How Landlords Are Getting Around St. Paul’s Rent Control Law

The 3% cap on rent increases is among the most strict in the nation, but loopholes are causing pain for some tenants.

St. Paul

(Photo by Josh Hild / Unsplash)

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When Katherine Banbury, 64, and her partner moved into a two-bedroom apartment in St. Paul, Minnesota four years ago, the rent was advertised to be $1,000 a month. She had been means-tested before moving into the HUD-subsidized building for low-income seniors and she was categorized as extremely-low income. Yet when she was presented with her lease, the corporate owners of the building, Dominium, told her the rent was actually $1,060.

Her rent has risen steadily over the years as HUD raised the maximum allowable rent. Fed up with the rent hikes, Banbury began organizing other tenants in Dominium buildings. Eventually, she helped to collect signatures for a ballot referendum that would restrict annual rent increases in all of St. Paul’s residential buildings. That referendum was resoundingly approved by voters last November and the law took effect May 1.

Yet Banbury still received another rent increase notice from Dominium after the law went into effect, this one for 7.9%. That’s well above the 3% minimum rent hike set by the ordinance. It would take the rent on her two-bedroom to $1,440, something she and her partner can’t afford.

How is the hike possible? St. Paul’s rent control ordinance allows landlords to raise rents up to 8% as long as they complete a worksheet affirming their expenses have increased. In most cases, no one from the city will check their work, and these “self-certifications” are automatically approved.

“They just keep raising it,” Danbury says of her corporate landlords. “And they’re not doing anything for us…they don’t take care of the building.” Some seniors in her building have left to live in their cars over the years due to rent increases, she says.

On November 2, 2021, St. Paul voters approved one of the strictest rent control ordinances in the nation, limiting increases to 3% a year for all units. But the ordinance allows owners to hike the rent to 8% in order to receive a “reasonable return on investment” without any formal audit, and up to 15% if they undergo a more rigorous evaluation of their expenses. While advocates say most landlords are staying under the 3% rent hike limit, tenants say the law’s built-in loopholes and legal gray areas are leaving some people vulnerable.

Some landlords have raised the rent past 3% without even applying for an exemption, claiming to be unaware of the new law before being contacted by the city. Others have effectively raised rents by hiking utility costs; the city says this is not permitted under the legislation, while some housing advocates believe the wording in the law is vague enough to allow it.

St. Paul’s website does a decent job of explaining the new laws, but there has still been confusion among tenants and landlords. Eric Hauge, Executive Director of HOME Line, which provides free and low-cost legal advice to Minnesota tenants, says close to 50 tenant households have called their hotline seeking assistance since the law went into effect.

“There are just some smaller-time landlords that just didn’t know,” he says. In those instances, HOME Line provides a basic form letter on their website for tenants to send their landlords.

Tenants still facing illegal rent hikes can file a complaint with the city. According to Suzanne Donovan, a spokesperson for the Department of Safety and Inspections, the city received 59 complaints about violations since the law went into effect. The department responded to 43 of those complaints, usually by sending a letter to the landlord with information on the ordinance, Donovan says.

The ordinance leaves the door open for fines and criminal prosecution against landlords, but no specific punishments are mandated. A tenant’s best recourse is to file an appeal with the city or take their landlord to court, a potentially costly and time-consuming option.

While some landlords have been raising rents illegally, many have raised them above 3% through the aforementioned self-certifications.

“We have seen instances where people have been kind of abusing the self-certification system, and really just plugging in numbers,” says Margaret Kaplan, president of the Minnesota-based nonprofit Housing Justice Center.

In an email to Next City, the Department of Safety and Inspections says the city received 75 requests for exemptions, 56 of which were self-certified because landlords wished to raise rent between 3-8%. Of those 56 self-certifications, 52 were approved by the city. There were also 19 applications that had to undergo the more rigorous staff approval because they were between 8-15%. Of those, only one has been approved so far, but 15 are still in progress and might be approved later.

The city says it will clamp down on fraud by auditing a random selection of self-certified applications. Kaplan believes this would be sufficient for finding systemic issues and that the city might even choose to limit self-certification if the problem is rampant.

“It’s kind of on the honor system,” she says. “If people are violating the rules and breaching that trust, I could easily see a scenario where they limit self-certifications or end up auditing more of them.”

But Hauge and others believe the self-certification option is already causing problems.

“This middle ground between 3 and 8 percent, it’s a little bit of the wild west,” Hauge says. “If a landlord wants to, they can try to get away with it. And we’re seeing landlords try to get away with it.” The potential for abuse puts the onus on tenants to submit a complaint to the city.

Juan Luis Rivera-Reyes, a tenant organizer at HOME Line, also says the law lacks language justice; tenants who speak English as a second language, including Somali and Spanish-speaking communities that HOME Line works with are less likely to know about the legislation at all. And landlords don’t have to share with tenants if they are applying for a rent exemption.

“They don’t share a notice of rent increase or notice of a potential rent increase or any type of correspondence with folks in their preferred languages,” Rivera-Reyes says.

And there were landlords who preemptively raised rents before the ordinance even went into effect to lock in the higher rent. It’s a response that some advocates expected.

“We did see some examples that were fairly egregious,” Kaplan says of these preemptive rent hikes. But she says the city needed the 5 months between the passage of the ballot referendum and the law’s introduction to craft a strong policy immune to legal challenge.

“I think it was a strategy choice in some ways. And I think it was in some respects an okay strategy choice, in other respects not an okay strategy choice,” Kaplan says. “Some of the folks may have raised their rents in reaction to what they feared might happen rather than what was actually going to happen.”

Banbury says she witnessed lots of fear-mongering among landlords ahead of the law becoming official - despite the fact that the average rent hike over the past 20 years in St.Paul was 2.3% - well below what is now allowed under the law.

“People are just running scared and running greedy,” Banbury says.

Landlords have also been hiking up costs for renters by raising utilities and fees. While the city says this is a violation of the ordinance, some advocates believe there is a gray area and the issue may have to be resolved in court. The ordinance says that housing-related costs count as rent. But Rivera-Reyes has heard from tenants who are facing rising pet fees, parking fees and other more ambiguous service fees since May.

If the legislation is amended, it won’t happen immediately. The law can neither be repealed nor changed until November 2, 2022, a year after the referendum passed. And it’s not clear that the city’s political establishment has an appetite for strengthening the law, as a majority of the city councilmembers and the mayor were opposed to the legislation to begin with. Housing advocates point out, however, that a majority of people in six of the city’s seven wards voted for the ordinance, and lawmakers may have to adjust.

“I think that there is always a challenge for an elected official to go against the will of their own voters,” Kaplan says. But she says an attempt to weaken the legislation is still possible.

Opponents tried to water down the law as soon as the referendum passed. Banbury served on a working group assembled by the mayor to help craft the legislation and later provide recommendations on amending it. She says while there were some tenant advocates on the working group, other stakeholders disagreed with rent control altogether.

“There were investors and developers and bankers and landlords and most of them were completely against the ordinance,” she says.

The working group released a set of recommendations in June for reforming the ordinance, but tenant advocates say implementing those suggestions would be disastrous for renters. The recommendations include a 15-year exemption for new construction, the ability to exempt units from the ordinance once they become vacant (often referred to as vacancy decontrol), and the ability to “bank” rent increases so that a landlord could choose not to raise rent one year then raise it by 6% the following year.

Hauge at HOME Line says tenants have already expressed alarm about a potential exemption for new construction. Developers have claimed that the rent control law is limiting the amount of new affordable housing being built.

“Some of the tenants that are contacting us live in apartments that are new construction and potentially could be exempted, and they’re seeing serious rent increases,” Hauge says.

If loopholes allow landlords to deregulate units, it could lead to widespread harassment and evictions, one of the reasons that advocates had originally hoped to pass a Just Cause law along with the rent stabilization ordinance.

“Just Cause is an essential part of this ordinance,” says Rivera-Reyes. “That’s something we were saying before the effort even started to get this on the ballot.”

Hauge says a Just Cause law would address many of the complaints he gets from tenants. “A huge thing we get calls on our hotline about is not not just evictions in the formal sense of court filings, but judicial efforts around displacement, where landlords are giving notice to vacate or lease non-renewals, often times retaliatory,” he says.

Banbury is now representing Dominium tenants in an ongoing court case fighting their rent increases. Despite the uphill battle against her corporate landlords’ ceaseless rent increases, she is glad she fought for the rent stabilization ordinance. She realizes people in Dominium buildings just outside of St. Paul’s city limits don’t have legal ground to fight their rent hikes in court.

“I think the ordinance is fantastic. I think they thought everything out, it looks really great,” she says, adding, “I wish we had just cause, we don’t have that.”

Hauge agrees that most renters have benefited from the ordinance. “Maybe it’s not always working for everybody, it is working for a lot of people,” he says. “We have been able to help people push back against rent increases, and we know that there are landlords that are just complying with the law.”

This article is part of Backyard, a newsletter exploring scalable solutions to make housing fairer, more affordable and more environmentally sustainable. Subscribe to our weekly Backyard newsletter.

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Roshan Abraham is Next City's housing correspondent and a former Equitable Cities fellow. He is based in Queens. Follow him on Twitter at @roshantone.

Tags: renters rightsst. paulrent controlminnesota

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