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Homeowners fight rental ban in Minnesota property-rights case

By   /   January 22, 2013  /   2 Comments

Plaintiff Ethan Dean said a city rental cap slashed his income and drove him into foreclosure.

By Tom Steward | Watchdog.org

WINONA, MN — More than a year after suing the City of Winona for preventing them from renting out their houses, three homeowners will get their day in court Wednesday in a property rights case that’s being tracked by zoning authorities beyond Minnesota.

“It’s being watched across the country because restrictions on the right to rent and other property rights are popping up in states all over the country. But the epicenter for this battle is in Minnesota, where cities have been very aggressive in denying people the right to rent out their homes,” said Anthony Sanders, the Institute of Justice lawyer who represents the homeowners.

The southeastern Minnesota city implemented an ordinance in 2005 that caps the number of homeowners who can rent out their properties to 30 percent of dwellings per block.

“The 30 percent rule is a rationally based licensing ordinance enacted pursuant to the city’s broad police powers granted under the Winona Charter to address the particular and unique problems facing the city because of rental housing,” according to the city’s court brief.

A city study of rental housing in the college community found “the concentration of rental housing results in negative impacts to the quality and livability of residential neighborhoods” and a higher incidence of nuisance and police violations.

Homeowners unable to obtain a rental permit, however, say the prohibition has cost them thousands of dollars in lost rental income, while also undercutting the value of their property in the real estate market. “I could have sold it years ago. I’ve had numerous people tell me, realtors and people that own homes in the town, that they would have bought it the day I put it on the market so they could rent it out,” said Ethan Dean, a plaintiff in the case.

A 2010 city task force found that 180 dwellings have received rental permits since the ordinance went on the books. Most city blocks exceed the 30 percent limit because many rental housing units were grandfathered in, according to the task force findings.

During Dean’s five tours of duty as an U.S. advisor in Iraq and Afghanistan, the city granted him a temporary rental waiver until his return. Now that he’s back, Dean says he is in the final stages of losing the house to foreclosure, along with some $50,000 in equity.  He places the blame squarely on the lost rental income and sale opportunities due to the rental ban. “It’s not just me who’s been hurt here.  It’s numerous people in the Winona city district. Enough is enough and sometimes you just to stand up and say this is wrong,”

The lawsuit asks the state court to strike down the rental ordinance as a violation of the homeowners’ fundamental property rights under the Minnesota constitution.  “What the 30 percent rule does is it bans people from renting out their homes if a certain number of their neighbors already rent out their homes. So your property rights are controlled not by yourself or whatever tenants you have, but by your neighbors,” Sanders said.

At least three more Minnesota cities have slapped similar restrictions on rental properties. Two cities with significant numbers of college-age students, Mankato and Northfield, now limit the number of rental properties to 25 and 20 percent respectively on a block. West St. Paul may have the toughest restrictions in the country, allowing just 10 percent of dwellings per block to be rented out.

The Minnesota District Court in Winona may not decide the case for several weeks. Its finding could have national implications as more communities across the country clamp down on homeowners’ freedom to rent their property.

Contact the author at tomasteward@yahoo.com

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Tom Steward covers government waste, spending and policy issues in his home state of Minnesota. Also a documentary filmmaker and in-depth broadcast journalist, Tom's work has appeared on NPR, Animal Planet, WCCO-TV, WGBH-TV, PBS, Australian Broadcasting Corporation, KSTP-TV, CBC, among other outlets. Highlights include the fall of the Berlin Wall, a Peabody Award, the first footage in the wild of the endangered Sumatran tiger and rhino and countless individuals who shared their stories, big and small. Steward served as a communications strategist in the U.S. Senate before returning to reporting on issues and people often overlooked by other media.

  • Jim

    As a guy in West St Paul who has had his life turned upside down because of these awful rental bans I hope and pray everyday that the courts will overturn them. How is it fair or constitutional to let my neighbors down the block rent their house but I can’t? Is that “Liberty and Justice for all?” or just a few lucky people or friend’s of the city council?

  • Bill from Omaha

    History has taught us that the more a government authority presses its power over free enterprise, the worse things become until everything collapses. Sure we need zoning and building code regulations but this goes way beyond safety with government getting right in your face. C’mon Minnesota, get these ordinances off the books and live free!