St. Paul already seeing the consequences of rent control
Over the weekend, the Star Tribune reported the following,
Less than 24 hours after St. Paul voters approved one of the country’s most stringent rent control policies, Nicolle Goodman’s phone started to ring. Developers were calling to tell the city’s director of planning and economic development they were placing projects on hold, putting hundreds of new housing units at risk.
“We don’t want our equity goals to be at odds with our growth goals,” Goodman said in a presentation to the City Council Wednesday. “The ordinance as written may actually put those goals at odds.”
Voters’ decision Tuesday to cap annual rent increases at 3% sent developers into a frenzy, prompting some with stakes in Minnesota’s capital city to pause projects or reconsider sites for future housing.
Unlike most cities with rent control, St. Paul will not exempt new construction, which opponents argue will force lenders and developers to look outside the city for spots where they feel more confident that they will recoup investments and earn profits.
“We, like everybody else, are re-evaluating what — if any — future business activity we’ll be doing in St. Paul,” said Jim Stolpestad, who has worked on developments in St. Paul for 30 years as founder of Exeter, the company behind major projects like Grand Avenue’s revamped retail corridor and new luxury apartments in the Cathedral Hill neighborhood.
It’s a sobering prospect as major redevelopments, including the Hillcrest Golf Club and Boys Totem Town sites, enter critical planning stages. At the Highland Bridge site, where construction is well underway, Ryan Companies was scheduled to submit three building plans to the city this week — but Tony Barranco, Ryan’s north region president, said Wednesday those reviews have been postponed indefinitely in light of the referendum’s outcome.
Ryan Companies warned before Election Day that the rent control ordinance could prevent them from finding investors for the 760 affordable housing units the city pledged to bring to the former Ford site.
“If our banking partners won’t loan us dollars to build the buildings that are planned as market rate because they can more safely lend their dollars elsewhere, we will not be able to build the market rate projects” that help subsidize affordable housing, Barranco said.
Advocates for rent control, of course, choke this to developers making empty threats.
Supporters of rent control, led by a grassroots coalition that petitioned to put the ordinance on the ballot, say developers are making empty threats.
“This happens in every city where new regulations are passed … because they want to scare the city into changing the ordinance,” said Tram Hoang, campaign manager for Housing Equity Now St. Paul, which led the ballot measure push
Ramsey County Commissioner Trista MatasCastillo, who voted for rent control, said she believes St. Paul’s population and need for development will ultimately win out.
“I don’t think development will stall,” she said. “But there will be some kinks that need to get worked out.”
But based on the evidence we have already represented in our research, St. Paul residents should be wary of what the potential consequences for rent control will be going forward. Delays and loss of potential housing units will exacerbate housing shortages, an issue that is already prevalent in the Twin Cities.
There is a lot of uncertainty
Residents should also be warier of the overall uncertainly regarding the rule and how it will be administered. For one, there is already confusion about when the ordinance goes into effect.
St. Paul voters on Tuesday approved a ballot measure that caps residential rent increases at 3 percent annually. So when, exactly, do the new rent limits take effect?
The answer is complicated. The ballot question indicated a start date next May, but the city attorney’s office has said under the city charter, ballot initiatives are legally binding immediately. In other words, rent control has already started in St. Paul.
Or maybe not. The ordinance requires the city council and city staff to create an appeals process for landlords facing particular hardships, such as a major property tax increase or a necessary building improvement. Until that happens, there’s some question over how binding a rent limit really is.
“The ordinance itself is effective immediately by charter, but the ordinance does include an effective date,” said St. Paul Planning and Economic Development Director Nicolle Goodman, addressing the St. Paul City Council on Wednesday. “From a practical standpoint, we don’t yet have the infrastructure in place. … There’s an administrative lift.”
And yet, the new rent stabilization ordinance includes a “private right of action,” which means tenants, acting as individuals, could take their landlords to court for failing to abide by the particulars.
Furthermore, before the Nov. 2 election, St. Paul mayor Melvin Carter indicated that he would be open to making changes to the current draft which is currently one of the strictest proposals to ever be seen in the country.
The mayor has, however, not announced those changes yet. And according to Pioneer Press, “…the city attorney’s office has raised concern that amendments that appear to veer from the voters’ intent could open the city to litigation.”
All the uncertainty surrounding the ordinance, how it will be enforced, and when it will go into effect could further depress investment in St. Paul’s housing industry.
Not to mention that St. Paul officials have already passed a 2022 budget with maximum property tax levy which means that in order to fund the administrative effort behind rent control enforcement they might have to cut funding from other city projects.
Rent control is a bad bargain for St. Paul residents
Certainly, it will take a longer period to effectively analyze what the overreaching effects of rent control on St. Paul will be. But so far, nothing indicates that rent control is going to be a win for St. Paul residents as advocates claimed.