Federal judge denies rent stabilization lawsuit against St. Paul

Federal court records show a judge denied a lawsuit against the City of St. Paul that said rent stabilization is unconstitutional.

The plaintiffs in the lawsuit are Woodstone Limited Partnership and the Lofts at Farmers Market LLC, who claim that the 2022 St. Paul rent stabilization ordinance is unconstitutional.

U.S. District Judge Nancy E. Brasel released a 51-page report on Monday that outlined her decision to throw out the lawsuit. Court records show Brasel denied the plaintiff’s request for summary judgment while granting the City of St. Paul’s motion for summary judgment.

The plaintiffs claimed that the rent stabilization ordinance was in violation of the Due Process Clauses of the U.S. and Minnesota Constitutions, the Contract Clauses of the U.S. and Minnesota Constitutions, Article XII, Section 5 of the U.S. and Minnesota Constitutions, and in violation of the 42 U.S.C. Section 1983 claim based on the federal violations, court records show.

In May 2022, St. Paul enacted a rent-stabilization ordinance, according to the City. The ordinance limited annual rent increases to 3%, except for when property owners need to earn a reasonable return on investment.

RELATED: St. Paul rent regulations are now in effect. City and community leaders are trying to make sense of the new rules.

Just over half of voters passed the rent stabilization ordinance in November 2021, according to federal court records.

In a document explaining the federal court ruling, Brasel noted that St. Paul amended the ordinance in September 2022 to include new exemptions from the 3% rent increase limit, including a 20-year exemption for newly constructed buildings, exemptions when there is a change in tenancy if the vacancy is supported by “just cause,” and exemptions for affordable housing for those with low income.

RELATED: St. Paul residents sound off on proposed changes to rent stabilization ordinance

Prior to the 2022 amendments, the plaintiffs in the lawsuit sued on the basis of unconstitutionality. According to court records, Woodstone said they bought their property over 30 years ago and did not expect there would be limits to rent in the future.

The court records added that the Lofts were built in 2012, and the owner has raised rent every year since then due to increases in property taxes.