In first test, St. Paul’s housing rent control has limited impact

The exterior of an apartment building
Union Flats, 787 N. Hampden Ave. in St. Paul, owned by Dominium, is pictured on July 19. It's one of two apartment complexes in St. Paul where residents are challenged an eight percent rent increase, under the city's new rent control ordinance.
Tim Nelson | MPR News

The St. Paul City Council has turned back challenges to housing rental increases above a three percent limit set by voters last fall — allowing hikes more than double that to move forward.

In the 6-0 decision on Wednesday (council president Amy Brendmoen was absent), the council upheld an administrative finding that an 8 percent rent increase was justified for a tenant at Union Flats, a Midway neighborhood building owned by developer Dominium.

The council also upheld an administrative finding allowing a 6.1 percent increase — trimming a proposed 8 percent hike — for a tenant at Dominium’s Cambric Senior Apartments, near Metro State University’s campus on the city’s East Side.

Cambric renter Katherine Banbury called it a small victory as she spoke to the City Council on Wednesday.

“Having utilized the rent stabilization's appeal process, I am heartened that renters like me have a legal recourse, and I am all the more determined to make the process stronger and more accessible for all tenants,” she said.

Dominium on Thursday said they would abide by the Council's ruling for other renters in that building.

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Both appellants still wound up paying twice the cap proposed in the ballot measure that passed last year.

That’s because the city included a series of exemptions, factoring in inflation, return on property owner investments, capital improvements and other financial factors that allow landlords to raise rents greater than three percent annually.

The city process also allows owners to “self-certify” the need to raise rents up to eight percent, and file formal requests with the city for rent increases from eight to 12 percent.

The two St. Paul renters who filed appeals, represented by the Housing Justice Center, did so against "self-certified" increases imposed by Dominium.

The company owns a wide range of housing around the Twin Cities, including many with tax subsidies to keep them affordable. Dominium contended in administrative hearings that its subsidies and development deals had built-in rent hike controls, and that the city’s contracts superseded the rent control ordinance.

The city didn’t address that issue, but said the rent control process put in place allowed the increases.

The administrative recommendation, and the council’s ratification in both cases, sets a key precedent for the fate of the rent control measure, establishing wide authority for property owners to raise rents.

That’s in addition to the exemption for new housing, retroactive for decades, that the city added to the rent control ordinance in recent weeks. The city also will allow landlords to raise the rents on vacant units up to eight percent plus inflation.

Rent control advocates like St. Paul City Council member Mitra Jalali counted the reduction in the Cambric case as a sign that at least some control can be imposed.

“These increases were analyzed; they were audited. And ultimately, we're seeing an increase that is lower than it would be in just a pure, unregulated situation,” Jalali said. “I think this self-certification process is problematic at times, enabling a rate of reasonable return. But it has created important steps so that a property (owner) like Dominium should have to go through this before it raises rents on people. And I think we're seeing that in how this is playing out.”

It may also have even wider implications, as Minneapolis is still sorting out how to define and implement a rent control measure that voters also approved there last year.