Minneapolis-St. Paul multifamily investment guide

St. Paul is the only city in our national coverage that has enacted rent stabilization by its own ordinance. Washington has since capped rent increases across an entire state by statute, which we cover separately. Voters approved it on November 2, 2021, the City Council amended it in April and September 2022 and again in May 2025, and it has been in force since January 1, 2023. The current text is published by the City as Chapter 193A of the Legislative Code.³

The cap itself is Section 193A.04: "No landlord shall demand, charge, or accept from a tenant a rent increase within a 12-month period that is in excess of three (3) percent of the existing monthly rent for any residential rental property."

Three mechanics decide what that means for an owner, and each one matters more than the headline number.

First, there is no ordinary vacancy decontrol. Section 193A.05(a) provides that the limitation "shall apply if there is a change of tenancy in a residential rental unit and the vacancy is not supported by just cause." The cap follows the unit. A tenant leaving of their own accord does not reset anything. Only a just cause vacancy lifts it, and then Section 193A.05(b)(1) permits an increase of no more than "eight (8) percent plus the Consumer Price Index above the existing rent."

Second, exceeding the cap requires an application. Section 193A.06 provides a reasonable return on investment process, and the ordinance is explicit that the landlord "shall have the burden of demonstrating that the rent increase above three (3) percent is necessary," and that any such increase "shall not take effect until a final determination is issued." You do not raise the rent and defend it later. You apply, you carry the burden, and you wait.

Third, and this is the one that decides whether a St. Paul deal is investable at all: Section 193A.08(a)(3)(a) provides that "[t]he limitation on rent increases shall not apply to newly constructed residential rental properties that were issued their first building certificate of occupancy after December 31, 2004." A parallel provision at 193A.08(a)(3)(b) extends the same exemption to non-residential conversions first occupied after that date.²

So the entire regulatory question in St. Paul collapses to one line in a certificate of occupancy. A 1974 garden apartment is capped at 3 percent a year with no reset on turnover. The building next to it, first occupied in 2006, is not capped at all. That date runs straight through the middle of the vintage that value-add multifamily is built on, and it is the first thing we would establish about any St. Paul asset, before rent rolls, before expenses, before anything.²

• The cap is 3 percent in any 12-month period.
• It continues to apply through an ordinary change of tenancy.
• A just cause vacancy permits 8 percent plus CPI, and nothing more.²
• Exceeding the cap requires an application on which the landlord bears the burden.
• A building is exempt only if first occupied after December 31, 2004.

Before the rent roll, before the expenses, establish one thing: the date on the first certificate of occupancy. After December 31, 2004 and the ordinance does not touch you. On or before it, and 3 percent is your ceiling.

It would be easy, and it would be intellectually dishonest, to present the previous section as a clean demonstration that rent stabilization suppressed construction in St. Paul. We do not think the data supports that claim, and an investor who acts on the strong version of it will misprice something. Three problems with it are worth stating plainly.

The first is that Ramsey and Hennepin are not comparable canvases. Ramsey is the most densely populated and most fully built-out county in Minnesota, roughly a third of Hennepin’s size by land area while holding more than 40 percent of its housing units. A built-out county permits less than a county with greenfield edges, and it would do so under any policy regime. Some meaningful share of that permitting gap is geography, not law.²

The second is timing, and it cuts directly against the simple story. The original 2021 ordinance contained no new construction exemption, which is precisely the design that economists expect to chill development. But the exemption for buildings first occupied after December 31, 2004 was added by the September 2022 amendment, effective with the ordinance on January 1, 2023, and broadened again in May 2025. By 2025, the year these permit figures cover, new construction in St. Paul was already fully exempt from the cap. A developer building in Ramsey County today is not subject to the 3 percent limit. If the ordinance is still suppressing new supply, it is doing so through expectations and financing conditions rather than through its operative terms.²³

The third is that both counties carry a downtown office problem, a post-2020 migration pattern, and a construction financing environment that changed for everyone. Isolating one variable across two counties is not something two data points can do.

What we will say is narrower and, we think, more useful. Ramsey County has the second lowest permitting rate we have measured and one of a handful of population declines in our coverage; it is also one of only two jurisdictions we cover with binding rent regulation. That is a pattern worth pricing as a risk, and it is not a proof. The specific, defensible underwriting consequence is not about the county at all. It is about the certificate of occupancy date on the specific building, which is a fact rather than an inference.

• Ramsey is far denser and more built out, which suppresses permitting under any regime.
• New construction in St. Paul has been exempt since January 1, 2023, so the 2025 figures do not test the chilling hypothesis cleanly.
• Downtown office exposure and post-2020 migration affect both counties.

We would buy in Hennepin County and we would buy post-2004 product in St. Paul. We would not underwrite pre-2005 St. Paul stock on a conventional value-add rent thesis, because the instrument that thesis depends on, the ability to reset rents to market on turnover, does not exist there. Our method is set out in how we evaluate a market, and the full ranked list is on the markets index.²

• What date did the first certificate of occupancy issue, and do we have the document?
• If the building is in St. Paul and predates 2005, what does the model assume about turnover, and does it wrongly assume a market reset?
• Has a reasonable return on investment application ever been filed on this asset, and what was determined?
• Are any vacancies in the trailing twelve months recorded as just cause, and is that documented well enough to support an 8 percent plus CPI increase?
• If the asset is in Minneapolis, how is the risk of a future ordinance priced, given that it would require both a Council vote and a ballot?³
• How much of the submarket’s employment sits in information, financial activities or downtown office space?
• What rent growth is assumed against a $768 gap to ownership in Hennepin, or $646 in Ramsey?²
• What share of the projected return comes from operations rather than the exit?

A value-add thesis depends on resetting rent to market when a unit turns over. In pre-2005 St. Paul, that instrument does not exist. Everything else in the pro forma can be right and the plan will still not work.