Twin Cities developers, landlords prepare for the worst as rent control organizers celebrate

St. Paul on Tuesday became the first Midwestern city to enact rent control, after an election that largely disappointed progressives brought a decisive win for tenants' rights organizers.

Minneapolis voters' simultaneous approval of a referendum that allows the city to craft its own rent control ordinance sets the stage for continued debates over whether such policies address or exacerbate the affordable housing shortage in the Twin Cities and nationwide.

"The fact that it passed in both cities is testament to the critical nature of the housing crisis, and the real vulnerability that renters feel in the market," said Ed Goetz, director of the Center for Urban and Regional Affairs at the University of Minnesota.

Still, Tuesday's results were a bit of a surprise. Though both cities are majority-renter, that population tends not to vote at the same rate as more affluent property owners, Goetz said.

St. Paul's ordinance, which limits rent increases to 3% per year, has been pegged as the most restrictive rent control policy in the country because it does not allow landlords to raise rents once a tenant moves out, does not exempt new construction and is not tied to inflation.

Already, property developers are hitting the brakes on ongoing projects and landlords are crafting contingency plans. Still, organizers continued to celebrate Wednesday — while also recognizing the work ahead as both cities hammer out policies.

"We're excited to see what the city has planned," Housing Equity Now St. Paul campaign manager Tram Hoang said. "We definitely want to be a part of those conversations, to ensure that renters who are most impacted by this issue are a part of those conversations as well."

In both cities, rent control measures passed with about 53% of votes. While the Minneapolis ballot question clears the way for city leaders to craft a policy, the St. Paul measure puts into effect a specific policy to be implemented May 1.

Those cheering and lamenting the St. Paul referendum's passage both said they're looking to the city for more specifics.

City Council members on Wednesday expressed frustrations about questions they say Mayor Melvin Carter and his staff have failed to answer about how the ordinance will be administered.

The ordinance says landlords can seek permission to raise rents more than 3% to cover property tax increases or capital improvements, but the city has not indicated how that exemption process will work or be funded. It's also unclear whether tenants could challenge landlords who try to impose large rent hikes before the spring.

"The referendum language was in front of us for months, and there's literally no information," Council President Amy Brendmoen said at Wednesday's council meeting.

Carter refused to publicly take a stance on the ballot measure until three weeks before Election Day, when he said he would vote in support.

While celebrating his re-election Tuesday night, the mayor said he planned to convene stakeholders to examine how to best handle the policy's rollout.

Last week, the City Attorney's Office said the city charter prevents St. Paul officials from repealing the ordinance for one year and added that tweaks to the policy could increase the risk of legal challenges.

Lex Lucht, who rents out four units in Frogtown, is convinced the city has it in for landlords. Since St. Paul's tenant protection ordinance passed in 2020 — it was later deemed unconstitutional — Lucht said he's thinking about getting out of the business. He said he thinks other landlords will also leave. "I think we are going to see a lot of properties for sale," Lucht said.

Other rent control opponents, who spent nearly $4 million to fight the ballot measure, said they don't think the average voter grasped the effects the policy could have on St. Paul's economy.

Property managers and real estate agents have said rent control could prompt them to convert rental units to condos, shrinking the already tight rental market. Developers said the measure would discourage new construction, which trade unions have said could mean fewer jobs.

"We just didn't get around to educating enough people about what this measure really means," said Mark Mason, president-elect of the St. Paul Area Association of Realtors, part of the coalition opposing rent control.

But supporters have pushed back, saying the vote shows popular support for a policy that protects tenants, particularly low-income residents and people of color who are most often displaced by rent increases.

"I think that the important message here is that our community overwhelmingly said we believe that we should stabilize rent and that keeping people stably housed is critical," said Ramsey County Commissioner Trista MastasCastillo, who said she voted for the St. Paul ballot measure despite having some "hesitancies" about how the policy will work.

In Minneapolis, the future is even less clear. Advocates say they want to see a rent control policy similar to St. Paul's, and opponents want to make sure that doesn't happen.

Downtown Council President Steve Cramer said he thinks Minneapolis will see that St. Paul's policy is "ruinous" to housing investment and will exacerbate the problem it was intended to address.

But although property owners and developers are disappointed, they're not stepping back.

"They're disappointed in the result," he said, "but they want to be at the table as, and if, this discussion proceeds."

Staff writer James Walsh contributed to this report.