Unraveling the appeal process for St. Paul’s rent control ordinance

St. Paul’s rent stabilization order has been in effect for less than three months, but tenant groups and landlords say many issues still need to be ironed out.

One area that needs more clarity is the appeals process by which landlords can request an exception to the 3% rent increase cap. The first hearings on these appeals began in late June. The St. Paul Legislative Hearings office has a full list of upcoming hearings.

Here’s how the appeals process works and what landlords and tenant groups have to say about it:

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The process

The rent control ordinance prohibits a landlord from increasing the rent more than 3% per year. But there are exceptions. If a landlord feels that his situation meets the criteria, he can request a rent increase above the 3% threshold.

The arrangement which was developed by Housing Equity Now St. Paul (HENS), a coalition of affordable housing advocates, allows exceptions to the cap when a landlord anticipates that they will not get a reasonable return on their housing investment.

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The Rent Control Ordinance lists seven cases that may interfere with a landlord’s right to a reasonable return:

  • Property tax increases or decreases.
  • “Unavoidable” increases in maintenance and operation, as if water tariffs tripled. A decrease in maintenance and operating expenses is also listed, but city officials said there was no example yet of what that would look like.
  • The cost of capital improvements that are necessary to bring the building up to city health and safety codes, but are not “ordinary” repairs.
  • Increases or decreases in the number of tenants occupying a unit or using building furniture or housing services.
  • “Substantial deterioration” of the unit beyond normal wear and tear.
  • The landlord does not provide adequate housing services or comply with state and local housing regulations. City officials, who also note that they are unsure when this would apply and that this exception needs to be “road tested,” interpret this as a case where a tenant asks a district court for compel a landlord to raise or change rent, or refinance, in order to make repairs resulting in condemnation of the unit and forcing the tenant to move out.
  • The trend of recent rents is going up or down.

Increases in property taxes or maintenance costs are simple: if that cost goes up, rent could go up as well, said Marcia Moermond, St. Paul’s Legislative Hearing Officer. Some of the other situations have not yet arisen.

If a landlord feels they fall into one of these categories, they can file a request for an exception to the rent cap rule with the city.

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A landlord’s request for a 3% to 8% rent increase is a self-certified and mostly automated process, according to Moermond. If a landlord applies for such an increase, the city will grant it, Moermond said.

But requests for rent increases above 8% prompt the city to individually review financial records submitted by a landlord. In case of refusal, an owner can appeal to the municipal council.

There is no mechanism that notifies tenants that a landlord has requested an exception to the rent increase cap. But both the landlord and tenant have the right to appeal city council decisions on exceptions.

However, if a tenant gets wind of their landlord’s attempt to appeal the rent control ordinance, they can file an appeal with the city to challenge the landlord’s claim that they are eligible for an exception. , in which case a hearing will be held and the owner’s exception request reconsidered.

Tenant groups understand it’s early but have suggestions

Margaret Kaplan is president of the nonprofit Housing Justice Center of St. Paul, one of the organizations that worked with HENS to lobby for passage of the rent control ordinance.

She pointed out that city officials have been “responsive” and send information when requested regarding the process for landlord appeals or tenant complaints.

“So it’s been a positive thing and I would say overall it’s all a work in progress,” Kaplan said. “The prescription just came out of the ground.”

But Kaplan said his organization had observed “hurdles”.

One is the cost: filing any call with St. Paul codes comes with a $25 fee. If a tenant wants to dispute a landlord’s exception request, they must pay the fees.

“It’s not that easy for everyone,” Kaplan said.

Another problem with the rent control appeals process, particularly when a landlord self-certifies paperwork for a 3% to 8% rent increase, is the lack of notice to tenants, Kaplan said. Tenants don’t know exactly the right time to file a complaint, she added.

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“We’ve had calls from tenants who don’t know their landlord can self-certify an increase of up to 8%,” said Eric Hauge, executive director of HOME Line, an organization that provides legal resources and defense of tenants.

Hauge, who said St. Paul employees have been “very open” about the entire appeals process, also supports adding a way to notify tenants that their landlord is trying to make appeal of the rent stabilization order. He said the city could also take steps to make sure tenants are aware of all aspects of the ordinance and their rights.

Kaplan notes that the city takes their suggestions “very, very seriously.” On St. Paul’s Rules and Process page for rent control, he points out that there is nothing in the ordinance that deals with tenant notification, but that tenant notification is a “valuable step in the process” and that the issue is a subject discussion by the city. Rent Stabilization Stakeholder Group.

Some owners find the process too complicated, unfair

On July 13, the group told St. Paul City Council that the rules and processes needed to be clarified.

Cecil Smith, president and CEO of the Minnesota Multi Housing Association (MHA), which is one of the largest nonprofit organizations representing property owners and managers in the state, agrees.

“It’s too complicated for tenants and landlords,” Smith said. He added that the city has created “opaque” rules and “no one understands”.

MHA members report that the time it takes to simply understand the rules — let alone pursue an appeal — adds costs to their business, driving up housing costs in St. Paul.

“It’s not a gift to ask accountants and regional managers to spend time working on this. It takes resources,” Smith said.

Some MHA owners reviewed the process, found it too confusing and decided not to pursue an appeal, Smith said. The appeals process is often too complicated, even for MHA accountants.

Smith said the appeals process does not conform to general accounting practices, which can cause a problem if a landlord makes an appeal that receives a city review. Once city staff dig into an owner’s financial books, those records become public. This means that anyone could look at the owner’s financial records and find that their accounting does not follow general accounting practices. Smith said that exposes owners to other liabilities and may impact future sale prices, as well as tax increases for appraisers.

Also, some owners aren’t happy to have their records made public, to begin with.

Smith said the struggle to understand or attempt to appeal is unfair because the cumbersome process will hit smallholders and owners of color the hardest.

Smith and MHA suggest simplifying the appeals process — which he says may not be possible given the complexity of a rent control order.

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