A divided St. Paul City Council on Wednesday approved a set of substantial changes watering down the rent control ordinance that voters passed last year.

The council voted 5-2 to exempt new construction and affordable housing from the 3% cap on annual rent increases. They also amended the law so that a landlord can raise rents up to 8% plus inflation after a tenant moves out or is evicted for just cause.

Additionally, the suite of changes included provisions meant to clarify aspects of the law, bolster tenant notification requirements and prevent landlords using utility charges from skirting the law.

"I think and I hope that this amendment improves the existing policy for both renters and property owners," said Council Member Chris Tolbert, the lead drafter of the amendments. "I hope that it adds additional protections for renters, and I think it will also ensure that people continue to invest and reinvest in building housing in this city."

The action wrapped up months of tense debate over the ordinance, which became the first rent control policy in the Midwest after 53% of voters supported it in last November's election.

Tenants and organizers — nearly two dozen of whom condemned the council's action during Wednesday's public hearing — lambasted the elected body for defying the will of voters and removing protections for thousands of renters.

"My fear is that it appears we have some council members who seem to be more accountable to corporate landlords and developers than to the more than half of St. Paul residents who are renters and people of color," said Arlene Datu, a leader with ISAIAH, which has helped organize in support of rent control.

Council Members Mitra Jalali and Nelsie Yang, who opposed the changes, pledged to continue to work on policies that would help protect renters — especially those who are low-income or people of color — from displacement. Jalali already has said she is working to more narrowly tailor the affordable housing exemption.

Yang said that the council's vote will cause "harm to renters, to people in our community who are getting taken advantage of and have been historically."

Many landlords and developers, on the other hand, repeatedly called for the full repeal of rent control, arguing that the council's changes do not go far enough to incentivize the creation and maintenance of rental housing in St. Paul

"There are lenders and investors that will not invest in any cities with rent control ordinances," Maureen Michalski, vice president of real estate development for Ryan Companies, wrote in a letter to the council. The Minneapolis-based developer is in charge of the Highland Bridge project on the former Ford site, where 3,800 new housing units are slated to be built.

"If the majority of them simply choose to go elsewhere, St. Paul will have less new housing and likely more expensive housing as a result," Michalski added.

Property owners will continue to be able to request rent increases up to 15% if they can prove why they need them, and tenants can continue to file complaints about illegal rent hikes with the city.

In a statement Wednesday, Mayor Melvin Carter said he supports the changes passed by the council.

"This ordinance protects renters while helping construct the new housing units we need for the future," Carter wrote. "I thank all the community members who helped craft this policy, and applaud the council for passing it."

It appears rent control could continue to be a hot-button issue headed into 2023, when all seven council seats are up for election. Sean Lim, program director at the Minnesota Youth Collective, testified that organizers will "use every tool at our disposal to ensure that anyone who stands against working people on this policy and is no longer aligned with their constituency is voted out of office."

Margaret Kaplan, president of the Housing Justice Center, said the council's exemption for affordable housing and new construction could both potentially be challenged under state and federal fair housing laws.

The city is already facing one lawsuit for the ordinance in federal court. Landlords filed a complaint in June arguing that the ordinance violates their constitutional due process and property rights.

"I've heard that we all want families to have stability in their homes, and we all want more housing so that current tenants and also future tenants can live here in St. Paul," said Council Member Rebecca Noecker, who voted in favor of the changes. "The questions I think we've been wrangling very visibly with … are about how to make sure that this ordinance does both — that it protects renters and ensures a supply of housing."