Tenant Advocates Closely Monitor St. Paul Landlord Rents

Pao Xiong paid $ 1,000 a month to rent a duplex on the East Side of St. Paul for three years until a new owner bought his building and raised his rent to $ 1,150.

The 43-year-old father-of-two was not happy with the hike but believed he and his wife could make the finances work. But 12 days later – less than two weeks after St. Paul voters adopted the Midwest’s first rent control measure – Xiong received an email telling him his rent would rise to $ 1,850 in March.

The landlord didn’t say why she was raising rents, but Xiong said friends and legal experts he had consulted suspected rent control was a factor.

“It’s stressful,” he said. “We’re in a place where we can try to fight this rent increase, but it looks like an uphill battle.”

More than 30,000 St. Paul residents – about 53% of voters – approved a referendum order earlier this month that will cap annual rent increases at 3%. The city has yet to finalize the details of its new policy, which has been seen as one of the toughest rent control measures in the country because it doesn’t allow landlords to raise rents once. that a tenant moves out, does not exempt new construction and is not tied to inflation.

Already, some landlords are planning rent increases, saying they want to match market rates before the May 1 effective date set out in the ordinance. In response, tenant advocates are urging residents to report rent increases above 3%, which they say could be ripe for legal challenges.

But in the short time since the St. Paul’s ballot measure was passed, few tenants have come forward to report experiences like Xiong’s.

“There are acts of intimidation to scare people about what might happen,” said Eric Hauge, executive director of Home Line, a nonprofit organization providing free legal aid to tenants. “But the reality is, landlords have to set their rents based on what the market can take.”

The average monthly rent in St. Paul at the end of September – $ 1,258 – was the same as the year before, according to a report by Marquette Advisors, which tracks rents for more than 160,000 apartments at market prices. in the Seven Twin Cities. departmental metro.

But in other parts of the country, rents are rising rapidly. Homeowners point to this trend and others – including higher inflation and property tax increases – to argue that 3% annual increases will not be enough to cover their expenses.

“Landlords will work to bring their rents closer to the market rate for the start of this ordinance as we are concerned about falling behind in the future,” said Joe Hughes, who owns more than 150 apartments in Saint-Paul. .

Hughes, a two-decade St. Paul landlord, has kept rents for some longtime tenants stable – even though they’ve fallen $ 100 or $ 200 below the market rate – to save on running costs and help reliable tenants who cannot afford steeper accommodation. costs. Now he fears that these demonstrations of good faith will cause him to back down.

Normally Hughes would adjust prices once these tenants move out, but St. Paul’s ordinance will prohibit him from doing so. While he plans to preemptively raise rents, he expects tough conversations with tenants who will see the biggest increases. He said he will offer them other units that might better suit their budgets.

However, not all of Hughes’ leases end until May 1. The city plans to develop a way for landlords to apply for permission to increase rents by more than 3%, but it’s unclear how that will work.

Margaret Kaplan of the nonprofit Housing Justice Center, which helped develop and campaign for voters approved ordinances, said she encouraged homeowners to participate in community conversations about rolling out the policy instead of rushing drastic rent increases.

Although Kaplan and others are watching the overreaction, she said Twin Cities tenants – especially people of color and low-income residents – have suffered disproportionate rent increases for years. This is what prompted activists to petition for change in the first place.

“The intention is not that that 3% is really expensive – the ordinance says people should be able to get a reasonable return on their investment,” Kaplan said. “But I think it’s a lot harder to argue that you deserve an exemption if you slap someone with a 20% rent increase.”

Kaplan said advocates will see if tenants facing large rent increases in the coming months have grounds for legal challenges on the grounds of retaliation, non-compliance with habitability standards or violations of housing laws. tenant-owner basis.

There is also some uncertainty about when the order will come into effect which could allow tenants to claim that the rent control went into effect on the day it was passed, but tenant advocates have said that they were less inclined to prosecute on that basis alone.

Peter Leggett, director of communications for Mayor Melvin Carter, said in a statement Thursday: “While the city cannot provide legal advice to individuals or entities, we encourage members of our community with legal questions to consult a legal counsel. lawyer. We are encouraged to do so. community members are eager to engage and help answer critical questions like these and expect to mandate a group in the coming weeks. “

People on both sides of the rent control debate have expressed frustration with Carter since he proposed an exemption for new construction after developers threatened to pull projects out of St. Paul. Those who campaigned for the ordinance say the mayor is fueling a “disaster story” launched by opponents; Homeowners accuse Carter of jumping to allay fears of wealthy corporations while leaving mom and pop homeowners to dry out.

“We never set out to make a fortune,” said Jim McCorkell, who, with his wife, owns five duplexes in St. Paul, including one in which they live. “For us, it was a way to have retirement income when we are ready to retire.

McCorkell said he believes the city’s lack of housing – especially affordable units – is a huge problem, but rent control is the wrong solution. He wonders if the city could find another way to target price gouging owners.

Some landlords say the ordinance will prompt them to increase rents by 3% each year, postpone maintenance and explore ways to pass on bills for water, garbage, laundry or other services that tenants may not cover.

As a last resort, McCorkell has said he would consider selling his properties, although he fears they will be taken over by a large business owner with fewer interests in the community.

Xiong, the East Side tenant, contacted a real estate agent this week to determine if he could buy a house – which he had planned to do, but not so quickly. He and his family will enter a market where homes always sell quickly and at high prices.

“Are we going to be able to afford it? I don’t know,” Xiong said. “I’m not totally sure what we’re going to do.”

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