Minneapolis mayor and city staff oppose rent control. Can supporters move ahead without them?

It’s been a year and a half since Minneapolis voters voted Open the door to rent control in the city.

In November 2021, more than 53% of city voters voted to amend the city charter, giving the city council the power to place a rent control proposal on a future ballot.

Mayor Jacob Frey was skeptical throughout the process. In 2021, it is blocked A proposal to allow citizens to place a rent control measure directly on the ballot paper. Last December, he threatened to veto A proposal originating from a task force set up by the council: a cap on annual rent increases of 3%.

“I don’t think we should strive for the least bad option. I think we have to make a city-appropriate decision,” Frey said in an interview with MinnPost in February.

Finally, several senior Free MPs on Tuesday presented their conclusion to the council: Don’t get carried away with rent control. Even relatively lenient restrictions on rent increases, employees said, could cost the city revenue and scare off housing development.

Nothing in the staff recommendation prevents rent control proponents from charging them anyway. However, city council members will need to bypass the mayor. Frey would have the power to veto any attempt to put the issue on the ballot, and the House would need nine votes to override the veto.

Still, Division I councilor Eliot Payne hopes fellow rent control supporters can convince the mayor to at least let the issue pass to voters if they can’t muster a veto-proof majority.

“I think it’s workable,” Payne said after the council meeting on Tuesday. “I think we have to get on with it. I think we have to use the democratic process to answer some of the most difficult questions.”

Last year, the city council appointed a 25-member working group to study the issue. In December 2022, the group published Final report Developing “two frameworks” for rent control in Minneapolis.

• Box 5: The majority of the working group – 14 of the 25 members – favored a proposal to prevent landlords from increasing rents by more than 3% each year with limited exceptions.
• Box 7: A large minority – 11 of the 25 members – favored a softer cap that would allow landlords to raise rents by 5% or 7% annually, as well as some flexibility in accounting for higher inflation. The minority group also wanted newly built, affordable, or owner-occupied units exempt from rent control limits.

But at a council committee meeting on Tuesday, a parade of the city’s top officials on budget, policy and housing matters stood urging the city council to pursue neither option, warning that adopting the more permissive Framework 7 could be disastrous for the city.

City officials said the main goal of the rent control policy is to provide relief to low-income tenants — who in Minneapolis saw their rents rise 44% between 2006 and 2019, despite very little growth in their incomes.

But officials predicted that capping rents would lead to a cascade of effects that would hit these vulnerable tenants the most. Under Framework 5, controlling expected rent for employees would cause new building permits to fall by as much as 75% in the first year – undermining the city’s broader goal of expanding housing supply, which would also help ease upward pressure on rent.

This is one way employees have argued that rent control, paradoxically, can raise rents faster.

For most of the past two decades, average rents in Minneapolis have increased between 1.5% and 2.5% each year. But employees argued that a hard cap could spur “more aggressive rent increases”: landlords could squeeze every penny out of an allowed increase of 3% or more each year — because if they didn’t, they could miss out on future revenue.

City officials readily acknowledged that these projections were not the result of a peer-reviewed analysis; They relied on academic studies of rent control policies in other cities in conjunction with Minnesota data to make their estimates. The staff tried, and failed, to get an outside consultant to perform a more complex statistical analysis in Minneapolis.

But some University of Minnesota scientists They came to different conclusions.

For example, in its September 2021 white paper, the Center for Urban and Regional Affairs (CURA) found “little empirical evidence to show that rent control policies negatively affect new construction.”

CURA’s research also found that research on rent control programs in other cities showed that strong restrictions were effective in “maintaining rent levels below market and moderating price hikes.”

Councilman Jason Chavez—who is part of the rent-control caucus—questioned why the city had not hired CURA to help analyze it. Payne expressed frustration that the city’s accounts failed to capture the nuances of the local housing economy, or the effects of broader forces such as inflation or interest rates.

“I don “t think so [staff] We had the time and resources to do the kind of comprehensive analysis to answer common questions that we have from a policy-making site,” Payne said. “I was hoping to see some kind of statistical modeling, some source data that we could point to.”

But Minneapolis officials said they also set their expectations by looking “across the river.”

Six months after St. Paul voters enacted a strict rent control policy (similar to Minneapolis Framework No. 5) in November 2021, New multi-family housing development is down approximately 80%. Last September, the leaders of St. Paul Many restrictions eased in the Rent Control Act (with provisions that sound more like Box 7, the Minneapolis staff said).

This step taken by the St. Paul City Council stems from “difficulties and problems [rent control] Minneapolis director of development finance Angie Skildum stated: She said Minneapolis employees consulted with St. Paul developers and city officials in writing their recommendation.

If Minneapolis city councilors hope to help the most vulnerable renters, employees have argued that they should consider creating new rent subsidies or Guaranteed income Programs – that would deliver direct benefits to low-income residents at a lower cost than rent control.

Without specifically naming these policies, Council President Andrea Jenkins indicated her desire for “targeted” programs to help tenants at risk.

“Whatever policy we come up with—and I want to see something happen to these very challenging members of our community—it has to be targeted, it has to be direct,” Jenkins said, “and it can’t exacerbate the problem that members of our community are currently experiencing.” .