BY CAM GORDON
The rent control debate is heating up. With the city’s rent stabilization workgroup completing its work in December, it now falls to the City Council to approve a policy and draft an ordinance if we are to have rent stabilization in Minneapolis.
On Dec. 13, the 25-member workgroup took a vote between two competing frameworks and voted 14-11 in favor of a framework (Option 5) that would limit rent increases to three percent per year with exceptions for “substantial capital improvements” and for “deferred maintenance and habitability.”
The other framework (Option 7) calls for variable rent increases starting at five to seven percent plus a cost-of-living increase and would have no controls in place when there was a vacancy, meaning landlords could set rents at any level they wanted. It would allow rental license holders to “bank” annual increases to be used later, and would exempt affordable housing, all new construction for 30 years and all owner-occupied rental housing. It also calls for rental subsidies for renters making 30% or less of the area’s median income.
With the full report not coming until early 2023, many elected city officials have chosen not to respond. Others have been quick to react.
Mayor Jacob Frey said the day after the workgroup’s final vote that he would veto the recommended framework (Option 5) that set a three percent cap. He was concerned that it would hurt the rental market, pointing to what happened in St. Paul.
Ward 2 City Council Member Robin Wonsley was quick to praise the group’s recommendation. “Minneapolis is ready for strong rent control with a three percent cap, no exemptions,” she wrote. “Renters and small landlords voted to advance this policy to the City Council because it’s what Minneapolis needs to keep people in their homes.”
Organizations are also weighing in. The interfaith group ISAIAH called it a “big win in Minneapolis” and gathered with other coalition partners the next day to celebrate, calling on the council to “listen to voters and their workgroup.”
“City Hall will hide behind the chasm of difference between these two proposals to debate the merits of rent control from scratch,” said Minneapolis United for Rent Control (MURC), a group that campaigned for the rent stabilization charter amendment that narrowly passed in 2021 with 53.21% of the vote and gave the council the authority to pass or propose a rent stabilization ordinance. They were critical of Option 7’s inclusion of “variable rent increases (basically no rent control), with rent banking, meaning that a landlord could ‘bank’ rent increases over years and implement one large rent increase, plus inflation! Their proposal also includes massive carve outs, including a possible 30-year exemption for new construction.”
The City Council voted against giving a representative of MURC a seat at the table earlier in 2022.
The Minneapolis Advisory Committee on Housing, however, did have a representative at the table. Their representative, Bruce Brunner, supported Option 7 and said that Option 5, if passed, would be the most restrictive policy in the country. “I believe in rent stabilization,” Brunner said, “but I believe in a more moderate approach.”
As both a landlord and a developer of mostly duplex and triplex rental housing for the past 20 years, Brunner has experience providing a variety of rental housing. “I am the largest provider of housing for the Stable Homes Stable Schools program,” he said, noting that he also provides Section 8 and market-rate housing.
Brunner supports an exemption for new construction, although said it could be less than 30 years. He also believes that rents need to be decontrolled when a unit is vacant so that its rent can be adjusted to match the current market rate and that accommodations need to be made to address inflation and rising costs.
After years of relatively small and predictable cost increases, Brunner said that in 2022 his mortgage rates have gone up seven percent, his taxes have gone up eight percent, and maintenance has gone up 12%.
With only a three percent cap and no provisions for people to bank or reserve rent increases over more than a year, and no opportunity to adjust rents when there is a vacancy, Brunner believes landlords will decide to increase rents the maximum amount every year, and that will actually lead to higher rents for some tenants. He is also concerned that “we will get more and more places with delayed maintenance.”
“It’s important to have something that’s passable at the ballot,” Brunner said, acknowledging that city officials say they intend to put it on the ballot in November of 2023.
Daniel Suitor, a Central neighborhood homeowner, also served on the workgroup. He supports Option 5 and represented the nonprofit organization he works for, HOME Line, which provides tenants with free and low-cost legal, organizing, education and advocacy services.
“I don’t think anyone would agree that what we have now is working,” Suitor said. “We proposed a strong policy and there is no reason this won’t work.”
Option 5 “lays out a slate of drastically needed reforms for tenants,” said Suitor. One of its strengths, he added, is the ease of how it will be administered and understood. “Simplicity will make it easier for everyone,” he said. “It will become the way of doing business in Minneapolis.”
Suitor believes that a separate cost-of-living increase is not needed because “we know for a fact that there has to be a reasonable rate of return” or the policy could be challenged and defeated in court. He points to St. Paul’s ordinance that allows all landlords to have a base level of profit. The rent stabilization ordinance there limits monthly rent increases to three percent in any 12-month period, even when tenants move out, but also recognizes property owners’ right to a “reasonable return on investment.” The ordinance creates a process for landlords to request an exception to the rent cap based on the right to a reasonable return on investment, and to consider specific factors when determining whether an exception is justified, including increases or decreases in property taxes and property deterioration.
While it appears unlikely that supporters of Option 5 would ever support removing the control when there is a vacancy or exempting new construction, there may be some openness to rent banking. In Oakland, for example, if rent has not been raised in recent years, a landlord can bank up to three years of allowable rent increases and apply the total increase in a single year. “I’m open to rent banking personally, but it needs to be studied more,” said Suitor.
With the mayor promising a veto, a compromise may be necessary to get anything passed and approved. So far, the mayor has offered little insight as to what might get his support. Without it, the council will need nine yes votes to override a veto and move something forward to the ballot.
“I think there is plenty of room for compromise at the council level,” said Suitor, noting that there are many details that would need to be worked out in an ordinance.
“There was no looking for compromise from many people” at the workgroup, Brunner said. “The City Council has to come up with a compromise to find something that is supportable and passable.”
For a ballot question to be referred to voters in 2023, all legislative action must be completed by June 1.