St. Paul Mayor Melvin Carter wants to scale back rent control

Citing a slowdown in housing production, St. Paul Mayor Melvin Carter is proposing the city change its rent stabilization law to permanently exempt units built after 2004.

The move marks a concession to developers, who have said the city’s 3% cap on residential rent increases hampers their ability to finance projects in an already difficult economic environment.

Carter announced his proposal in his annual budget address as part of a larger portfolio of housing programs and policies he is asking the City Council to pass by the end of the year.

“This simple change would advance our values by maintaining the overwhelming majority of St. Paul rental properties as rent stabilized, while unlocking the critical release valve that only new housing construction can offer to us,” the mayor said in his speech.

St. Paul’s first-in-the-Midwest rent control policy was born of a grassroots effort driven by a desire to prevent large rent hikes from displacing tenants, particularly low-income renters and people of color. Voters passed the ordinance in 2021.

A year later, concerned as some developers paused or canceled their St. Paul projects, the City Council amended the law to exempt new construction for 20 years.

Tenant advocates at the time accused elected officials of betraying the will of the voters and caving to scare tactics. Developers said the change was not enough to assuage investors and lenders.

“Whether that contraction of resources is fair or not ... we have to acknowledge that it’s real,” Carter said in an interview.

Market conditions have also changed drastically over the last few years. Higher interest rates and construction costs have led to a slowdown in construction across the Twin Cities metro area and beyond.

St. Paul has issued permits for only 150 housing units in the first two quarters of 2024, according to data from the city’s Department of Planning and Economic Development — far below the pace needed to match last year’s 1,133.

Over the past year, rents for market-rate buildings in St. Paul have remained stable, according to research by Marquette Advisors, which tends to track larger properties, while rents for some income-restricted rentals have risen by double digits, according to HousingLink, which helps lower-income renters.

St. Paul’s rent control ordinance does not currently apply to income-restricted units. Since some affordable housing programs, like Section 8, have confidentiality requirements, city officials say it is difficult to estimate how many total units are exempt from rent stabilization.

However, staff from the city’s Department of Safety and Inspections estimate that 95% of St. Paul’s rental stock was built before 2005.

Other cities, such as New York and San Francisco, have taken similar approaches to rent control to incentivize new construction.

“The economics of building a new building are substantively different than the economics of maintaining a building that was built 40 or 50 years ago,” Carter said.

The mayor also said he plans to advocate for new tenant protections. The city’s previous measure was repealed in 2021 after a federal judge declared it unconstitutional.

In a statement after the mayor’s address, Cecil Smith, president of the Minnesota Multi Housing Association, a trade group for property managers and developers, said: “We hope the council supports what the mayor now understands.”

“The announcement today is an acknowledgment that rent control has harmed the current and future residents of St Paul,” Smith wrote. “We wish the Mayor had recognized this in 2021 and followed the data.”

Margaret Kaplan, president of the nonprofit Housing Justice Center, which advocated for the original rent stabilization law, said that St. Paul’s slowed development activity is no different than what other communities are experiencing so far this year.

“It appears that this is trying to respond to something that isn’t caused by rent stabilization,” she said. “I think there would need to be a very robust conversation before we turn around and make a change to what the voters of St. Paul decided was an important priority for them.”

Council Member Hwa Jeong Kim echoed those sentiments in an interview after Carter’s address, saying she would oppose any effort to exempt more properties from rent stabilization.

“We need to strengthen rent stabilization, not weaken it,” Kim said. “The voters in St. Paul were super clear in what they wanted out of this ordinance.”

The council’s six other members said they are open to conversations about changes to the ordinance, though some expressed wariness. Council President Mitra Jalali said she thinks the group is interested in reviewing the ordinance in its totality, which would include a look at how the law is being enforced.

“I would say I’m overall a bit skeptical of how it would work,” she said of the mayor’s proposed exemption. “But I’m committed to the conversation about rent stabilization in general — understanding all of the aspects we need to look at.”