Jim Stolpestad: Heres why I oppose the rent control proposal in St. Paul – TwinCities.com-Pioneer Press

I am writing in opposition of the proposed rent control measure on the November ballot in St. Paul.

The last several years have seen unprecedented rental housing development in St. Paul. New construction and renovated buildings with rents at all levels of affordability can be seen throughout the downtown and the West Side river flats, along the University Avenue light rail corridor, on Snelling Avenue south of I-94, and now under construction at Highland Bridge. This list does not yet include the future developments at the Sears site or the former Hillcrest golf course. Alarmingly, the rent control measure would place all of these projects at risk.

Local urban geographer Bill Lindeke (Ph.D., University of Minnesota) made many sound arguments against rent control in his recent Twin City Sidewalks posting, Why the 3% Cap Stops New Housing Construction. Here is an extended passage from his article:

Whether or not its possible (for landlords) to make money with a 3% rent cap in place is irrelevant. Its about the financing Its also not really about whether developers make money. Ask anyone who does economic development, and theyll tell you that developers have trouble getting financing for new housing in Saint Paul as it is. It will become impossible to get loans to build when the city has become three times as risky as anywhere else in the country. The people who finance construction have plenty of choices about where to (finance) build(ings). When it comes to building new housing, Saint Paul will basically be redlining itself. (Italics added.)

Lindeke summarized the flaws in the proposal by saying it would be one of the strictest in the world. The proposal does not contain exclusion for new construction like other cities, and in the end would not really benefit the income groups it is intended to help.

Lindekes comments resonate with me, based on Exeters 30 years of developing, managing, and owning commercial real estate in five of the seven wards in St. Paul.

It is perhaps not widely known that the pandemic has driven down apartment rents throughout the Twin Cities to substantially lower levels than 18 months ago. A blanket 3% rent cap would freeze rents in St. Paul at a point where a great many building owners would have difficulty covering mortgage payments and real estate taxes. As a result, there could be foreclosures and ownership changes that would hurt the downtown and other areas of the city where new rental projects have revitalized entire neighborhoods.

This would be a tragic outcome for St. Paul, which has gained so much development momentum in recent years, with light rail and new sports facilities to go with the citys many outstanding cultural and historical venues and solid large downtown public and private employers.

There are also many complex legal issues associated with the proposal as well. Whether the ballot initiative in fact complies with existing Minnesota law is debatable. The impact of third-party covenants in the citys many tax-increment-financing districts and their possible constraints could affect the ability of the city to entertain, adopt, and/or administer a program like the ballot measure.

Perhaps the most potent potential legal issue would be the Fifth Amendment to the U.S. Constitution, which prohibits a municipality from exercising public policy powers that go too far and constitute an eminent domain taking that would require the payment of just compensation to affected property owners. The 2013 U.S. Supreme Court case of Koontz v. St. Johns River Management District gave new vitality to this takings clause of the Fifth Amendment, and a more recent federal district court case in Hennepin County was decided along somewhat similar lines. All of which probably increases the likelihood of a serious and well-funded legal challenge in St. Paul should the ballot measure pass.

Finally, its very distressing to me, a person who has been involved in local public affairs over his entire professional career as a practicing lawyer and then real estate developer, that there has not been a proper public discussion process about the proposal, which normally precedes a significant change in city policy. I believe this has been a glaring oversight. I hope voters will reject the ill-advised proposal and allow for a conversation about how to bring more housing to St. Paul.

James A. Stolpestad is the founder and senior principal with St. Paul based Exeter Group LLC.

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Jim Stolpestad: Heres why I oppose the rent control proposal in St. Paul - TwinCities.com-Pioneer Press