Inspection shortfalls, political pressures leave low-income renters vulnerable in greater Minnesota

When city inspectors showed up at Bemidji’s Red Pine Estates apartments in June 2023 to investigate a report of a burst water line, they quickly found the building’s problems ran deeper than a broken pipe. The three-story, 50-unit structure was unsafe.

Forty-seven tenants, many of them low-income, disabled or elderly people, were given six days to vacate. Some left on the last day with help of volunteers, including football players from Bemidji State University. Many scrambled to find a place to stay, their belongings collected in piles on the Red Pine lawn.

“We were all in shock,” recalled Lynnette Rex, a former Red Pine tenant. “And then it was, so what the hell are we going to do? And then it was, where are we going to go? Because Bemidji doesn’t have housing.”

Residents say they weren’t told of structural issues until they were ordered to evacuate — but the building’s owners knew. Ten days earlier, a structural engineer hired by the company reported he’d found “failed floor joists” across the building with some joists damaged “severely and often in multiple places” due largely to poor construction.

“The framed floors feel abnormally uneven and soft in many places through the structure where I walked, especially in the corridors,” the engineer wrote, adding at one point, “I understand that the joists have been like this for years.”

The city didn’t know about the structural engineer’s findings or the depth of the problems until 10 days later, when a Red Pine tenant called to complain and said an engineer had recently examined the building.

The building’s owner, Twin Cities-based Schuett Companies, didn’t immediately share the inspection results with the city — Bemidji’s code does not require building owners to share results of structural engineering reports with tenants or city officials. The company’s owner would later note that Red Pine never failed a Bemidji city inspection.

MPR News reached out to Tom Schuett, president and CEO of Schuett Companies, multiple times for this story and received no response.

What happened at Red Pine was a gut punch for the tenants, but it was no isolated incident. Legal aid attorneys from around the state say many low-income rental buildings have serious problems that go unrepaired for long periods of time. And because of severe housing shortages in many areas of the state, city leaders are hesitant to hold those landlords accountable.

In documents and interviews, MPR News found problems tied to inspection processes and local political pressures that leave low-income renters in potentially unsafe buildings across greater Minnesota. Among those problems:

• Cities outside of the Twin Cities have been more lenient in allowing buildings to pass inspections despite knowledge of substandard living conditions.

• Sometimes, there isn’t a rental inspection at all. MPR News reviewed data from nearly 300 cities that responded to a request for information. Of those, more than 60% said they do not inspect rental units.

• In one city, leaders have been hesitant to hold a problematic landlord accountable because of a severe housing shortage.

• People living in substandard housing have little recourse beyond a lawsuit, an action tenants are reluctant to take for fear of retribution.

• The housing shortage is so acute, government officials are reluctantly agreeing to give millions of dollars in tax breaks, subsidies and grants to developers whose properties have had problems in the past.

Although Bemidji inspects rental properties, some city officials worry problems that happened in Red Pine will continue unless inspections become more robust and coordinated.  

“Could it happen again? I believe so,” said Justin Sherwood, Bemidji’s Fire Chief, about the Red Pine evacuation. “But it could also happen in a lot of other communities. Speaking specifically about Bemidji? Yeah, I think it could happen again.”

‘We’re not going to catch everything’  

Minnesota has no state law requiring a city to have a rental license ordinance, so oversight is largely a local matter. Cities with rental ordinances typically require a landlord to register a property and undergo routine rental inspections.

“Even a large city, theoretically with more resources, isn’t doing quite enough to even meet the bare minimum for what the public would expect a regulatory regime to do,” said Katherine Kelly, an assistant attorney general in the civil rights division of the Minnesota Attorney General’s Office. She also said tenants who have rental problems in cities without an ordinance have few options outside of legal action.

“It’s even worse in cities that don’t have a regulatory regime,” Kelly added. “For those communities, residents are one hundred percent on their own and they honestly don’t even know that they might have rights.”

Some cities only have one inspector. Others hire contract inspectors that often work for multiple cities. And in some instances, cities can’t find anyone to do the work.

The city of Waldorf passed a rental license program last year after a Mankato-area population boom increased rental demand. But the initiative hasn’t started yet because the city hasn't been able to hire an inspector, according to Waldorf Mayor Rob Wilkening.

In Bemidji, buildings with rental units are examined every two years by a fire inspector, a rental inspector and a building inspector, Sherwood said. But he said a lack of communication among those departments can lead to problems falling through the cracks.

In a rental property, Sherwood said he is only able to inspect common areas for fire alarms, extinguishers and other fire safety measures. He is not permitted to enter rental units unless invited by the tenant.

“Until we find a more efficient way, we’re not going to catch everything,” Sherwood said.

According to city records, Red Pine had passed Bemidji's rental inspections and inspections by two other agencies in the five years before it was condemned, but none were required to evaluate the building's structural integrity. In October 2023, the U.S. Department of Housing and Urban Development updated its structural integrity standards in routine inspections of privately owned Section 8 properties, but it’s still largely a visual assessment.

‘Did I get it right?’  

It was no easy task for Red Pine tenants to find new places to live. Bemidji has one of the more severe housing shortages in the state and Red Pine was the second affordable housing complex with closures in a year’s time. Many tenants had to stay in a hotel for months until they could find new apartments.

Bemidji’s rental inspector Ben Hein, who joined the department in 2021, said he and others tasked with inspecting Red Pine did the best they could and are exploring ways to update the city’s rental ordinance to include more structural engineering components.

“I don't know how any inspector in the United States could catch something like that without seeing it there. Like, I think there might be something wrong, but can I order a $20,000 structural engineer over something I don't know if it's right?” he said of the situation at Red Pine. “Unfortunately, I can’t see through walls.”

Two buildings at Ridgeway Court, another affordable housing complex in Bemidji, closed a year before the Red Pine evacuation, putting more people out of their homes amid concerns about unsafe living conditions. The condemnations of both Ridgeway and Red Pine have cut into the community’s rental housing stock, which was already in short supply.

“That’s a particular challenge in greater Minnesota,” said Gabriela Norton, the research manager at Minnesota Housing Partnership. “Even when one apartment building shuts down, it really has a broad impact on the community that is living there because there aren’t a lot of other options.”

In Beltrami County, where Bemidji is located, there isn't enough affordable housing for a third of the county's low-income population, according to a 2023 Minnesota Housing Partnership study.

Hein is the city’s only rental inspector, tasked with inspecting the city’s 3,000 rental units every two years. He said the housing shortage has put pressure on him to consider how his actions could send renters scrambling for a place to live. Still, he insists he’ll err on the side of safety.

“As much as I don't want people to have to try and find a place to live, I definitely don't want to have to bury them,” he said.

Hein choked back tears as he spoke of the challenges of trying to keep people safe and housed, given the limits and resources of his job.

“My logical brain says, as an inspector, I did exactly what I had to do with Ridgeway and Red Pine,” he said. “But the other side, my human side says, was that the right choice? I mean, the building's still standing. So did I get it right? Did I get it wrong? Did I just evacuate people for no reason?”

‘People wanted there to be punishment’  

Having rental ordinances in place doesn’t always guarantee safe buildings.

Problems have surfaced in Willmar, a city 90 miles west of the Twin Cities, where the affordable housing company Suite Liv’n, owns and operates about a quarter of the city’s rental units. Suite Liv’n is owned by 3D Money, a real estate investment firm.

For at least three years, Willmar officials knew some units owned by Suite Liv’n had problems with standing water, black mold and cockroaches, according to city records. Despite the problems, the city allowed Suite Liv’n to continue renting those properties for months after the city did not renew their licenses.

Justice Wahid Cotton, the former Willmar city planning director who oversaw the department that inspected Suite Liv’n properties, said there was a lack of political will to shut down some of the company’s units at a time when the city did not have enough rental housing to meet demand.

Small towns in rural America “certainly do not have the resources to win this fight,” Wahid Cotton said. “On a scale of one to ten, you’re dealing with a level twenty problem.”

Wahid Cotton says he and his staff spoke with other Willmar-area landlords and community members who were frustrated with the city's leniency toward Suite Liv'n's code violations.

“People wanted there to be punishment,” Wahid Cotton said. “This is a big deal for smaller communities watching this, because they don’t have the resources, and if Willmar folds to this, then the Spicers of the world, the New Londons — the smaller towns of 1,500 people — they don’t stand a chance.”

After a year in limbo, Willmar officials attempted to settle the issue with Suite Liv’n. City and company officials proposed a memorandum of understanding that said the owner fixed some of the problems and pledged to repair any remaining issues. But the City Council rejected the measure. Some argued that they didn’t believe Suite Liv’n would make the necessary changes.

“They know what they need to fix,” said council member Julie Asmus at a September 2023 City Council meeting. “You make it sound very civil, that if they do this, then this will happen. But we also know that there has been game playing, and there has been diversion and deception and frustration.”

Those who supported the measure argued cooperation was better than condemning buildings and evicting tenants.

Dean Zuleger, chief operating officer for the investment firm that owns Suite Liv'n, told MPR News that the company fired the property management firm responsible for maintenance of some of Suite Liv'n's properties. He also said the company spent around $3.5 million over the past two years to bring its properties into compliance.

“I would say right now, my apartments are on par with just about every other apartment in Willmar, maybe better,” Zuleger said.

Suite Liv’n eventually sued the city of Willmar in November. In an ongoing court battle, company officials alleged the city arbitrarily enforced its code, failed to comply with Minnesota law and schemed to shut down the company’s business operations.

An attorney for the city of Willmar declined to comment on the city’s relationship with Suite Liv’n but said the housing crisis has created a balancing act when it comes to enforcing rental codes. The attorney said he believes Willmar’s rental code program is working.

“Cities want to make sure that these places are safe, and they want to work with property owners to get that done,” said Jared Shepherd, an attorney representing the city of Willmar in the lawsuit. “We don’t want that outcome where people are suddenly looking at having to move, which may affect housing, which may affect education. These are all big impacts and so that’s why we try to work with them as much as possible.”

Zuleger says city regulation is causing his company to reconsider investing in greater Minnesota.

“I just think that there’s got to be a change in government regulation,” he said. “There has to be an easing in finance or you’re going to have a lot of people that can’t afford to live anywhere.”

The different approaches between Willmar and Bemidji highlight the reluctance to get involved in disputes between tenants and landlords. That’s one reason local ordinances focus solely on livability and life safety issues.

That hesitation is common in cities around the state because there’s no system in place to protect people who would be evicted if a city condemned their building, said Peter LaCourse, the leading housing law attorney for Justice North, a legal aid group in Northern Minnesota.

“I’ve definitely seen housing inspectors give longer leashes than maybe they should, or they normally would, because they are really concerned about where these people are going to go,” LaCourse said. “It definitely is a double-edged sword where, yes, we need these apartments to be in line with code, but I’m also glad that these inspectors are at least considering these tenants and hopefully giving them the opportunity to find a new place or give the landlord the opportunity to fix it.”

For some, the current system is better than nothing.

“We have a piecemeal system of having habitability protections for tenants,” said Kelly from the Minnesota Attorney General’s Office. “And as piecemeal and perhaps insufficient as that system is, it’s still better than what exists for all the other issues tenants face,” where there is “zero protection,” she added.

‘Between a rock and a hard spot’  

Some tenants at Bemidji’s Red Pine Estates and other community members initially blamed Schuett Companies for the apartment complex’s problems. But the criticism quieted after many tenants agreed to a settlement.

In exchange for waiving rights to bring further claims against Schuett and agreeing not to disparage the company on social media or in the news, tenants received $3,000 each from the company.

After Red Pine Estates was condemned, some tenants spent months in a hotel. Now, a tight-knit community of elderly and disabled women who lived at Red Pine and met daily for coffee in the common room is spread out around the city. Many can’t drive and haven’t seen their friends in months.

“You take that away from an old person, you change their routine, it’s not good for them,” said former tenant Lynnette Rex in an interview in December 2024. Rex is in her 60s and was one of the younger tenants forced to move out of Red Pine. “There’s a lot of loss. These ladies lived there for years. Their friendships that they forged, those people became family to each other. And just to have it ripped away? It’s difficult.”

Despite the findings that led to the July 2023 evacuation of Red Pine estates, Tom Schuett told the Bemidji City Council last summer that multiple agencies inspected the property over the years since his company first purchased the building in the 1980s.

“How did this happen? I can't answer that specifically,” he testified about his property at a Bemidji City Council meeting in 2024. City records indicate the building had passed routine inspections going back to 1997. “But what I can tell you is that Red Pine never failed any of these inspections.”

Nearly a year and a half after the condemnation, the Red Pine building still sits empty as city leaders struggle to meet housing needs.

Schuett is proposing to demolish the existing property and replace it with 95 low-income housing units.

The Bemidji City Council unanimously agreed last summer to support exploring tax increment financing (TIF) to help finance the project. Schuett is also eligible to receive up to $21 million through state and federal resources for the project, according to data from the Minnesota Housing Finance Agency.

Gloria Beighley, in her 80s, is a former tenant of Red Pine and stayed in a hotel for four months after the building was evacuated. She said she is furious that the city council approved Schuett’s request.

“They’re giving him a break? Excuse me, the city didn't even give us people a break,” Beighley said. “They weren’t even there to help us. … I just think it's hogwash.”

Some City Council members appeared uneasy about approving a tax break to the owner of a building that had to be evacuated because of its unsafe conditions.

“I find myself between a rock and a hard spot, because I know we need this housing and I know that TIF can make that happen, and I know there aren’t a whole lot of developers that are looking to do Section 8 (publicly subsidized) housing,” Bemidji Mayor Jorge Prince told the city council at the meeting last summer.

“On the other hand,” he added, “I don’t know whether or not I can believe in Schuett properties.”

MPR News reporter Mathew Holding Eagle III contributed to this report.