade group, referred questions to the plaintiff's attorneys, who declined to comment on the decision and did not say whether they planned to appeal.

Earlier this month, New York City landlord groups asked the U.S. Supreme Court to hear their rent stabilization challenge, which they filed in July 2019 after state lawmakers passed sweeping changes to tenant protection laws.

The case similarly argues that rent control is unconstitutional, and the plaintiffs are pinning their hopes on the conservative-leaning high court, which would have to choose to take up the matter. The Supreme Court agrees to hear about 100 to 150 of the 7,000 cases it is asked to review each year.

Brasel's decision could have a ripple effect closer to home. Minneapolis has been considering a rent control policy since voters indicated support for it in 2021. The city staff released a report last month recommending waiting until the outcome of the lawsuit against St. Paul.

The report also recommended that Minneapolis refrain from implementing a 3% cap on annual rent increases, despite an advisory group's previous support for such a policy.

The St. Paul law could still face challenges. After the City Council exempted affordable units from the ordinance last fall, tenant advocates suggested that the policy could violate fair housing laws.