The St. Paul City Council on Wednesday voted 5-0 to grant a request by a pair of Raymond Avenue property owners to increase rents in their apartment building by 15 percent, or more than five times the city’s new rent-control limit, but not more. And the cost of utilities once included in rents must be added to the total.
Pointing to a planned remodel of apartment units badly in need of long-deferred maintenance, Jim Lindquist and son Matthew Lindquist had appealed the city’s new 3 percent rent cap at 1029 Raymond Ave., a 12-unit, two-story apartment building they acquired in April.
The request represents the first appeal to the new rent-control limit to come before the city council for final approval.
“We’re not trying to gouge anybody,” said Jim Lindquist, addressing the council Wednesday.
Council member Mitra Jalali, who represents the neighborhood, said that rents had not gone up for some time, and the appeal was grounded in clear evidence of that.
“I personally care very deeply about additionally setting a standard and tone with property owners … (and) a clear legal basis why exceptions be granted,” Jalali said.
Council members Dai Thao and Nelsie Yang were absent Wednesday.
RENT-CONTROL APPEAL ACCEPTED, IN PART
The city allows landlords to “self-certify” increases between 3 percent and 8 percent through documentation that shows rent increases below 3 percent would not cover their expenses or provide a reasonable rate of return. Above 8 percent, property owners must attend an appeal hearing before a legislative hearing officer.
On Wednesday, legislative hearing officer Marcia Moermond told the council she had met with the Lindquists to consider their three rent-control appeals. She recommended allowing their first request, a 15 percent rent increase throughout the building, though utilities that had previously been paid by the landlord must be included in the total, she said.
“These charges are to be included for a total 15 percent increase, not more,” she said. “Natural gas, water and sewer — those three things are being pulled out.”
Moermond noted that the Lindquists had already embarked on a roof repair and laundry room improvements, and planned improvements to garages. Other future improvements include new flooring, carpet and appliance replacements that a previous owner had neglected, they told her.
“The Lindquists propose a thorough renovation of most units over the next three years and indicate these updates will mostly be made at the time the units ‘turn over’ and units are vacant between tenants,” she wrote in her July 12 recommendations.
Moermond also noted that it was unclear, under the terms of the city’s new rent-control ordinance, if the debt the Lindquists had incurred in acquiring 1029 Raymond Ave. could be considered a valid “maintenance and operating” expense for the basis of crafting an allowable exception to the ordinance.
Nevertheless, without an exception to the city’s 3 percent rent-control cap, she noted “the mortgage is sufficiently large to change the return on investment from the property from approximately 25 percent in 2020 to a projected loss in 2022.”
MORE THAN 15 PERCENT? DENIED
The Lindquists had also asked for a deferred exception to the 3 percent rent cap a year from now, with the expectation rents might go up anywhere from 2 percent to 15 percent per unit in 2023-24.
Average monthly rents, they said, would then reach $1,300, up from the current average of $985. Moermond recommended reviewing those increases when the time comes and preparing a recommendation to the council by March 1, 2023.
In a third appeal, the Lindquists also asked that monthly rents for Unit 4, which had already undergone a remodel, be increased by more than 15 percent. Moermond recommended that request be denied and rent increases be limited to 15 percent.