The Rent Is Too Damn High, Con't

Tons of local ordinances were voted on last week, including a rent control vote that passed overwhelmingly in St. Paul. Within a day of the vote passing, limiting rent increases in the city to 3% a year, developers called city hall to tell the city that planned new apartment units would be placed on hold indefinitely and that they would look to the outer Twin Cities suburbs to build.

 

Less than 24 hours after St. Paul voters approved one of the country's most stringent rent control policies, Nicolle Goodman's phone started to ring. Developers were calling to tell the city's director of planning and economic development they were placing projects on hold, putting hundreds of new housing units at risk.

"We don't want our equity goals to be at odds with our growth goals," Goodman said in a presentation to the City Council Wednesday. "The ordinance as written may actually put those goals at odds."

Voters' decision Tuesday to cap annual rent increases at 3% sent developers into a frenzy, prompting some with stakes in Minnesota's capital city to pause projects or reconsider sites for future housing.

Unlike most cities with rent control, St. Paul will not exempt new construction, which opponents argue will force lenders and developers to look outside the city for spots where they feel more confident that they will recoup investments and earn profits.

"We, like everybody else, are re-evaluating what — if any — future business activity we'll be doing in St. Paul," said Jim Stolpestad, who has worked on developments in St. Paul for 30 years as founder of Exeter, the company behind major projects like Grand Avenue's revamped retail corridor and new luxury apartments in the Cathedral Hill neighborhood.

It's a sobering prospect as major redevelopments, including the Hillcrest Golf Club and Boys Totem Town sites, enter critical planning stages. At the Highland Bridge site, where construction is well underway, Ryan Companies was scheduled to submit three building plans to the city this week — but Tony Barranco, Ryan's north region president, said Wednesday those reviews have been postponed indefinitely in light of the referendum's outcome.

Ryan Companies warned before Election Day that the rent control ordinance could prevent them from finding investors for the 760 affordable housing units the city pledged to bring to the former Ford site.

"If our banking partners won't loan us dollars to build the buildings that are planned as market rate because they can more safely lend their dollars elsewhere, we will not be able to build the market rate projects" that help subsidize affordable housing, Barranco said.

Supporters of rent control, led by a grassroots coalition that petitioned to put the ordinance on the ballot, say developers are making empty threats.

"This happens in every city where new regulations are passed … because they want to scare the city into changing the ordinance," said Tram Hoang, campaign manager for Housing Equity Now St. Paul, which led the ballot measure push

Ramsey County Commissioner Trista MatasCastillo, who voted for rent control, said she believes St. Paul's population and need for development will ultimately win out.

"I don't think development will stall," she said. "But there will be some kinks that need to get worked out."

 

I think this is the most likely outcome, but understand that the problem with affordable housing is that when you add to the supply of it, it lowers the value of existing housing.

There are people who will fight that with every fiber of their being. Not all of them are housing developers, either.