City considers law preventing most residents from renting their homes

Karen Johnson owns two houses on the same lot in South St. Paul, living in one and renting out the other. But she worries a proposed ordinance limiting rental units to 10 percent of properties per block could keep her out of the rental market.

“If I decided to move away and keep the property, then I would be unable to rent both properties,” said Johnson, a resident for 15 years. “And if I should sell it to somebody, and there’s only one license for one property, it may affect my ability to sell the property to somebody, who may want to own it for rental purposes.”

The controversial provision surfaced in an overhaul of rental policies now before city councilors in the Twin Cities suburb. The so-called rental density cap would direct the city clerk to consider rental license applications on the basis of whether anyone on the block already rents his or her residence. Four Minnesota cities already have rent caps on the books.

“That obviously has been very controversial in other communities, but it has worked effectively to avoid high concentrated areas of rental properties,” said city attorney Korine Land in the first city council meeting on the ordinance. “Because that can be a burden on public service and public safety considerations.”

The development has already prompted a hint of possible legal action. The Institute for Justice previously sued Winona over the constitutionality of the nation’s first rental property cap, but the Minnesota Supreme Court left the legality unresolved because some plaintiffs no longer owned the property at issue.

ON ALERT: Eric Myers of the St. Paul Area Assn. of Realtors sent out alerts urging 1,500 local realtors to oppose the proposed cap, which could affect potential property values and sales.

“A future challenge to Winona, or another municipality’s, rental cap could be the case that allows the Court to answer whether rental caps are permissible,” said IJ attorney Anthony Sanders in a letter to South St. Paul Mayor Beth Baumann. “Your proposed ordinance would be just as unconstitutional and unlawful, and also just as bad a policy, as Winona’s.”

The city issues about 775 rental licenses to owners of single-family houses, duplexes and apartment buildings. The 10 percent cutoff would apply to single-family properties only.

“One of the reasons that this ordinance was brought forth was based upon residents in the community that were concerned with the number of rentals on their block and issues related to them,” said South St. Paul city clerk Christy Wilcox in an email.

RELATED: MN: Rental ban hurts homeowner, property rights

But the proposed rental limit raises fundamental property rights concerns that have led to complaints and comments at city hall. Critics include some property owners with no intention of renting their homes, but who view the cap as a threat to everyone’s economic freedom.

“If you and I were next door neighbors, and you already had your house rented out, I’m screwed,” said Burnell Beermann, a 76-year-old homeowner who opposes the ordinance. “That’s the thing, it ain’t right. If they’ve got concerns with behavior, they should address the behavior.”

The restriction has also mobilized the St. Paul Area Association of Realtors. The group alerted 1,500 members in the area, leading several to file bluntly worded complaints with city planners.

“Although your office may have good intentions, it is not the cities business to restrict homeowners rights in this fashion,” wrote Tim Krey, a broker from Real Estate Masters. “Drawing up any percentage is completely arbitrary and UNFAIRLY rewards some but not others. This is an intrusion on a basic American property right.”

Others see the robust rental market as a positive economic indicator for the blue-collar community, population 20,000.

“Strong rental demand today is probably going to turn into strong purchase demand in the future,” said Eric Myers, government affairs director for the St. Paul Area Association of Realtors. “There are cities all over the country that would love to have a rental problem today.”

Official promise to iron out the kinks in a city council workshop and meetings with concerned property owners. Lucky duplex owners may get a break.

“If they sell their duplex and the rental density is over 10 percent, the new owner would still be able to obtain a rental license,” said Wilcox. “I believe that some of the wording in the language of the proposed ordinance may be confusing and we will have to tweak it so it clearly defines this type of situation.“

Regardless of the wording, opponents contend the ordinance says the same thing — renters not welcome.

“Your city would be saying to renters: ‘You are second-class citizens,’” wrote Sanders. “’We do not want you living in our single-family neighborhoods. Therefore we are making it illegal for more than a nominal amount of you to live in those neighborhoods.’”

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