For some St. Paul tenants, rent control falls short

Sumeya Mohamed checked her mail in June and found a postcard from the city of St. Paul.

"I thought it was junk mail at first," the 22-year-old said.

Instead, it was bad news: Mohamed's landlord had applied for an exception from the city's rent stabilization ordinance and gotten permission to raise rents up to 26%, more than $400 a month for her family's three-bedroom unit.

St. Paul voters passed the Midwest's first rent-control policy in 2021, to much fanfare from tenants. But in the year since the law took effect, hundreds are seeing their rents increase at rates beyond the 3% annual cap they supported.

Last fall, the City Council made sweeping changes to the law voters approved, so it no longer applies to the estimated one-third of St. Paul's total 78,000 rental units that are new or affordable. In addition, the city has approved more than 200 requests for rent increases above 3%, according to data from the Department of Safety and Inspections (DSI) that includes requests for both individual units and entire buildings.

And, even if a landlord doesn't get approval to raise rents higher than 3%, there's little the city can do about it.

"Criminal citation is our only tool as far as an enforcement action right now," DSI Director Angie Wiese said. "When you only have one tool, and that tool is a really giant hammer that you have to lift before you can use it, that's hard."

That's been frustrating for tenants like Mohamed, who learned her landlord's requested rent increase was approved less than a month after she and a handful of neighbors filed a lawsuit against the owners and managers of the Haven of Battle Creek. The suit alleges they are aiming to displace the property's large Muslim Somali population through a mass renovation, which is simultaneously exposing tenants to hazards and being used to justify rent hikes.

Attorneys for the Haven of Battle Creek did not respond to a request for comment.

The nonprofit Housing Justice Center, which represents the tenants, filed a rent control complaint with the city months ago. Mohamed said she and others have met with city staff and elected officials about their concerns.

"It feels like a slap in the face," she said of the decision to approve the rent increase, which she plans to appeal. "The first thing I said when I saw the mail was: What was the point of the rent stabilization ordinance? Why did we vote on this if it's not going to be enforced?"

The average rent in St. Paul grew 4.4% between 2022 and 2023, according to first-quarter data from Marquette Advisors, which surveys roughly a quarter of the city's rental units. The survey only includes market-rate buildings and does not track senior rentals. In the same period, Minneapolis rents rose 2.5% on average.

"When a rent increase happens, people in St. Paul are expecting 3% or less. That's the talking point that's come out," said Eric Hauge, executive director of HOME Line, a nonprofit that provides free legal advice to Minnesota tenants. "And then we unfortunately have to go through, 'Well, it's not that simple.'"

Tenant advocates who crafted the original ordinance said from the start that landlords should be able to request an increase above 3% if they can prove it's needed. But as the economy has continued to experience the ripple effects of the pandemic, including supply-chain bottlenecks and high inflation, Wiese said it's rare for the city to deny a request.

"Utility costs are going up. Insurance costs are going up. Property taxes are going up," said Joe Collins, CEO of Housing Hub, which manages 1,500 St. Paul rental properties. "People treat us like we're billionaires, like we're getting rich, but the rental game is tough."

Since rent control took effect, Housing Hub has been raising rents 3% across the board and delaying some capital work. In a handful of cases where "the numbers aren't working," Collins said the company applied for an increase using the city's self-certification process, a quicker option for landlords seeking to raise rents up to 8%.

"Even that's quite a bit of admin work," he said. Plus, it can draw outrage and appeals from tenants.

Rachael Waters and Bailey Miracle said they desperately wanted to move out of their duplex in the Dayton's Bluff neighborhood after two years plagued by wasps, mice, hostile neighbors and an aggressive pit bull.

For financial reasons, the couple decided to stick it out one more year. Then they learned Housing Hub was planning to raise their monthly rent from $1,071 to $1,160.

Weeks after submitting an appeal and paying a $25 filing fee, the couple arrived at City Hall for a hearing. They told city staff that police and fire inspectors did little to respond to calls about some of the problems they experienced. The property already had one complaint under city review.

But staff reported that a preliminary financial analysis showed Housing Hub could have raised Waters' and Miracle's rent 25% — triple the amount requested.

Collins, who attended the two-hour hearing and disputed some of the tenants' maintenance claims, offered to let the couple vacate the unit on their own time, without the 60-day notice typically required. Though the city's decision on the rent hike is not yet final, Waters left the hearing room feeling jaded about local government — and the rent stabilization law.

"These people aren't working for the citizens or the tenants of St. Paul, trying to make sure that their rent doesn't go higher," Waters said. "They're literally collecting money from us to come in and fight the automatic approval that the landlords get."

St. Paul has heard almost a dozen appeals from tenants so far, and many have expressed similar sentiments, demanding forensic analysis of landlords' balance sheets.

But the city has limited resources and says it's sometimes not worth diving deep into financial line items if a requested rent increase is justified by one or two big factors, like inflation or property taxes. It budgeted about $717,000 for rent stabilization in 2023, and Wiese said she does not plan to ask for an increase in 2024.

Though the city and tenant advocates said brazen violations of the law appear rare, Wiese said DSI "would need a pretty significant case" to take a landlord to criminal court. They first send educational letters to properties out of compliance, and could make calls or visits as a next step.

There is a desire "to have more tools in the toolbox," Wiese added. For instance, city leaders sought the ability to impose administrative fines in 2021, but the proposal never passed.

Tenants also have the option to go to court to enforce their rights under the rent control ordinance, though city staff and tenant advocates said they are not aware of any St. Paul renters who have done so — perhaps out of fear of retaliation, advocates say.

"Right now, tenants are being hung out to dry," said Daniel Suitor, a housing attorney for HOME Line. "They're the ones that have to do it all, and they're the ones with all the downsides."

Still, advocates are optimistic about the future for St. Paul tenants.

"There are the folks who've had to fight for their rights under this ordinance," said Margaret Kaplan, president of the Housing Justice Center. "But for the vast majority of people, they just have a set of rights now that they didn't have before — and it's working pretty well for them."

Rebecca Gaida is one of those tenants. Before her lease ended earlier this year, Gaida received notice that her rent would increase 3% in accordance with city law.

"I'm in a union," she said. "My contract is settled for the next three years, and I know that my wages will increase about 3% for the next three years. I love that it's all predictable."

The discussion of rent control is likely to continue as the November election approaches. All seven council seats are on the ballot.

"I think rent stabilization has really generated a huge amount of conversation about what people in St. Paul want out of our housing system, what we want our communities to look like," said Meg Daly of the Minnesota Youth Collective, which organizes young voters. "I just think overall, it's been such a powerful thing to watch."