St. Paul's rent control policy faces another rollback

• Supporters have argued the move is necessary to jump-start housing construction in St. Paul — which has stalled since voters passed the ordinance in 2021 — without ditching rent control altogether.

The big picture: The proposal represents a big bet on a minor change to a policy whose current iteration has critics in many corners.

• Developers don't like it, and even many rent control advocates have argued St. Paul's policy is a watered-down version of what voters initially demanded.

Catch up quick: The policy voters approved capped annual rent increases at 3%, with few exceptions — until Carter and the council loosened the rules in 2022.

• As a result, new construction is now exempt from rent control for 20 years, and landlords can enact much larger rent increases after a tenant moves out.

The latest: The proposal before the council this week would be another relaxation, permanently exempting any new housing built in 2005 or later.

• Rent control critics say it's an easy way for the city to make a bad policy more workable.

What they're saying: "What we've done in St. Paul is create the worst of both worlds," Nate Hood, a city Planning Commission member and small-time landlord, told Axios.

• "Rent control scares people, so developers just stay away from the city," Hood said. "At the same time, we haven't necessarily protected tenants because there are loopholes that some people could probably drive a semi through."

The other side: Rent control advocates share some of Hood's frustrations but say the solution is to strengthen rent regulations, not weaken them further.

• "City officials in St. Paul seem more focused on managing the pushback of wealthy developers and special interests, and not on implementing a strong policy," Elianne Farhat, co-executive director of advocacy group TakeAction Minnesota, told Axios.
• With better enforcement and strategy from city leaders, "we wouldn't necessarily be experiencing the 'worst of both worlds,'" added Tram Hoang, who managed the 2021 rent control campaign.

Carter says that if the new proposal passes, rent control will cover more than 90% of St. Paul's rental units.

Stunning stats: Builders pulled permits for 404 housing units in St. Paul, down 80% from the 2,077 units permitted in 2020, according to federal data.

Reality check: Rent control isn't the only cause of this slowdown in St. Paul. Building has sagged nationwide as developers contend with supply chain issues, labor shortages and difficulty securing loans.

• Minneapolis, which doesn't have rent control, saw a 90% drop from its pre-COVID-19 development peak, and metro-wide construction is down too.

• "The real estate industry is scapegoating rent stabilization and using this time of economic uncertainty … to force the council into making a false choice," said Hoang, now an analyst at think tank PolicyLink.

Yes, but: Rent control critics fear that without further changes to St. Paul's rent control policy, developers will bypass opportunities to build in St. Paul whenever economic conditions rebound.

Zoom in: The effects of St. Paul's rent caps

St. Paul's typical rents have grown at a pace similar to — if not slightly faster than — that of Minneapolis in recent years, according to Zillow estimates.

Zoom in: One reason is that St. Paul's ordinance gives landlords several options to raise rents more than the 3% annual cap.

By the numbers: Since the ordinance took effect in 2023, more than 1,700 landlords have applied to raise rents on vacant units by as much as 8%, plus inflation.

• The city granted 1,580 requests in 2023 and 2024, the city's Department of Safety and Inspections tells Axios.
• Another 111 applications have been granted to landlords seeking to exceed the rent cap to cover repairs or certain cost increases — like, in Hood's case, insurance.

Friction point: These exemptions affect only a fraction of St. Paul's 57,000-plus renter-occupied units, but Hoang said "the onus is on the tenant" to fight any rent increases that exceed the cap.