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Mayor Carter asks St. Paul council to exempt new construction from rent control

Voters passed the rent control measure last week, capping increases at three percent. Developers have said the move could put projects at risk.

ST PAUL, Minn. — Mayor Melvin Carter's administration urged the St. Paul City Council on Monday to pass an amendment exempting new housing construction from the rent control ordinance passed by voters last week, following concerns from developers that the measure will put future projects at risk.

In an email sent Monday morning to the entire city council, Deputy Mayor Jaime Tincher said the mayor would sign such an amendment "once it reaches his desk," noting that "virtually every other rent control ordinance in effect today exempts new construction."

St. Paul voters last Tuesday approved the first rent control policy in the Midwest and among the most restrictive in the country, capping year-to-year rent increases at three percent "regardless of whether there is a change of occupancy." Minneapolis voters also approved a rent control measure on Election Day, but rather than implementing a concrete policy, that ballot question merely gave the city council power to craft an ordinance in the future. 

As they did before the election, landlords and developers in St. Paul immediately began sounding the alarm after Question 1 passed, saying the cap on rent increases without an exemption for new construction may force some to build elsewhere. 

Ryan Companies, which is developing 3,800 housing units at the old Ford site under the "Highland Bridge" project, confirmed to KARE 11 on Monday that it pulled applications for three buildings at Highland Bridge "as we try to understand and navigate all of this."

"The City and Ryan took great care in creating a finance plan that leveraged market rate developments to provide funding to support deeply affordable housing creation both at Highland Bridge and throughout Saint Paul. The rent control policy threatens the funding sources for market rate projects and therefore the overall finance plan for the development," Tony Barranco, the north region president at Ryan Companies, said in a statement. "We're aware that Mayor Carter has asked the Saint Paul City Council to pass a clarifying ordinance that allows exemption for new housing construction. We support that position and hope to learn more about those clarifications as soon as possible."

Stefanie Sokup, the VP of Marketing and head of new construction at Real Estate Equities, said the lack of an exemption for new projects also troubled her. Real Estate Equities owns five apartments in St. Paul. 

"I do worry about other developers in St. Paul and what this means. I think it will halt development, or at least stall it for awhile," Sokup said. "Ultimately, we feel this wasn't thought through... Is this the best solution to help the people that need affordable housing in five years, or is this just a quick fix?"

However, advocates for renters are pushing back against the landlords' narrative. 

"It is really way too early for people to say the sky has fallen on them," said Margaret Kaplan, president of the Housing Justice Center that pushed for the ballot measure. "Now is the time for all of us to kind of come together and figure out, are there issues in the way the policy can be implemented that will address some of the concerns developers may or may not have?"

Kaplan called the rent control measure "remarkable," arguing it could serve as a template for other Midwestern cities. 

"It means that renters in St. Paul will no longer be subject to really high rent increases. Looking at patterns of increase, this has disproportionately harmed low-income renters and renters of color. From now on, the default is going to be, no more than three percent," Kaplan said. "This really is going to be the difference between being able to stay in a place, have their home, or, the possibility of losing that."

The ballot question, as written, does allow for landlords to apply for exceptions "based on the right to a reasonable return on investment." That could include adjusting for a property tax hike, or to bring a property up to code. 

Nicolas Kirkvold, who recently moved to St. Paul from Rapid City, S.D., said the three-percent cap on rent increases would help him financially.

"Honestly, I think it's a great idea," Kirkvold said. "Staying here long-term, I would definitely prefer if there's a cap overall."

Since voters passed the measure last week, there have been some questions about when the cap actually goes into effect. According to the St. Paul city charter, referendums take effect immediately upon passage. However, in this case, the ordinance lists a May 1, 2022 implementation date. 

Based on comments from the Carter administration and the city, it appears they are preparing for implementation in 2022, not immediately. 

"We remain focused on balancing our equity and growth goals as we work toward implementation next year," communications director Peter Leggett said in a statement to KARE 11. "The Mayor looks forward to engaging with stakeholders from across our community, as well as an amendment to exempt new housing construction, which he will sign once it reaches his desk."