St. Paul City Council pondering last-minute changes to rent-control exemptions

Frederick Melo, Pioneer Press
·5 min read
St. Paul City Council pondering last-minute changes to rent-control exemptions

As the St. Paul City Council lines up votes on a series of amendments to the city’s rent-control ordinance, Woodlawn Avenue resident Wendy Neurer is casting predictions on what a potential 20-year exemption for developers of new rental housing would mean for the city’s oldest and cheapest housing stock.

Neurer on Tuesday pointed to the example of Paster Properties’ proposed Highland River Parkway Apartments at 706 Mississippi River Blvd., a four story, 91-unit luxury apartment building that would replace a smaller apartment building dating to 1959. The existing structure spans 18 units at relatively affordable rents.

With residential property taxes rising but rents capped at 3 percent, “there is the high potential where owners of older apartment buildings in desirable neighborhoods … will be motivated or find it financially necessary to sell to new developers who have an exemption (from rent control),” said Neurer, in a recent letter to the city council. “New developers then will tear down the buildings and create luxury high-rise units. This drives out medium and lower-price renters and tears neighborhoods apart with imposing huge box apartments.”

In St. Paul, where some 80 percent of all structures were built before 1972, the prospect of incentivizing the demolition of older properties in favor of pricier new housing has alarmed historic preservationists and others concerned about losing some of the city’s most affordable residential units.

“The vast majority of the affordable housing that exists today is stuff that’s just older,” said Paul DeGeest, a development director with Rethos, a nonprofit preservation advocacy organization based in St. Paul.

On the flip side, city officials have pointed to a slowdown in housing construction since the ordinance was approved last November.

They say a lengthy exemption period for new construction will entice developers to start building again. New building permits issued in St. Paul are down by as much as 30 percent compared to their four-year average, depending upon the period studied.

The likelihood of a 20-year exemption for new construction — coupled with a 20-year lookback period that would end rent-control protections for thousands of existing renters — has raised debate. But it’s not the only major ordinance change before the council.

The raft of amendments that could be voted upon Wednesday includes a provision that would allow landlords to raise rents to market rate once an apartment is vacant, a notable departure from the ordinance approved by voters in November 2021.

EXEMPT VACANT UNITS FROM RENT CONTROL?

The prospect of “full vacancy decontrol” for empty units has angered and surprised some housing advocates, leading to tense last-minute discussions that could delay a final council vote yet another week. While St. Paul Mayor Melvin Carter has repeatedly called for rent-control exemptions for new construction, the mayor has yet to publicly weigh in on the prospect of full vacancy decontrol.

“I have huge concerns with it,” said council member Mitra Jalali, who voted against the vacancy decontrol amendment when it was presented to the council last week.

On Tuesday, council President Amy Brendmoen said she would introduce a compromise amendment that would cap rent increases on vacant units, limiting them to 8 percent plus inflation, as measured by the consumer price index. If her amendment is approved, a final vote on the full package of changes to the rent-control ordinance would take place Sept. 21.

Some call vacancy decontrol a fair give-back to small landlords who are counting on someday selling their rental properties for retirement income. With the option of hiking rents once a unit is empty, a conscientious small landlord might keep rents fairly steady, only to increase them later when the unit is vacant and a buyer is in the wings.

“This provision gives (landlords) the flexibility to maintain lower rents for current tenants, while encouraging long-term and stable tenancies,” said council member Jane Prince, who authored the amendment for full vacancy decontrol, in a written statement on Friday. “Upon vacancy, this provision allows landlords to upgrade and modernize units, incentivizing reinvestment in the city’s rental housing stock.”

Austin Altenburg, 28, owns seven rental units in St. Paul, including a duplex in the West Seventh neighborhood that until recently he occupied himself. He has no plans to raise rents this year on most of his units, in part because pricing out existing tenants would cost him time and money looking for new occupants he could trust.

“Mom and pop landlords are very connected to their tenants, in a different way than larger companies are, because they can be and they have to be,” said Altenburg. “You want to maybe not raise the rent at all for a period of time, but 10 years from now, if you want to sell it to somebody, your property value has to have rents to back it up.”

A SMALL LANDLORD SELL-OFF?

Altenburg said without vacancy decontrol exemptions for vacant units, small landlords will do one of two things. Some will sell off properties to large management companies, which are likely to be less attentive to their tenants’ needs and less forgiving about credit scores, criminal histories and other blemishes.

He said he’s already seen some peers begin the process of selling, though “who they’re selling to, I haven’t gotten into the weeds yet.”

Other small landlords will retain their properties but hike rents 3 percent annually, which is higher than they might otherwise without rent control in place, he said. “The key is to make sure people can maintain their retirement,” he said.

In other words, if landlords hike rents as much as they can because of rent control, the ordinance will have effectively undermined its own purpose.

“Vacancy adjustment with a voluntary or ‘just cause’ end of term would be better for renters than the way we have incentivized annual rent increases under rent stabilization,” said Brendmoen, in a written statement issued Friday.

She noted that vacancy decontrol is a common component of rent control in other cities.

“I think it’s important to be clear that the 3 percent (rent) cap is intact,” said Brendmoen, noting rent control supporters assured voters last year that adjustments were possible if problems surfaced. “The ballot initiative passed 53-47. In making the case for a yes vote, vocal supporters including Mayor Carter qualified their support with their confidence that the city council would refine the ordinance language.”

Related Articles