St. Paul has reached a settlement with two landlords in a long-running federal lawsuit in which the city is accused of hurting minority tenants by aggressively enforcing its building codes, thereby reducing the supply of affordable housing.

City officials, who have vigorously contested those allegations, say they expect to prevail over at least three other landlords when the case goes to trial this spring in Minneapolis federal court.

But they were happy to announce Tuesday that they had reached a non-monetary settlement with St. Paul landlords Thomas Gallagher and Joseph Collins Sr., who agreed to drop their claims in exchange for the city's help in finding them more St. Paul housing properties to buy.

They and their companies, all going by the name Dadder's, currently own about 200 rental units in the city.

"We welcome the opportunity to partner with Mr. Collins and Mr. Gallagher in an effort to encourage their long-term, positive investment in the city," City Council President Kathy Lantry said in a prepared statement.

The terms of the settlement include putting a residential landlord on the city's Business Review Council, a group of mostly business people that advises the inspections department on regulations.

The first nominee for that seat is Collins, whose appointment by Coleman to a three-year term on the business council is expected to be approved Wednesday by the City Council.

City officials also will meet quarterly in each of the next two years with Collins and Gallagher to make them better aware of available properties within the city, according to outgoing City Attorney Sara Grewing.

But the city is paying them nothing, she said.

Lantry and Grewing helped negotiate the settlement, which has been in the works for more than two years.

Grewing said the deal came together in a 10-hour session last month and was only recently finalized.

The lawsuit was filed several years ago by a group of mostly white landlords, who claimed that St. Paul's aggressive enforcement of housing codes was forcing them to board up their properties and turn out low-income and minority renters.

The city argued that they were slumlords who provided shoddy housing for tenants with few other options.

A federal judge ruled for the city in 2008, but her decision was reversed by a three-judge appellate panel. The federal circuit court then asked the U.S. Supreme Court to look at the case, which it agreed to do.

But housing advocates worried that the conservative-leaning high court might use the case to gut federal fair housing laws, which the landlords accused the city of violating with its enforcement policies.

Their concerns prompted St. Paul Mayor Chris Coleman to drop the city's appeal, returning the case to federal district court. The remaining plaintiffs are expected to take the case before Judge Michael Davis in May.

Kevin Duchschere • 651-925-5035