Voters in Minnesota’s capital city will cast ballots Tuesday on one of the country’s tightest rent-control laws, positioning St. Paul to chart a more aggressive approach for others as rents soar nationwide.

The city’s proposal would limit residential landlords to rent increases of 3% annually, with few exceptions. St. Paul’s larger neighbor, Minneapolis, will decide in a separate ballot measure whether to give its city council the go-ahead to consider its own rent limit.

Supporters...

Voters in Minnesota’s capital city will cast ballots Tuesday on one of the country’s tightest rent-control laws, positioning St. Paul to chart a more aggressive approach for others as rents soar nationwide.

The city’s proposal would limit residential landlords to rent increases of 3% annually, with few exceptions. St. Paul’s larger neighbor, Minneapolis, will decide in a separate ballot measure whether to give its city council the go-ahead to consider its own rent limit.

Supporters of the St. Paul measure say it will help protect the city’s poorest tenants from sudden price increases that uproot families and destabilize neighborhoods. Landlords say that capping rents when operations costs continue to rise will unfairly harm their business and discourage investment in new housing.

With rents rising throughout the country, several states and cities have considered enacting new rent-control laws. Oregon became the first to enact a statewide measure in 2019, followed by California in 2020, and that was before rent prices really took off this year.

St. Paul has been in the vanguard among cities promoting the development of affordable housing.

New York City, San Francisco and other major metro areas have had rent-control policies for decades.

The Twin Cities have been relative outliers. While rents rose 11% nationwide over the past year, they have gone up about 3% in the metropolitan area that includes Minneapolis and St. Paul, placing it last for rent growth among major metros, according to real-estate research firm CoStar Group.

The region’s lowest-income renters, however, have felt the pinch of higher rents. Between 2006 and 2019, Minneapolis renters in the lowest income quartile saw their incomes barely budge, while their rents rose 44%, according to a rent-control study this year by researchers at the University of Minnesota.

Nicholas Johnson said he avoids raising rents on existing tenants but might do so ahead of any cap on increases.

St. Paul and Minneapolis have also been at the vanguard of affordable-housing policy. In 2019, Minneapolis eliminated single-family zoning, part of a long-term plan to boost apartment supply. St. Paul this year eliminated parking requirements for developers to encourage more building. Rent-control proponents say that capping annual price increases is in line with the same kind of policy-making.

“We need zoning reform so it’s easier to build. And we need protections for people at the bottom of the market,” said Mitra Jalali,

a member of the St. Paul City Council who plans to vote for the ballot proposal.

Dissenters say that St. Paul’s proposal goes far beyond almost any existing rent-control law. While other laws offer exemptions for new buildings and for vacant apartments, St. Paul’s wouldn’t. The new law would also make it harder for landlords to boost rent after upgrading a unit’s flooring or other fixtures.

“It’s draconian,” said Cecil Smith, president and chief executive of the Minnesota Multi Housing Association, a landlord trade group.

“‘It’s draconian.’”

— Landlord representative Cecil Smith, referring to the rent-control proposal

Sensible Housing, a separate group headed by Mr. Smith, has spent about $4.3 million to campaign against the measures in St. Paul and Minneapolis. National lobbying organizations like the National Association of Realtors and the National Apartment Association have contributed.

Sensible Housing said it has focused on digital advertising, phone calls and texts to urge St. Paulites to vote no. One video warns that if rent increases are reined in, apartment conditions will worsen.

It is unclear if the proposal will pass, both supporters and opponents say. St. Paul Mayor Melvin Carter said on Twitter he will vote for it, but he added that as written it needs some changes. Sensible Housing has paid for polling but declined to share the results.

If the proposal passes, it is poised to go into effect in May, and some landlords could push up rents in the interim.

Nicholas Johnson, who owns two duplexes in the Twin Cities estimates rents for his units in St. Paul are about 20% below what he could charge. Mr. Johnson said he prefers not to raise rents on his existing tenants to keep them. Instead, he waits for a vacancy to raise the rent. If the ordinance passes, Mr. Johnson said he would move to increase rents soon.

“They are incentivizing the exact activity that they are trying to stop,” Mr. Johnson said.

St. Paul resident Emily Lynch said she is moving on, given the prospect of a $400 increase in her rent.

Advocates of the rent-control bill point to people like Emily Lynch, who lost her steel mill job last year and fell behind on rent. Ms. Lynch found a job working on the conversion of an old office building into affordable housing and eventually caught up on those payments. Now, she said she is leaving rather than paying an additional $400 a month that her landlord indicated he would soon charge.

“Utilities are going to go up this winter. At what point is it just, enough is enough?” Ms. Lynch said.

Joe Collins, co-founder of the company that owns Ms. Lynch’s house, said were it not for the ballot proposal, he wouldn’t have asked for such a large increase. “We think rent control is coming.”

Ms. Jalali, meanwhile, said such increases won’t change her vote. “If anything, it kind of makes the case for why we have to do this.”

Write to Will Parker at will.parker@wsj.com