Public comment sought on DSI’s proposed rules.

As the May 1 start date of rent control approaches, Saint Paul officials are hurrying to get all of the processes in place for enforcing the new ordinance. The City Council on April 6 voted 5-0 to approve the enabling language for enforcement as well as a set of necessary definitions.

Rent control supporters cheered as council members Nelsie Yang, Chris Tolbert, Jane Prince, Rebecca Noecker and Mitra Jalali voted for the measures (Amy Brendmoen and Dai Thao were absent). At the same time, some council members expressed their frustration with the lateness of Mayor Melvin Carter’s administration in presenting the enabling language for council adoption. They also acknowledged that the processes they have in place are less than perfect and will need scrutiny and possible amending in the future.

Prince said she supported the enabling language and definitions with reluctance. She also questioned whether they would hold up in court. “We’ve had six months since the ordinance was passed,” Prince said. “We’ve asked repeatedly for the administration to work with us.”

Prince, who is an attorney, questioned whether some of the ordinance language is legally defensible. She criticized the 22-page form that landlords must file to apply for an exemption to the 3 percent cap on annual rent increases and the 17 pages of “dense” rules proposed by the city’s Department of Safety and Inspections (DSI) to offer guidance on the ordinance.

   

The ordinance approved by voters allows landlords to apply for an exemption to the 3 percent cap if a higher increase is needed to realize a reasonable return on their investment. City officials will determine what is meant by a reasonable return by using what is called a landlord’s “maintenance of net operating income.” It could cover higher operating costs, inflationary pressures and an increase in the Consumer Price Index.

The rent control ordinance was approved by voters in a citywide referendum last November. However, Mayor Carter did not bring forward the necessary budget and administrative changes until March. The City Council in March earmarked $635,000 to cover the administrative costs of implementing and enforcing the ordinance for the rest of 2022. That includes six staff positions, three of them in DSI.

The ordinance approved by voters allows landlords to apply for an exemption to the 3 percent cap if a higher increase is needed to realize a reasonable return on their investment. City officials will determine what is meant by a reasonable return by using what is called a landlord’s “maintenance of net operating income.” A reasonable return could cover higher operating costs, inflationary pressures and an increase in the Consumer Price Index. The city will provide the worksheets to make such calculations, and it reserves the right to audit the completed worksheets.

 

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DSI’s proposed rules include a process whereby landlords can apply for a hardship exemption. Under the rules, landlords who provide detailed information on several kinds of expenses would be allowed to self-certify rent increases that are between 3 and 8 percent. To increase rent by more than 8 percent, a landlord would need a determination by DSI staff. Landlords who disagree with DSI’s determination could file an appeal with a legislative hearing officer. Tenants may also challenge a higher rent increase by taking their landlord to court.

Exeter, a Saint Paul-based developer and property management company, testified in favor of broad exemptions to the rent control cap. In written comments, Exeter described rent control as an “ill-advised ordinance that is proving to be a political and economic mess for the city.”

The City Council held a public hearing on the implementation of rent control on March 23. More than a dozen comments were received, mainly from tenants and tenant advocates urging the council not to delay in putting the measure in place. Some speakers told of the steep rent increases they are facing in advance of the May 1 effective date. Erin West, an organizer with Home Line, a statewide tenant advocacy organization, reported 87 complaints from Saint Paul tenants who have faced large rent increases in the wake of the November referendum. That is almost three times the number of complaints typically received in that period, West said.

West told the City Council about the additional fees some landlords are charging Saint Paul tenants. Some landlords, she said, are charging tenants separately for utility costs when those charges were included in the monthly rent before.

“The longer we wait to implement these policies, the more harm is being done,” said Ann Schulman, a tenant in Merriam Park who said her rent increased by 9 percent recently.

Exeter, a Saint Paul-based developer and property management company, testified in favor of broad exemptions to the rent control cap. In written comments, Exeter described rent control as an “ill-advised ordinance that is proving to be a political and economic mess for the city.” Exeter pointed out that since November, new housing permits in Saint Paul are down 80 percent from the previous year. The construction of more than 3,000 affordable and market-rate apartments have been postponed or canceled, Exeter wrote.

Mayor Carter has asked the City Council to consider amending the rent control ordinance with an exemption for new construction. However, under the City Charter, an ordinance adopted by referendum may not be amended for at least a year, or not before November 2022.

A Saint Paul Pioneer Press analysis of construction permits for multi-family housing confirmed Exeter’s numbers: From late December 2021 to early March 2022, permits were pulled for 231 such units in Saint Paul. That is down from 1,393 units during the same period in the previous year, a decrease of more than 83 percent.

The growth in residential property values is also lagging in Saint Paul, according to an analysis of real estate transactions by University of Southern California researchers. The economists studied several factors to determine the change in Saint Paul real estate prices following the rent control referendum in November 2021. They compared that change to the change in property values in Denver, Indianapolis, Kansas City, Nashville and Saint Louis. The economists concluded that if rent control had not been adopted by voters, residential property values in Saint Paul would be 6 to 7 percent higher today.

DSI is seeking public comment on its proposed rules for the rent control ordinance. Comments may be submitted through April 22 via the city’s website at stpaul.gov/rent-stabilization-rulemaking; emailed to rent-stabilization@ci.stpaul.mn.us; or mailed to DSI-Rent Stabilization, 375 Jackson St., Suite 220, Saint Paul, MN 55101. For more information, visit that website, email rent-stabilization@ci.stpaul.mn.us or call 651-266-8553.

— Jane McClure

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