More Questions Than Answers After Rent-control appeal hearing of Dominium’s 8 Percent Rent Hikes

Tuesday, Hannah Gray showed up in St. Paul City Hall prepared to argue against a uniform 8 percent rent increase that would have affected all 217 units of the Union Flats apartments on St. Paul’s Hampden Avenue. She felt less hopeful than irritated after her appeal hearing.

Gray, an artist and baker who has lived in the complex at 787 Hampden Ave. since it opened in the summer of 2019, said, “I feel like we’re being taken advantage of.”

She claimed that Somali immigrants make up around three-fourths of her building’s population and that few of them are aware of her appeals procedure because of language issues. Or that their rent will likely go up by about $80. Or that Dominium, a for-profit developer of affordable housing in Plymouth, obtains $2.5 million in federal tax credits for low-income housing per year for Union Flats alone.

Gray said, “I feel more incensed.”

More than 90 minutes were spent at the appeal hearing for two Dominium buildings, Union Flats and the Cambric on East Seventh Street. The company’s request for an exemption from St. Paul’s 3 percent rent-control ceiling was based in part on whether Dominium utilized the correct base rents from 2019 to determine what should constitute an acceptable rate of return. During that time, arguments were heard in a crowded hearing room.

There was a lot of math, to put it simply. Legislative hearing officer Marcia Moermond requested further papers from the parties to be submitted to the city and then asked them to return on September 1 for further discussion after rounds of conflicting testimony from the attorneys representing Dominium and the Housing Justice Center.

The appeal petitions from Gray and another renter, Katherine Banbury, will then be reviewed by Moermond, who will then make a recommendation. The St. Paul City Council will then make the ultimate decision. She pointed out that the procedure was still in its early stages and that the Cambric and Union Flats appeals were just the second and third rent-control appeals to be heard by municipal hearing officers.

Another Union Flats homeowner, Debra Muse, expressed her displeasure following the hearing by saying, “That meeting couldn’t have been more unwelcoming and more indifferent.”

Muse claimed that during the early stages of the epidemic, both she and her husband put their careers on hiatus. She had to dissolve her skyway massage company in downtown Minneapolis very immediately, and he has since returned to school to change occupations. Her salary from working as a YMCA customer service representative supports the pair.

“Why can’t they just suck it up a little bit if I have to pull myself up by my boot straps?” In reference to Dominium, Muse stated. When will we follow Jesus’ example and care about one another?

According to representatives from the condominium, their rent hikes are set between 50% and 60% of the regional median income, as assessed by USHUD. Both a separate agreement between the developer and the city’s Housing and Redevelopment Authority, as well as a 30-year “Land Use Restrictive Agreement” between the developer and the city, further control such increases.

The agreements already keep rates much lower than what market-rate rentals for buildings of a similar caliber would be.

Senior vice president at Dominium Owen Metz stated, “We’re not looking for massive cash flow. Operating costs, including unpaid rent, have increased with inflation.”

Dominium would earn $2.5 million in tax credits every year for ten years for Union Flats alone, according to Jack Cann of the Housing Justice Center, who also alerted city officials that the benefit has already been resold on the open market for close to $23 million.

In a spreadsheet that the business presented to the city along with their exemption request, Cann claimed that the corporation had been less than honest about its financial flows. The city requests that property owners utilize 2019 as a base year for comparison in order to determine a realistic rate of return.

Dominium utilized 2020 values even though Union Flats didn’t open until May 2019 and neglected to indicate this on its spreadsheet or in the written narrative that accompanied it, according to Cann. Incorrect base year selection also affects other computations, such as inflation adjustments.

They constituted a full year’s worth of running expenditures, Cann claimed, despite their being only a partial working year.

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