St. Paul proposes process to request exceptions from rent control

St. Paul on Friday released a set of proposed rules and procedures outlining how and in what circumstances landlords may request an exception from the city's new rent control ordinance, which is set to take effect May 1.

Landlords, tenants and other residents have for months been calling for more details surrounding the law, which was passed by voters in November and charged the city with setting up its own processes.

The city will gather public feedback on the draft rules — crafted by its Department of Safety and Inspection staff — between April 7 and April 22, with the intent of publishing the final guidelines by April 29.

The policy says landlords have a right to a reasonable rate of return on their investment, which the 17-page proposal defines as a property's net operating income in 2019 adjusted by subsequent changes in the Consumer Price Index (CPI).

The city is assuming landlords earned a fair operating income in 2019, before the COVID-19 pandemic, though property owners and tenants have the option to seek an adjusted base by providing evidence of extraordinary circumstances impacting expenses (such as repair costs) or gross income (such as the charging of reduced rents).

Landlords seeking to increase their rent by a rate between 3% and 8% in a year will be encouraged to "self-certify" using an online form outlining their case for an adjustment. The city's website says all self-certifications are subject to audit, and the number of audits performed will depend on the volume of applications.

City staff will examine landlords' requests for rent increases greater than 8%, with an option to appeal staff decisions to a hearing officer. That officer would make a recommendation to the City Council, which would vote on a final decision.

No landlord could increase a tenant's rent more than 15% in one year. Justified increases beyond that limit must be deferred a year, with the intent of preventing displacement, the proposal says.

There is no requirement in the ordinance requiring landlords to notify tenants about their requests for rent increases above 3%. The city encourages renters who believe their landlords are not following the law may take private action in court, though there will also be a process for tenants to file complaints that staff will investigate.

The entire list of proposed rules can be found on the city's website.

Starting April 7, members of the public will be able to comment on the suggested rules via an online form, e-mail or mail. Landlords can start requesting exceptions May 1.

A group of 41 stakeholders convened by Mayor Melvin Carter has been meeting weekly since late February to learn about different types of rent control programs and, ultimately, recommend changes or clarifications to St. Paul's ordinance. That group is set to wrap up its deliberations in late June.

Residents on both sides of the issue have criticized the city for not providing more information about rules and processes quicker, arguing that confusion has led to preemptive rent hikes and other reactionary behaviors. Last month, the City Council approved a $635,000 budget to hire five employees to administer the rent control program.

"Overall, I'm happy to see steps being made toward clarity," said Tram Hoang, who led St. Paul's campaign for rent control last fall and serves as director of policy and research for the Housing Justice Center. She added that she supports the city's choice of standard for determining a reasonable rate of return and has concerns that the self-certification option will not be equitable.

The Minnesota Multi Housing Association, a landlord trade group, said in a statement: "These draft rules are extensive and complicated. It will take some time to analyze. It is going to force public disclosure of proprietary information which will have a chilling effect on anyone who may need an exemption to the rent cap — even for self-certification."