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Voters in St. Paul, Minn., passed one of the most restrictive rent control ordinances in the country. It's one of several cities reviving interest in an old but controversial way to limit housing costs. NPR's Laurel Wamsley reports.
LAUREL WALMSLEY, BYLINE: Katherine Banbury says her rent has gone up nearly $400 in the little more than three years since she moved into an apartment on St. Paul's East Side.
KATHERINE BANBURY: So it was 969. They raised it right away.
WALMSLEY: And now she and her partner are paying 1344 a month in a building that's classified as affordable housing for low-income seniors.
BANBURY: It's a revolving door. I know a handful of elders. They couldn't pay the rent, so two of them are living in the car.
WALMSLEY: Rent increases that big won't be permitted under St. Paul's new rent stabilization measure. Banbury volunteered for the rent control campaign, which voters approved last week by a 53-47 margin. And the new law is more restrictive than most rent regulations in the U.S.
TRAM HOANG: Our ordinance would limit annual rent increases to 3% a year. And this would be across the board for all private rental units, regardless of whether they're single-family home rentals or a larger apartment building.
WALMSLEY: That's Tram Hoang, who led the campaign for yes on the ballot measure. The 3% cap on rent hikes isn't pegged to inflation, and if property owners want to raise rents higher - say, due to rising property taxes or capital improvements - they'll have to apply for an exemption. There are a couple other unique aspects to the law. The 3% cap holds even when a tenant moves out, so landlords can't raise the rent higher for the next tenant. And there's no exemption for new construction. It's that last part - no exception for new construction - that's been a major concern for city leaders and real estate developers.
JENNY SCHUETZ: Usually, this gets phased into older buildings, say, after an apartment building has been in use for 15 or 20 years. Then rent controls come into effect.
WALMSLEY: Jenny Schuetz is a senior fellow at the Brookings Metropolitan Policy Program. She says a law that limits the option to raise rents in new buildings can discourage building more rental housing.
SCHUETZ: Immediately, new buildings - the owner has high mortgage payments. They're still probably recouping some of the construction costs. And so if you build a brand-new building and you can't raise the rent on it, it's a disincentive even to build the new apartments. And, of course, the problem we have already is that there isn't enough housing to go around.
WALMSLEY: And the conversation about rent control isn't just in St. Paul. Across the river in Minneapolis, voters also gave City Council a green light to enact rent control. And in Boston, voters elected a mayor, Michelle Wu, who supports rent stabilization, though it might be tough going as Massachusetts has a ban on rent control. Schuetz says constituents are asking their elected officials to do something about housing costs.
SCHUETZ: There's more conversation in the last, say, three years about rent regulation than we've probably had in the past 30 years.
WALMSLEY: Since rent control's passage in St. Paul, one major developer, Ryan Companies, said it's putting the city review process on hold for three apartment and condo buildings that are part of a project on the site of a former Ford plant. The company says the ordinance has threatened its overall finance plan for the development. Four of the city's seven council members had urged voters to reject the measure. St. Paul's Mayor Melvin Carter supported it but wanted some changes and now says he'll ask the City Council to amend the ordinance, exempting new construction from rent control. Not surprisingly, landlords say the law will make their business harder. Stephanie Sokup is a vice president at Real Estate Equities, which owns and operates five apartment buildings in St. Paul.
STEPHANIE SOKUP: We can not do improvements, not do the pretty landscaping. There's a lot of ways to control expenses. But there's only one way to make income, and that's through rent. So we're going to have to do the 3% rent increase every single year on everyone and then hope that that's enough income to cover our expenses.
WALMSLEY: Hoang, who led the campaign for the ordinance, says rent control is just one part of the puzzle, along with government funding for more deeply affordable housing and stronger tenant protections. She believes developers will keep investing in the Twin Cities even if they announce a pause. And she does hope that rent control will discourage one type of investor - big corporate landlords that have been buying up single-family homes in the area. Laurel Wamsley, NPR News.
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