St. Paul voters on Tuesday opted to become the first Midwestern city to enact rent control. Minneapolis came one step closer to adopting such a policy, after voters approved a referendum allowing the city to develop its own rent control ordinance.
At least one banker with extensive experience in housing issues urged lenders to be cautious as they consider future credit obligations in this arena. Nichol Dehmer is CEO of Reliance Bank in Faribault, Minn., and Chair of the Board at Drake Bank in St. Paul; she has also served as president of the Minnesota Multihousing Association, and as the Chair of the Board for Habitat for Humanity of Minnesota. She suggested community bankers pause any planned financing for St. Paul rental property until a final rent control policy is developed and the impact of the plan on property values outlined. She said rent control could lead to deteriorating building conditions in St. Paul, lower the value of neighboring properties, and hasten the trend of local rental property owners selling to out-of-town developers.
“It’s kind of a cumulative effect … a lot of the local ownership gets frustrated and sells off their property” she said of rent control and its known impacts on cities on the East and West Coasts that have implemented rent control.
As reported by the Star Tribune, the St. Paul measure caps rent hikes at 3 percent beginning next year. St. Paul’s rent control measure is seen by some to be the strictest in the country, because it is not tied to inflation, does not allow landlords to raise rents once a tenant moves, nor exempt new construction. The votes in St. Paul and Minneapolis proved divisive, with organizers inundating the two cities with messages for or against rent control.
Opponents said rent control would cause developers to lose revenue and encourage them to look elsewhere to build. Supporters said rent control would keep an abundance of affordable housing and promote stability for renters.
Dehmer said although Minnesota has historically had extensive local ownership of rental properties, more owners have been selling to non-local groups offering higher prices since tenant protection measures were implemented in recent years. Still, she noted the Midwest is still a relatively inexpensive place to develop land.
“We are an attractive spot, still, for outside development,” Dehmer added.