Is the Nation's Harshest Rent Control Law Unconstitutional, or Just Counterproductive?Two St. Paul, Minnesota, landlords claim that the city's restrictions on rent increases above 3 percent amounts to a taking of their property without due process or compensation.
CHRISTIAN BRITSCHGI
6.23.2022
The preliminary results of St. Paul, Minnesota's, strictest-in-the-nation rent control law have not been good. Developers have fled, while applications for new building permits and property values have both collapsed. Now, a pair of landlords are suing the city, claiming the law is unconstitutional.
Late last week, the owners of two St. Paul apartments—Woodstone Limited Partnership and Lofts at Farmers Market, LLC—filed a lawsuit in the U.S. District Court for the District of Minnesota claiming that the "draconian" nature of the law and the burdensome process for securing exemptions from it amount to a taking of their property without compensation or due process.
"The sudden depreciation in property values, coupled with the withdrawal from the market of many significant developments that would have included affordable housing, is predicted to significantly worsen, rather than alleviate, the affordable housing crisis plaguing St. Paul," reads their complaint.
The ordinance, written by local activists and passed by voters in November 2021, capped rent increases in the city at 3 percent per year, with none of the typical allowances or exemptions for inflation, vacant units, and new construction.
The policy is far stricter than basically every other rent control law in the country. Oregon's 2019 state rent control law, for instance, allows for property owners to raise rents by 7 percent plus inflation and exempts buildings less than 15 years old from these price caps.
While the St. Paul ordinance did allow landlords to obtain exemptions to that 3 percent cap if it threatens their ability to earn a "reasonable return" on their investment, what would count as a reasonable return and how to secure an exemption were left up to the city to hash out. St. Paul came out with proposed rules for implementing the ordinance, including the exemption process, in early April 2022. These were finalized later that month, and everything went into effect on May 1. The final rules allow landlords to "self-certify" exemptions if they're trying to raise the rent by no more than 8 percent, which involves filling out a short form and submitting it to the city.
* * *
That all makes a compelling case that rent control is bad policy. Convincing a court it is unconstitutional is going to be more difficult.
"Constitutional challenges have really gone nowhere in the past century," says Jim Burling, the vice president for legal affairs at the Pacific Legal Foundation, a public interest firm that has litigated or supported legal challenges to rent control.
Back-to-back U.S. Supreme Court decisions in 1921 and 1922 upheld wartime rent control schemes passed in Washington, D.C., and New York City.
* * *
Source:
https://reason.com/2022/06/23/nations-harshest-rent-control-law-unconstitutional-or-just-stupid/
