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Voters in Minneapolis and St. Paul will soon get the chance to decide how their local government responds to one of the most pressing and contentious issues: housing affordability.
Median gross rent across the state of Minnesota increased by a total of 14 percent over the last two decades, but the average renter income increased by only 1 percent, according to the Minnesota Housing Partnership. To meet population growth, Hennepin and Ramsey Counties also need tens of thousands of additional affordable housing units to accommodate demand.
Forty-five percent of renters in the metro area have become cost burdened, meaning they pay more than 30 percent of their income on housing. As a result of systemic racism, the homeownership gap between white people in Minnesota and people of color is the fourth-highest in the nation. A majority of cost-burdened renters are low-income renters of color.
Rent control (or rent stabilization) is the hot-button policy that Minneapolis and St. Paul are considering as a solution to the chaotic rental market. But while a number of cities across the country have enacted rent control programs, there’s no one-size-fits-all solution for the Twin Cities.
Minneapolis residents will see a rent-control charter amendment question on their ballots next to two other questions: public safety and government structure (also known as the “strong mayor” ballot measure). If the charter amendment passes, that doesn’t mean the city will automatically have a rent-control program. The incoming Minneapolis City Council will be responsible for developing a policy residents will vote on in the future.
In St. Paul, voters have already made it to that point. Residents will be voting to pass a rent control policy that experts have called one of the most comprehensive rent stabilization programs attempted in North America. For rent control advocates, that’s a good thing. For real estate professionals and some property owners, not so much.
The path toward rent control in the two neighboring cities has already diverged, but the debates have persisted. Sahan Journal spoke with three housing experts to break down what you need to know about rent control in Minneapolis and St. Paul.
Who benefits from rent control?
Advocates and city council members have pushed for rent control in the city to address dramatic increases in residential rent. Rent increases have especially affected renters from low-income backgrounds and communities of color.
Tram Hoang is a campaign manager for the Keep St. Paul Home coalition. Led by the nonprofit group Housing Equity Now St. Paul (HENS), the coalition collected more than 9,000 signatures for a petition to put a rent stabilization policy on the ballot.
“When you look at communities of color and you look at the breakdown by income, it’s very clear that low-wealth renters and renters of color are more likely to experience larger rent hikes that generally don’t have to do with an improvement or a valid reason,” Hoang said. “It’s really just a tool for displacement.”
Ed Goetz is the director of the Center for Urban and Regional director at the University of Minnesota. In February, the center compiled and presented a report on rent control to the Minneapolis City Council.
“Our data analysis shows that, although most of the market is functioning pretty well for renters, it’s not functioning well for the lowest income renters—and that’s why we need rent control,” said Goetz.
According to the Minnesota Housing Partnership, renters in Hennepin County have been the most cost-burdened in the state over the last few decades. Tens of thousands of renters are paying more than 30 percent of their monthly income for housing. The racial disparities are particularly stark: 44 percent of white renters in the Twin Cities are cost burdened, compared to 57 percent of Black renters, 54 percent of Latino renters, and nearly 60 percent of Indigenous renters.
What would the rent control charter amendment do?
If the Minneapolis rent control ballot measure receives a majority vote in November, it would change the charter, which acts as the city’s constitution.
The charter amendment would allow the city to get around a state law that restricts the city from enacting rent control unless it’s been approved in a general election. If amended, the charter would instead task the City Council with creating a rent control policy and introducing it on a subsequent ballot.
If the charter amendment passes in Minneapolis, Goetz noted that the city will have to consider a variety of policy design choices. What’s the right percentage for capping annual rent increases: Say, 3 percent or 6 percent? Which housing units should the cities include: Pre-existing housing or new housing? Big apartment buildings or all buildings? Can property owners raise rents after making major improvements or repairs to a rental unit? What happens to the rent when a tenant moves out?
The St. Paul ballot has already selected strict rent-control measures on those questions (we’ll look more at those choices, below).
“The impact that rent stabilization will have is very much dependent on those design decisions,” Goetz said. “If you exempt new construction, for example, then it’s been the case in most places that there is no impact on the rate of housing production. If you allow some form of passing through major capital improvement costs, then there is no significant decline in the quality of the housing sector, etc.”
So am I voting on rent control in November?
It depends on where you live. If you live in Minneapolis, you will be voting to amend the charter and create the opportunity to introduce rent control in the city. Again, if the ballot initiative passes, the City Council would be empowered to write a specific proposal and put it to voters.
If you live in St. Paul, you’ll be voting on an actual rent control policy, which we’ll outline in further detail below
Didn’t the mayor veto the rent-control question in Minneapolis?
Minneapolis Mayor Jacob Frey vetoed an additional charter amendment ballot question: the citizen-driven referendum. The question would have allowed Minneapolis residents to write a rent-control ordinance and bring it to a general vote.
“Good policy requires a data-driven approach, guidance from experts, and a process that is open to everyone and accountable to everyone—not just a single interest group,” Frey said in a letter to the city after he vetoed the ballot question. “We should not be in the business of forgoing these criteria and outsourcing our core responsibility as elected representatives.”
The Minneapolis City Council didn’t have enough votes to override the mayor’s veto. But the ballot measure asking voters if the council should have the ability to create a rent control program will still be on the ballot.
What is rent control anyway?
Rent control, or stabilization, refers to laws that regulate how much landlords can increase rent each year. The goal of rent stabilization is to protect low-income renters from exorbitant rent increases. Other cities like San Francisco, Los Angeles, New York, and Newark have applied rent-control rules for decades. Oregon passed rent control statewide in 2019.
St. Paul residents will vote on a rent stabilization policy in November that would limit landlords from increasing rent more than 3 percent annually on all units in the city, including new construction. The ordinance also keeps landlords from increasing rent to market rate after a tenant moves out. Some landlords can request an exemption if property taxes increase or if significant construction or renovation is required to ensure the building meets St. Paul’s housing codes and standards.
Here’s the rent stabilization question St. Paul voters will see:
Should the City adopt the proposed Ordinance limiting rent increases? The Ordinance limits residential rent increases to no more than 3% in a 12-month period, regardless of whether there is a change of occupancy. The Ordinance also directs the City to create a process for landlords to request an exception to the 3% limit based on the right to a reasonable return on investment. A “yes” vote is a vote in favor of limiting rent increases. A “no” vote is a vote against limiting rent increases.
If passed, rent control in St. Paul would begin in May 2022.
Who’s pushing for rent control?
A group called the Home to Stay Coalition, made up of local unions and community organizations, has been garnering support for rent control in Minneapolis. Members of the group come from United Renters For Justice, ISAIAH, SEIU, Jewish Community Action, and Unidos MN.
At the city level, Minneapolis City Council President Lisa Bender in Ward 10 and Council members Cam Gordon in Ward 2 and Jeremiah Ellison in Ward 5 co-authored the proposal to put two rent control charter amendments on the ballot in November. Jamal Osman, who represents Ward 6, later signed on as a co-author.
There’s been less dispute over the rent control charter amendment in the Minneapolis City Council than, say, the public safety ballot measure. But residents are also going to vote on something else in November: their City Council representatives. If the charter amendment passes in November, it will be up to the newly elected City Council to come up with a policy.
The Beacon Interfaith Housing Collaborative in St. Paul develops and owns rental apartments for low-income residents, according to Elizabeth Tannen, an organizer with the group. The organization has been campaigning for rent stabilization in St. Paul.
“St. Paul needs rent stabilization to ensure that all families and people can stay where they live,” Tannen said in a statement to Sahan Journal. “Spiking rents disproportionately harm BIPOC residents and the displacement they cause prevent people from building strong networks and communities.”
Who’s opposing their rent control ballot proposals?
The Minnesota Multi Housing Association has been campaigning against rent control measures in Minneapolis and St. Paul, according to the group’s CEO, Cecil Smith. Members of the association include real estate developers, management companies, and property owners.
“Rent control is a price control, and price control leads to market distortions,” Smith said.
Smith continued that rent control programs would discourage developers from creating new housing, which is already in high demand.
“You get a lack of supply and the quality of the housing declines, because there’s no market incentives to continue to upgrade,” Smith said. “There may not even be financial capacity to upgrade, and there’s no incentive to develop new product.”
In Smith’s view, rent control would lead the affordable housing shortage to worsen. The quality of existing units would also decline, as some property owners may lack the rental income to support improvements and repairs.
Smith represents real estate professionals in the state. But he believes that average voters might agree with the idea that rent control could disturb the rental market.
“Is this going to help address the affordable housing challenges that we have?” Smith said. “That is the right issue, but this is the wrong solution.”
Smith is particularly concerned about rent control passing in St. Paul. Critics point out that the 3 percent increase doesn’t have any allowance for overall inflation. While core inflation has been low in recent years, economists point out that conditions can change. And the St. Paul proposal wouldn’t allow property owners to reset rents when tenants move out—a different approach from the rules in other American cities.
“This is probably the most draconian rent control policy that has ever been imagined in the United States,” Smith said. “We’ve been doing research and no one can look at this ordinance and say that there is a comparable policy anywhere.”
Does rent control work?
Depends whom you ask!
As a solution to spiraling housing costs, rent control tends to divide policymakers. Advocates argue that rent stabilization can protect tenants against rent increases, allowing them to remain in their homes and strengthen ties to their neighborhood. For example, renters can stick with a local school, manage their work commutes, and connect with neighbors. Proponents of the policy also maintain that rent stabilization prevents displacement and gentrification, particularly in Black, Latino, and Asian neighborhoods.
Opponents of rent control—a group that includes many economists—argue that rent control discourages developers from building new units, making the housing shortage even worse. Property owners may invest less money into necessary repairs and improvements. Some landlords may remove properties from the rental market and turn them into condos. Critics say that rent control limits housing access and affordability for renters in the future, including new immigrants.
Has anyone studied how rent control might play out in the Twin Cities housing market?
Hoang, from the Keep St. Paul Home coalition, said that she has considered these risks when crafting a rent stabilization policy for St. Paul voters.
“When done right with thoughtful policy, it won’t interfere with development,” Hoang said. “We acknowledge that there’s a wide array of solutions that are needed.”
For example, rent stabilization won’t impact the initial rent, Hoang explained. Developers can still set rent at a rate that allows them to get the cash flow they need for construction costs, financing, and wages for people working on the building.
“The environment is changing all the time. Eliminating parking minimums, changes in zoning—all of these are factors that influence development,” Hoang said. “There’s no clear way to say this one exact policy is going to end development in the city.”
According to Goetz, there are ways to avoid some risks of market distortions. Exempting new construction is one option.
“I don’t know what Minneapolis is going to decide,” Goetz said. “But that’s the idea behind those exemptions—that it should not be a disincentive.”
On the other hand, voters in St. Paul will be considering a rent control policy that doesn’t exempt new construction. Goetz said the city of St. Paul will act as sort of a test for policymakers in Minneapolis to see if it really does discourage new development.
The ordinance would allow property owners to request an exemption to the 3-percent cap in rent increases for major repairs, according to Hoang. She added that this process is meant to keep small-scale landlords in the community.
“The majority of landlords—who are local to our city, who are rooted in community, who are not corporate landlords with private equity firms, people who already do business morally and ethically in a way that takes care of our communities—those are the people we want to stay in our housing market,” Hoang said.
Goetz said he’s found it difficult to convince property managers and real estate professionals to support rent control. But after examining 20 years of data on the Minneapolis rental market, Goetz says that one conclusion surprised him. Rent control probably won’t impact a landlord’s income very much. The majority of landlords, especially small operators, don’t increase rent by more than 3 percent a year anyway.
“What it will do is it will protect tenants from the most exorbitant rent increases,” Goetz said. He hopes real estate professionals can get on board with at least that much.
According to Hoang, the Keep St. Paul Home coalition decided on a 3-percent cap for the same reason. If the charter amendment passes in Minneapolis, city officials will have to make their own policy choices.
“Although the council asked us for this study,” Goetz said, “they have played it pretty close to the vest in terms of details.”
In other words, it’s difficult for Goetz to predict what kind of rent control the city of Minneapolis will come up with.