Minneapolis and Saint Paul pass rent control!

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Mike MoeBusiness Member
Realtor · Minneapolis, MN · Member since 2017 · 79 posts · 52 votes
4y

I smell opportunity for the well trained investor! Hopefully this super restrictive form of rent control passed in Saint Paul is only a short term headwind. Yes it has to be in place for minimum of a year, but the mayor has already stated while he is for rent control, he wishes to quickly make changes to this policy if it passes to still encourage outside investment and development which is needed in the city . That’s nothing to bank on though, as it isn't easy for him to do that.

While this is in place investors are obviously going to have to analyze deals in Saint Paul differently going forward. The typical value add strategy of rehabbing & increasing rents will need to be scrutinized as the renovation investment may not make sense if rents cannot be raised to account for the rehab. On that same note, investors will definitely need to be sure to check the leases in place on a property before offering. Owners who have kept their rents closer to market will likely be able to charge a premium for their properties at sale as the new owner won't have to worry about never catching the market rents with the 3% cap. This could also put more pressure in Minneapolis investments until things are more clear on what/if/how rent control will be implemented there.

Interesting times for sure. In any market there are ways to make money, things like this just make us as investors have to think about how we can do so with the current situation. Can't change the market, just what you do with it.

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  • Ku ThaoPro Member
    Handyman · MN · Member since 2021 · 23 posts · 12 votes
    4y

    This is all very informative. I will be following this thread closely. Thank you all for the insight and updates.

    0Reply
  • Wendy Man
    Member since 2019 · 104 posts · 35 votes
    4y

    https://www.cbsnews.com/minnes...

    News story after this Wednesday's vote:

    "The St. Paul City Council moved forward with a plan that adjusts the 3 percent rent cap approved by voters last fall... The carve out to the rent control ordinance authorizes landlords to increase rents by 8 percent plus the rate of inflation if a tenant moves out. ...  There will be a public hearing next week followed by the formal vote by the city council on the changes..."

    "The St. Paul ordinance still has the 20-year exemption from rent regulations for new construction.  ... It also details what constitutes a "just cause vacancy" which would allow a landlord to raise rents by the recently approved cap of no more than 8 percent plus the rate of inflation. Those terms include if there's plans for renovation, the tenant repeatedly doesn't pay rent or he or she chooses not to renew a lease. ... In a statement to WCCO, St. Paul Mayor Melvin Carter said he plans to sign the ordinance as it's currently drafted..."

    0Reply
  • Wendy Man
    Member since 2019 · 104 posts · 35 votes
    4y

    https://www.mprnews.org/amp/st...

    St Paul city council voted to allow increase of 8% plus inflation after tenant leaves for just cause, and exempts new construction for 20 years.  Mayor Melvin says he will sign the ordinance.

    How do people think this will affect twin cities rental investment?

    0Reply
  • Mike Nelson
    Investor · Oak Park, IL · Member since 2014 · 316 posts · 150 votes
    4y

    Any news on how things are going in Saint Paul?  My son's rent was increased by 2.8%.

    0Reply
  • Jeff SchemmelBusiness Member
    Real Estate Agent · Saint Paul, MN · Member since 2014 · 384 posts · 401 votes
    4y

    @Mike Nelson, here's a good article on the amendments they just passed to loosen up the original policy.  it takes effect at the new year.

    https://spaar.com/saint-paul-c...

    1Reply
  • Eric Hempler
    Accountant · Apple Valley, MN · Member since 2009 · 38 posts · 10 votes
    4y

    From what I hear it's pretty easy for investors to increase their rents. All they do is fill out a form and it's approved 99% of the time. 

    0Reply
  • Jeff SchemmelBusiness Member
    Real Estate Agent · Saint Paul, MN · Member since 2014 · 384 posts · 401 votes
    4y

    @Eric Hempler up to a certain % that's the process as I understand it.  It seems they focused on trying to prevent tenants from being booted for profit increases.  My interpretation of it is, if tenants leave on their own accord there's no way for the city to really enforce anything with increases even though they say the policy still affects that scenario - at least not realistically.  Tenants can dispute an increase if a landlord tries to just increase the rent on an existing tenant, and that's what makes some of these properties in saint paul listed with long-term, under-market rent, tenants a tough sell.  I could see some non-owner-occupier investors buying those types of properties and using cash for keys to get the tenants out...do some rehab (which enables them to increase MORE than the limit if approved), and get the rent up that way.  I'm not one of those investors, but I am sure this is happening to some degree, those properties are taking a long time to sell and buyers have much more leverage than they did last spring.

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  • Wendy Man
    Member since 2019 · 104 posts · 35 votes
    3y
    News about the case challenging the constitutionality of the St. Paul rent control.  Story includes a link to a pdf of a Star Tribune story. https://anthonyostlund.com/jos...  I wonder when the judge will rule on the case.
    1Reply
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