A complaint has been filed against the Frazee City Council in response to what some residents believe are discriminatory changes to the city’s rental housing laws.

The complaint was filed with the U.S. Department of Housing and Urban Development’s Office of Fair Housing and Equal Opportunity by a Frazee resident on July 22.

That action followed the City Council’s July 13 approval of a new rental density limit that will, over time, significantly reduce the number of rental units in Frazee's residential neighborhoods -- specifically, single- and two-family residential zoning districts, known as R-1 zones, which cover the majority of the city.

Frazee Mayor Ken Miosek, who was the lone ‘nay’ vote against the measure -- the four city councilors were unanimous in their support -- said he’s concerned the community will come across as unwelcoming to landlords and people looking to rent.

“We’re an all-inclusive town,” Miosek said. “I don’t want to shut people out. I don’t want to put a gate on our city. We don’t need to be gated.”

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Mayor Ken Miosek worries Frazee might not seem so welcoming anymore to landlords and potential renters, with the city's new 10% rental cap now in effect in neighborhoods around town. (Marie Johnson / Tribune)
Mayor Ken Miosek worries Frazee might not seem so welcoming anymore to landlords and potential renters, with the city's new 10% rental cap now in effect in neighborhoods around town. (Marie Johnson / Tribune)

The law change came one month after the City Council’s June review of a rental density study that shows Frazee’s percentage of renter-occupied housing is considerably higher than the statewide average -- at 42%, versus 27% statewide. The rentals are mostly older, lower-valued, single-family homes that have been converted into rental properties.

The study contends that there are “adverse effects” associated with higher rental densities in R-1 neighborhoods, such as “increased noise, traffic, litter, and illegal parking; inadequate property maintenance; and a general decrease in quality of life for permanent residents of the neighborhood … Data for Frazee reveals a direct relationship between the concentration of rentals and rental-related calls for police service.”

Meanwhile, the study states, “there is a beneficial relationship between homeownership and neighborhood stability.” Homeowners “take better care” of their properties than landlords and renters, thus maintaining or increasing property values in the neighborhood.

Citing the findings of this study, city councilors voted to restrict the number of rental units on residential blocks to no more than 10% of all lots on a block. Exceptions may be granted by the council on a case-by-case basis.

The rental cap applies to any new rental unit registration request, meaning it’s unlikely any new rentals will be allowed in residential neighborhoods that have rental densities of more than 10%. Existing rental units in these neighborhoods will be grandfathered in and those rental registrations may be renewed; registrations that lapse or are revoked, however, are not likely to be reinstated.

The cap only applies to R-1 zoning districts; higher rental densities will still be allowed in R-2 and R-3 districts, which are zoned for mixed use and multifamily dwellings.

Frazee city councilors say they want to preserve home values and homeownership opportunities in town, and they point to the rental density study, as well as a more general housing study completed in 2019, as evidence in support of the 10% rental cap.

Opponents, however, question the rental density study's findings and are concerned that the new rental cap discriminates against low-income people and people of color -- who tend to make up a higher percentage of renters -- and thus may violate the Fair Housing Act.

One of those opponents is Heath Peterson, who filed the complaint against the city. Peterson is the owner of Frazee Family Foods and is a member of the city’s Economic Development Authority.

“I made the decision (to file the complaint) because we have council members that seem to want to run people out of town based on income level,” Peterson said. “I’ve always felt that I want Frazee to be the type of community that rewards people for working hard and trying to get ahead. This rental ordinance hurts that situation.”

The complaint specifically names city councilor Mike Sharp for his leadership role in getting the new rental cap passed. Sharp also authored the rental density study, according to Miosek and City Hall.

Sharp declined a phone interview for this story, saying the city had yet to receive a formal copy of the complaint, but he did email a written statement to the Tribune. He said he understands the opposition to the rental ordinance, but the notion that the city is trying to run renters out of town “is far from the truth.”

Mike Sharp
Mike Sharp

“To be very clear, the rental density ordinance does not reduce a single rental unit in the city,” Sharp wrote. “The rental density ordinance only applies to the R-1 zoning district and all existing rental unit registrations remain in effect. Furthermore, the city has ample land for future rental unit development in its R-2 and R-3 zoning districts. Looking forward, the percentage of rental units in the city will undoubtedly increase, not decrease; in 2010 this was 42% (well above the statewide average). By no means is the city excluding anyone.”

Some housing experts, however, argue that rental caps have traditionally been used in an exclusionary way.

Karen Pifher, who lives in Frazee and has expertise in community development, said, “Rental density ordinances are considered an exclusionary policy. They were typically used in the 1950s and ‘60s to keep minority populations out of suburban living. ‘Best practice’ has been to move away from exclusionary policies when possible; studies show that inclusive and restorative policies, and communities and housing, are actually more effective (in creating a thriving community).”

Several other Minnesota cities, like Anoka, Mankato, West Saint Paul and Winona, have enacted rental caps similar to Frazee’s, ranging from 10% up to 30%. Frazee is uniquely small and rural compared to other cities that have imposed these limits. In most of those other cities, the caps were set in response to disagreements between college students and non-student residents, and they were usually met with controversy -- but have held up when challenged in court.

“The Minnesota Civil Liberties group showed up and people protested this ordinance when it passed in North Mankato (in 2016),” said Pifher. “They’re very divisive. They’re very tenuous policies because they dance on the line of discriminating against poor and minority people, and it’s a dangerous line to walk on.”

The Minneapolis Area Association of Realtors, in a statement posted on the group’s website, describes rental caps as harmful to both renters and homeowners. Such caps assume that “renters cause problems,” the association states. "This philosophy is discriminatory...”

For homeowners, rental caps mean they lose their right to rent, or must get special permission from the City Council to do so.

“It takes longer to sell a house in Frazee than other communities in Becker County,” said Peterson. “This policy takes away the ability to rent in the meantime.”

Brikker Ware, a Frazee resident who owns or co-owns more than 30 rental units in Frazee, noted that rental caps “unfairly restrict people who want to get into renting or landlording.”

He said he understands the underlying goals behind Frazee's rental cap, but wishes city leaders would have reached out to local landlords like himself for input before moving ahead with their decision.

“No one ever reached out to me,” Ware said. “I just want things to be right and fair. I feel like there’s a common goal to have good renters and good homeowners in Frazee, and I don’t know if this is the right way to accomplish that goal. … I feel like renters shop local and support our local businesses, and we’re missing that opportunity (with this policy).”

Contrarily, councilor Nicole Strand has said increased homeownership should have a positive impact on Frazee’s economy, helping to attract new businesses to town. According to the City Council’s July meeting minutes, Strand feels, “if Frazee is a city of just landlords and tenants with no vested interest, how can business be attracted?”

Strand currently rents a property in Frazee herself. She said at the meeting that her goal is to buy a home, but, as the minutes state, “most homes that come up on the market in her price range are immediately scooped up by landlords, then priced out of her buying or rental range.”

Pifher acknowledged that this can be an issue in Frazee, but said the council “went too far” with its rental cap, and doesn't have a plan for how to take care of renters who might be displaced by the policy: “Ten percent is pretty extreme,” she said. “It’ll be a slow phasing out, but still, it’s a phasing out.”

A Frazee welcome sign greets visitors coming into town from Highway 10. (Marie Johnson / Tribune)
A Frazee welcome sign greets visitors coming into town from Highway 10. (Marie Johnson / Tribune)

In his email to the Tribune, Sharp framed the situation as a difference of opinion on how best to meet Frazee’s demand for future rental housing. While some residents want to continue the trend of converting homes into rentals, he said, “this is not recommended by the city's housing study. Based upon the finding and conclusions of the Rental Density Study, I believe that it is in the city's best interest to preserve affordable homeownership opportunities (those homes that have been typically bought up by landlords) and focus on meeting the need for future rental housing in the R-2 and R-3 zoning districts.”

The full study can be read on the city of Frazee website, frazeecity.com.

Pifher said she read the study and has "a lot of questions" about it, but city councilors were refusing to speak to her. She said they told her they’d been advised not to because of the complaint filed. Peterson, too, said councilors wouldn’t talk to him. He’s also still awaiting a response to his complaint from the Department of Housing and Urban Development.

Mayor Miosek said he’s not been directly advised to stay mum with the public, and he has spoken with people about the rental cap in recent days. He said city ordinances can and do change, and with resident concerns coming to light, it’s possible the council may have more discussion about the cap at future meetings.

“When I looked it over (plans for the rental cap policy), some of it seemed good and some of it seemed bad,” said Miosek. “I wasn’t sure where I stood on the whole issue… I voted against it for that reason, because I thought, if we’re trying to accomplish something here, there are other rules and regulations that we have that would take care of our goals.”