St. Paul City Council ends rent control for housing built after 2004
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Nearly four years after city voters approved one of the strictest rent control laws in the nation, the St. Paul City Council voted 4-3 to eliminate rent caps for new construction, including residential buildings that received their certificate of occupancy after 2004.
In doing so, the council followed the lead of St. Paul Mayor Melvin Carter, who announced his intent to eliminate rent control for new buildings in his State of the City address last August, describing it at the time as an important step — though not a cure-all — toward reviving stalled real estate development.
'If there's one thing that unites everyone here it's that we need more housing,' said Council President Rebecca Noecker, addressing the council toward the end of Wednesday's four-hour meeting. 'We need to send a strong, clear and unequivocal signal that we are open to investment and like it or not — and I don't really like it — we need investment from beyond our local community.'
During a public hearing before the vote, Council Vice President HwaJeong Kim and other critics said the council was undermining the will of the voters, who approved the city's 3% cap on annual rent increases at public ballot in November 2021, and more study is needed on whether rent control has impacted some low-income tenants for the better.
'Basically, what we're going to be seeing more of is frontline workers, working class folks in older buildings,' said Council Member Nelsie Yang, who joined Kim and Cheniqua Johnson in casting the three dissenting votes against the permanent exemption for new construction. 'It's going to create a two-tier system that is extremely inequitable.'
'We are going in the wrong direction when it comes to rent stabilization,' Yang added.
Tenant protections approved
In the same session on Wednesday, the council voted 7-0 to pass a sweeping package of residential tenant protections aimed at limiting the scope of security deposits, criminal history checks and credit checks, without barring them outright, and requiring landlords to provide 30-day written notice before filing evictions.
Other protections spell out responsibilities for landlords when affordable properties are sold, including a requirement that a new owner either cover relocation benefits or give existing renters a three-month grace period before raising rents and rescreening tenants. The ordinance indicates that the protections will take effect a year from approval.
Johnson, who spent 18 months crafting the details of the tenant protections package, said her section of the city's East Side is plagued by evictions with limited notice, high security deposit requirements and other housing inequalities that often fall heaviest on the most financially vulnerable.
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'We've heard stories where individuals have had to pay two or three times the rent just to get the keys to move in,' said Johnson, who chairs the city's Housing and Redevelopment Authority.
The previous council approved a raft of tenant protections but rescinded it in 2021 under legal pressure. Johnson said she listened closely to both community and legal feedback to make sure the new package will fulfill the council's commitment to renters while surviving legal scrutiny.
'One of the things I think that is important about this ordinance is it is reasonable,' she said. 'It is important that we don't make promises years prior and then rescind them and we don't bring them back to the community.'
RELATED: What's changing with St. Paul's new rent control policy and tenant protections
New construction exempted from rent control
The rewriting of rent control follows months, if not years, of public debate over whether the rent stabilization ordinance has lived up to its purpose and protected the most vulnerable renters, or dissuaded lenders and developers from investing in the capital city, undermining efforts to build more housing.
Rent control's supporters have noted that while St. Paul's housing slowdown has been stark — 2024 was St. Paul's worst year for new housing starts in more than a decade — Minneapolis and other cities without rent control have also experienced slow housing growth, likely as a result of rising construction costs, high interest rates or demographic projections predicting limited population growth.
'I've been hearing from community members on the need to have data on how effective (rent control has) been for our renters,' said Yang, noting most studies have focused on housing supply and production rather than tenant experiences.
Construction of single-family homes gained some ground last year, but building permits for multi-family housing began tanking in St. Paul even before neighboring cities. A study by the Bureau of Economic Research blamed the ordinance for as much as $1.6 billion in lost property value in St. Paul, and noted that the policy's biggest beneficiaries stood to be wealthy white renters, who have been shielded from rent increases as much as lower-income renters, if not more so.
That's because many owners of older properties have applied for and received exemptions to the rent caps after citing high maintenance costs, inflation and property tax increases.
The rent control amendment approved by the council Wednesday was sponsored by Anika Bowie, Saura Jost and Noecker, and also drew the support of Matt Privratsky. Johnson, HwaJeong Kim and Yang cast the dissenting votes after attempting without success to back key amendments.
Instead of entirely exempting new residences from rent control, Yang's amendment would have extended an existing 20-year exemption for new construction, approved by the previous council in 2022, and converted it into a 30-year exemption, mirroring the length of a construction mortgage. It was voted down 4-3, with Johnson, Kim and Yang voting to support it.
'We went from 20 years to permanent, with no discussion about anything in between,' Johnson said.
Jost called the 30-year exemption 'an outdated request' that 'just does not provide reassurance to the market.'
Nick Nowotarski, a development director with Weidner Apartment Homes, said his company has long planned up to 1,000 units of housing at the Highland Bridge development in Highland Park, and that housing has been on hold since rent control was approved. 'We will not move forward if there's a 30-year exemption,' he told the council.
Prevailing wage amendment voted down
Kim's amendment, which was also voted down 4-3 along the same lines, would have required contractors to pay construction laborers prevailing wages on new multi-family buildings spanning 12 units or more as a condition of receiving their exemption from rent control. Proponents said as many as one-in-four construction workers is victim to wage theft.
'It's something that has been in the works for at least 2½ years … (before) the previous council and this current council,' said Kim, listing a series of labor organizations who wrote letters in favor of the proposal. 'It's a pro-worker amendment.'
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Jost noted that no other cities in Minnesota impose prevailing wage rules on private construction, and the city already imposes prevailing wage requirements on projects that receive city grant funding. 'We need to build 10,000 homes to meet the need in our city, and we know that we're not doing that,' she said. 'We have too many vacant spaces.'
One of the most pointed criticisms of the prevailing wage proposal came from St. Paul City Attorney Lyndsey Olson, who submitted a rare letter of objection to the council, calling the amendment 'legally defective' and 'legally unenforceable' under both case law and city and state prevailing wage statute.
'Both the city's and the state's prevailing-wage laws only apply to … projects using public funds,' reads Olson's letter to the council. 'The amendment's language goes beyond this public-only constraint and reaches into purely private projects paid with private funds.'
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