Thousands of rental housing units erected over the past 20 years in St. Paul will likely be exempted from the city’s new rent control ordinance, as will new construction for 20 years to come. And landlords may soon be allowed to raise rents on empty units to market-rate — well above the city’s existing 3 percent rent cap — once a tenant has vacated an apartment.
Heavily divided in the face of stark public feedback for and against rent control, the St. Paul City Council signaled it will likely gut key aspects of the voter-approved “rent stabilization” ordinance next week after approving a series of amendments Wednesday aimed at courting new real estate investment.
St. Paul voters approved the city’s new “rent stabilization” ordinance 53-47 percent last November, the particulars of which took effect in May. In response, a series of real estate developers have said they’ve put planned housing construction in St. Paul on pause, sold off existing units or killed plans in the pipeline.
Data provided by two different city departments tallying both building permit applications and actual permits issued this year relative to previous years has led officials to conflicting conclusions about citywide construction activity.
In an attempt to clarify trends, St. Paul Planning and Economic Development Director Nicolle Goodman told the council on Wednesday that housing starts — as measured by actual residential building permits issued by the city from January through July — were down 30 percent compared with the city’s four-year average.
With those concerns in mind, the city council will vote Sept. 14 on a master rent control amendment authored by Council Member Chris Tolbert that would exempt new housing construction from the city’s 3 percent rent cap for 20 years.
Now change the time period studied by about a month, and look at building permits issued, as opposed to permits applied for. St. Paul numbers have declined dramatically from the four-year average. pic.twitter.com/1Y9TzJxVml
— Frederick Melo, Reporter (@FrederickMelo) September 7, 2022
FULL VACANCY DECONTROL
The wide-ranging Tolbert amendment includes a 20-year “lookback” period that would likely eliminate rent control for thousands of the city’s existing renters. Tolbert had also authored a provision for partial “vacancy decontrol,” allowing landlords to raise rents on empty units to a limited degree after a tenant has moved out.
On Wednesday, at the urging of Council Member Jane Prince, the city council voted 4-3 to further amend that language, allowing full vacancy decontrol on vacated units. In other words, there would be no upper limit on how much a property owner can raise rent once a tenant leaves.
Prince said that since the voters approved rent control, this had, in some cases, led landlords to hike rents more than they ordinarily would have for fear they’d never be able to make up for deferred increases.
“I’ve talked to numerous landlords who say, ‘I have tenants I’ve rented to for 5, 10, 15 years. I don’t raise their rents, knowing that when the unit is vacated, I can then raise the rents,’ ” Prince said. “We have put landlords in the position where they feel they have to raise the rents 3 percent every year, which is more (than they would have without rent control).”
“Since this passed, it’s been really bad for my ward,” Prince added. “I immediately lost 100 affordable units when a developer pulled out.”
Vivian Ihekoronye, an organizer with the interfaith advocacy coalition ISAIAH, told the council they had effectively tossed rent control out the window for a huge swath of the city. “I’m very frustrated for the thousands of people who will no longer be able to benefit from the rent stabilization policy,” Ihekoronye said. “It is completely unacceptable.”
EIGHT AMENDMENTS PROPOSED
In all, the council voted upon eight further changes to Tolbert’s master amendment proposal, which will be taken up next week. Several measures proposed by Council Member Mitra Jalali that would have reduced its scope were rejected by the council in a series of 4-3 votes.
The eight amendments were:
• In an attempt to pare down Tolbert’s 20-year exemption for new housing construction, Jalali introduced an amendment that would have removed affordable housing from the exemption, keeping affordable units regulated by rent control. Her amendment failed 4-3, with Tolbert, Prince, Council President Amy Brendmoen and Rebecca Noecker voting no. Jalali, Nelsie Yang and Russel Balenger voted yes.
• Noecker introduced an amendment that would require landlords to inform their tenant that their rental unit is regulated by rent control prior to signing a rent agreement. The amendment was approved 7-0.
• Jalali introduced a requirement that tenants be notified by the city when a landlord applies for an exemption to rent control, instead of merely being notified after the exemption has been awarded. “This is effectively far too late for renters to participate meaningfully in the process,” Jalali told the council. “Tenants are already at a disadvantage in the power dynamic that is inherent to the landlord-tenant relationship.” Her amendment was approved 7-0.
• Noecker introduced an amendment clarifying that inflation, as measured by changes to the consumer price index, are a valid reason to seek a one-year rent control exemption on the basis of “unavoidable increase … in maintenance or operating expenses.” She emphasized that the exemption would still be subject to city review and not automatic. Her proposal was accepted 7-0.
• With the intent of preventing forced tenant relocations, Tolbert’s master amendment lists limited “just cause” reasons why a landlord can remove a tenant prior to instituting a rent hike above 3 percent on a vacant unit. Jalali proposed removing “disorderly conduct” as one of the “just cause” protections because it’s overly vague and could be used as a catch-all for any seemingly unruly behavior. She noted property destruction or assaultive behavior would already be covered by other provisions, such as lease violations. Her proposal was approved 7-0.
• Jalali proposed requiring landlords to pay for tenant relocation assistance if they’re allowed to “bank,” or defer rent increases for several years and later institute a large, cumulative rent hike down the road. “I had an apartment complex on White Bear (Avenue) where basically, almost all of the senior citizens who were living there are no longer there, and they did not move out by choice,” said Yang, speaking in favor. “They were driven out.” Jalali’s motion failed 4-3, with Tolbert, Prince, Brendmoen and Balenger voting no and Jalali, Yang and Noecker voting yes.
• Noting that allowing landlords to “bank” unused rent hikes would likely require the city’s Department of Safety and Inspections to maintain onerous rent increase records on virtually every landlord in the city, Prince recommended full vacancy decontrol, allowing landlords to “reset rent” to market rate once a tenant moves out. She prevailed, with Prince, Brendmoen, Tolbert and Belanger voting yes, and Jalali, Yang and Noecker voting no.
• Jalali then recommended reducing Tolbert’s proposed 20-year exemption for new construction to 15 years, and eliminating a 20-year lookback period. The motion failed, with Prince, Tolbert, Noecker and Brendmoen voting no, and Jalali, Yang and Belanger voting yes.
“I believe 20 years is good. I believe 30 years would be better,” said Brendmoen, calling the lack of visible construction cranes in the city alarming. “I’m not interested in backing down to 15 (years). … The data we received from (city planning) is troubling.”
Added Noecker, “What you don’t want to do is have a new construction exemption that doesn’t go far enough to incentivize construction. … 20 years seems to be the minimum. … It is really important to me to get those housing numbers up.”
Brendmoen said that rather than introduce it Wednesday, she would take more time to fine-tune a planned amendment that would require developers receiving exemptions from rent control for new construction to pay contractors prevailing wages. Jalali said she would also introduce additional amendments at a later date.
Pointing to the council vote scheduled for Sept. 14, Yang emphasized that the mayor convened a 41-member stakeholder group on rent control that had recommended exempting new construction for no more than 15 years. The council’s votes on Wednesday in some cases went well beyond the task force’s recommendations.
“We had a stakeholder group … and I will not be supporting a rent stabilization amendment that does not honor that work at all,” Yang said.
During a public hearing following the vote, Marcus Troy, a West Side advocate who participated in the mayor’s task force, said the amendments collectively render the work of the work group nearly moot.
“It seems like that’s out the door,” Troy said. “We passed an ordinance for a reason. … We need affordable housing. You’re not doing what we voted for.”
Brendmoen emphasized that the city’s goal was to amp up housing construction. “What we need is more units,” she said. “More. As many as we can possibly build.”
