Court of Appeals upholds Winona's rental limits

Winona's cap on rental housing won the blessing of the Minnesota Court of Appeals in a case that cities across the state are watching closely.

On Monday, the court upheld Winona's ordinance limiting rentals to 30 percent of the properties on a block. The so-called "30 percent rule" was meant to ease parking woes and protect neighborhoods from being overtaken by rental units. But some homeowners challenged the cap, arguing that it's unconstitutional for a city to restrict homeowners' rights to rent and sell their properties.

"We easily conclude that the public has a sufficient interest in rental housing to justify a municipality's use of police power as a means of regulating such housing," Judge Michelle Larkin wrote in the opinion, which affirms an earlier district court ruling.

The decision makes clear that "the court will not interfere with cities' reasonable judgments and ordinances that are neutral and fairly applied," said George Hoff, attorney for Winona.

The city passed its ordinance in 2005 after a task force found that rentals made up about 39 percent of total housing units. It worked: "It is undisputed that the 30 percent rule has limited the number and location of converted properties, as it was intended to do," the opinion says.

But there have been consequences. The four plaintiffs, who sued in 2011, were owners of three houses they bought separately after the 30 percent rule but for different reasons — including military duty in Afghanistan — weren't able to live in. They plan to ask the Minnesota Supreme Court to consider the case, said their attorney Anthony Sanders.

"This isn't just a college town issue," said Sanders, with the Minnesota chapter of the Institute for Justice. "This is an issue of whether you can take a perfectly safe home and rent it out to perfectly safe tenants, of whether you can be denied that right because your neighbor's already done it."

Hoff compared it to a city offering a limited number of liquor licenses.

Northfield, Mankato and West St. Paul have set similar caps of various percentages. In its brief supporting Winona, the League of Minnesota Cities said that the Appeals Court's decision would "have a significant, statewide impact on Minnesota cities …"

While the judges rejected the homeowners' arguments, "we in no way diminish the impact of the 30 percent rule on the appellants' ability to use their properties as they would like," Larkin wrote, "and we are sympathetic to their circumstances."

Plaintiff Ethan Dean owned a Victorian house near Winona State University but had to leave it for stretches of time to serve in Iraq and Afghanistan as a corrections trainer and analyst with the U.S. Army.

He tried to sell the place for two years but potential buyers — some of them parents with a son or daughter going to the university — backed down when they learned they wouldn't be able to rent it. More than a year ago, "I gave it back to the bank," Dean said, in lieu of foreclosure.

Dean has since married and moved to Missouri. Before buying a house outside of Kansas City, he did his homework.

"Oh, yeah. We sat down with the mayor, went to the City Council and everything," he said. "They were like, 'As long as you don't have rusted cars outside and aren't growing pot, we don't care.' "