St. Paul City Council proposes exempting new construction, affordable units from rent control ordinance

The St. Paul City Council is considering exempting new construction and affordable units from the rent control measure that voters approved last fall.

A sweeping set of proposed amendments to the city's 3% rent cap also would allow landlords to bank and defer rent increases until a tenant moves out and prevent them from using utility charges to skirt the law.

"I think this is a consensus amendment that improves the policy for both renters and landlords," said Council Member Chris Tolbert, who will introduce the suggested changes at Wednesday's council meeting. "It adds additional protection for renters, but it also ensures that we can produce and reinvest in more desperately needed housing."

Even before St. Paul voters passed the Midwest's first rent control policy in November, some city officials were vocal about wanting to change the ballot measure as crafted by a grassroots coalition of tenant advocates. Early this year, Mayor Melvin Carter convened a group of nearly 40 tenants, landlords, developers and housing experts to recommend ways to improve it.

"I appreciate the council moving quickly on policy proposals that would strengthen the rent stabilization ordinance," Carter said in a statement Thursday. "I'm supportive of the proposal and look forward to the council process playing out as we work to deliver the best possible outcomes for our residents."

But those who campaigned for the policy have expressed frustration and disappointment about the prospect of changes, which they say would defy the will of the electorate. The rent control ballot measure passed with about 53% of the vote.

With few exceptions to its rent cap, St. Paul's law is considered one of the most stringent policies of its type. Advocates designed the policy with the goal of stopping large rent hikes that force tenants — especially low-income renters and people of color — to move out of their homes and neighborhoods.

Opponents argued that St. Paul's law will exacerbate a housing shortage by discouraging development and upkeep. After Election Day, multiple developers placed projects on hold or threatened to take their work elsewhere.

Citing a drop in residential building permits in the last year, the council is now proposing giving new housing developments a 20-year grace period before they have to comply with the cap. The amendment language notes that the city often builds new affordable housing units using tax-increment financing produced by market-rate developments.

Affordable housing units that have government agreements to limit rents for low-income tenants also would be exempted.

Other proposed ordinance changes would require that tenants be notified if their landlord is seeking a rent increase above 3% and would create what Tolbert described as a "narrowly-tailored just cause" provision to prevent property owners from evicting tenants to implement rent increases they defer.

"This is a starting point," Tolbert said, adding that the amendments were drafted after discussions with his peers and Carter. "I expect us to get feedback. I expect and anticipate people will bring amendments to iron out the policy."

St. Paul's Department of Safety and Inspections earlier this year devised enforcement mechanisms for the period before city leaders worked out the details, and many of those rules will remain in place, including the self-certification process for property owners seeking a rent increase between 3% and 8% — a process that some housing advocates have warned will place the burden of enforcement on tenants.

Landlords will continue to have to prove in an application why they need to increase rents by more than 3% to earn a reasonable return on their investment.

The council likely will hold a public hearing on the proposal during its Aug. 10 meeting, meaning members could vote on the amendments as soon as Aug. 17.

If passed, the changes would take effect Jan. 1. But even if that happens, lingering questions could plague the policy, including a federal lawsuit filed by property owners and uncertainties over future staffing and budgets for the program.

"One of the main things that we're trying to do is simplify and make it clearer, make it more understandable for property owners and tenants," Tolbert said.