Monday, June 20, 2011

Dueling Op-Eds on Rental Licensing

After a recent work session of the Planning Committee of the Bellingham City Council on the topic of rental licensing and inspections, John Stark published an article on the meeting. You can read the article by clicking here. The article elicited over a hundred comments, most of which were of little value and amounted to little more than mud wrestling. Posting some more serious comments to the article and to the question of rental licensing was Perry Eskridge, the Government Affairs Director for the Whatcom Realtors ®.

As a result of the lengthy comments by Mr. Eskridge and the Zonemaven on Mr. Stark's article, the two of us were invited by the Herald to write op-eds on the subject of rental licensing. These pieces appeared in the Herald on Sunday, 19 June 2011. You can read them by clicking here.

Naturally, it is difficult to present an argument in all its facets in an op-ed of 700 words. To gain a better appreciation of the difference in the various aspects of the topic, it may be useful to read our comments to the Stark article. I have extracted and reprinted them below. It may be a long read but you may find it worthwhile.

Perry: This is an interesting issue. As with many things, the devil is in the details.

People say this will not increase rents. Wrong. The Proposal will require that all rentals be maintained according to the International Property Maintenance Code. For those of you that don't know, housing is usually required to meet the code in effect when the structure was built or, if a substantial remodel, at the time the remodel occurs. This WILL be a wholesale change of the standards to which the landlord will be required to meet resulting in substantially increased costs that, ultimately, must be passed on to the tenants. The average age of housing in Bellingham is well over twenty years old, so you can imaging the code changes that have taken place in that time and the cost that will be necessary to meet this code! If you think those upgrades are going to be free, you are sorely mistaken. If you don't believe me, ask your landlord.

Also, would someone explain to me where the city is going to find ONE inspector qualified to do electrical, plumbing, environmental, and structural inspections for $100,000/year who is also willing to try and conduct 5-10 inspections per day AND be available for court AND be available for follow-up inspections AND be able to drive to the various rentals every day AND take time to write reports? Anyone that thinks that one inspector is going to do all this HAS to be a bureaucrat! So, when the city realizes that $24 isn't going to cut it, what happens then? The fees go up and the rents go up.

This proposal makes tenants second-class citizens. A Tenancy is, legally speaking, an "estate in land." It is distinguished from a Fee Estate in that the tenant does not have all the rights a Fee owner has, but the Tenant does retain many ownership rights. Included in those rights is the right to possession of the home free from unreasonable intrusion by the Fee owner, the right to exclude persons from the home, the ability to benefit from the "quiet enjoyment" of the property, etc. But let's look at some of the hallmarks of this proposal.

First, the government wants to come into your home and inspect for violations. This is something that does NOT happen to a fee owner absent a warrant, subject to due process protections, and the opportunity to oppose the issuance of a warrant to the judge the government has asked to issue the warrant. Now, if you are a tenant, the city is giving itself the right to come into your home to be sure that you are living in a safe manner. Remember, some of the violations that the City is looking for will be fines for which the Tenant is responsible, so the landlord isn't the only one on the hook here when the inspection occurs.

Also, what happens if a city inspector is in your home and finds evidence of criminal activity? Don't think for a moment that such a circumstance will go unnoticed or unpunished. Even better, you aren't notified that you have the ability to oppose the inspection if you wish. Better hide that water pipe, that prescription that isn't yours, make sure your computer is turned off, etc., because anything you say, or do, will be used against you in a court of law! Ever tried to get the government out of your house after you invite/allow them in?

What happens when you oppose? Well, the council thought of that as well. They have inserted a provision that allows the City to go to court and obtain a civil warrant. If you oppose the inspection, the City proposes to take you to court and force you to submit to the inspections. This means that you will take time to appear before the judge and have to provide evidence that your home should not be inspected for violations. Not increased rent, but lawyers are more expensive! And if the landlord has to hire a lawyer, any guess as to who will ultimately pay? Sure, the inspections will be a random percentage, but as with many games of chance, we know the house always wins!

Make no mistake, this is a loser proposition from the word, "Go." Even a council member yesterday confessed that they don't really have a good handle on how big -or small- this problem is. The Mayor and the former Planning Director have stated time and again that they receive, on average, less than two dozen complaints a year. Too bad the council refuses to work with the information they have.

I could go on about how the proposal flies in the face of Washington corporate law, how the city already has an effective process if they would just use it, and how this is a $300,000 solution looking for a problem. If you think the council is concerned about the real impacts of this proposal, just take a look at whether a public hearing is required. The staff report says "No." Zonemaven will scream if I don't point out that I am the Government Affairs Director for the Whatcom REALTORS(R). As the spokesperson for the County's largest professional association, an association that counts many landlords as members, I have offered to make any and all information in our possession available to council members concerning this proposal. To date, only one member has accepted, but refused to believe anything we said sticking to the mantra that this is about public safety. Public safety may be an issue in a handful of situations, but it is also about affordable housing, privacy rights and due process, and it is about private property rights, not just for tenants, but landlords as well. A council member joked that perhaps it was time to put cameras into rentals. Funny right now, but when you start digging into the proposal, you will realize just how close that statement is to the truth. Remember, it is an election year! Perry Eskridge Whatcom REALTORS(R)

The Zonemaven: Except that for your $30 you get an analysis that plays fast and loose with the facts and suppositions that are not based on any data whatsoever. I would ask for my money back. Read my blog and then have a conversation with Perry.

Perry: Really Dick? Tell me what part you find as "fast and loose" and then we'll have a conversation. Kind of like that house fire in the York neighborhood that you tried to pin on the landlord, only to discover that it was most likely the tenants' fault? I asked you to give me a copy of the report to prove me wrong; nothing ever showed up.

You also went after another property that I recall claiming a bad landlord, only to discover the property was owned by a Canadian Corporation who had not authorized the property manager to make changes.

I had 10 landlords at that meeting with me yesterday. Perhaps you want to talk to them about their business/investments and how they calculate their costs and set rents before you accuse me of not having facts.

Anytime, anywhere Dick!

The Zonemaven: The fire marshal’s report for the Ellis St. and the Grant St. fires have been on my blog since 7 Feb. You can check them out here. You will note that the Grant St. fire was occasioned by a suspected loose wire and not due to actions by the tenants. The Ellis St. fire was occasioned by loose bolts on a heater in the living room. The house had been also been rewired by the owner without being inspected for code compliance. No fault to the tenant here either.

The house with the Canadian ownership was cited by the city code inspector and the student was able to break her lease. You can read about that on my blog entry of 3 Mar 2011 or you can watch her comments before the city council on 28 Feb 2011. The video is on the city’s website. The fact that the owner in Canada did not want to approve the fixes to the house prior to being cited by the code inspector speaks volumes in and of itself.

I am not much interested in finding out the manner in which the landlords calculate their costs. I have no problem with the math of $24 per year. Divided by 12 is $2. If the landlords claim that this will drive up their rents, then I am a confused person. Now if they have been neglecting their properties for years and the place needs repairs, that is the price of doing business and those repairs are deductible on income tax, right? Unless the landlord is not reporting his income from the rentals. Then the situation becomes dicey. And then there were all those rent increases over the decades. What occasioned those if the upkeep was not being done?

As for the items to be inspected, you should look at the inspection list from Sacramento, CA or from Pasco, WA. These are not nit-picky lists that look for banister or window heights. They are straightforward categories that deal with health and safety. The Pasco checklist is on my blog entry of 9 Feb 2011.

The city of Pasco seems to be able to do thousands of inspections each year with one inspector. Your claims that Bellingham will not be able to do the relatively low number of random inspections it now envisions does not hold water. And just how many times do you think that these cases will end up being challenged? Pasco ended up with about 20 cases that were referred to their code enforcement board in 2010. These cases had to do with landlords who did not get a license or who did not present a certificate of inspection.

Perry: This is great. Thanks Dick for posting this information.

York Neighborhood: Yes, loose connection that arced . . . in an electrical box in the attic above the bathroom . . . on a circuit that, from the landlord's own mouth, had three space heaters plugged into the same circuit. No operating smoke detectors (tenant responsibility under the RCW by the way!)

Loose bolts on a heater? An inspector doing an inspection every 15-30 minutes is going to check the attach points on a heater? By the way, I can do some re-wiring in my own home if I want to. The question is when was the wiring done, who did it, and was it, in fact, illegal?

The Canadian house is a debacle to be sure. I will not defend the condition of that home. In any event, however, there is a lesson with respect to this proposal First, the City proposes to demand a real live person to be personally responsible for the actions of a corporation! Well, I've got news for you. I can have a corporation that owns property and the WHOLE reason for corporate law is so that I don't have personal liability beyond my investment. I know that many people in Bellingham disagree with the exitence of corporations, but in any event, that is the law. Look it up. Moreover, there are corporations that have more than one house and do a good job of renting to tenants. You can be sure that a couple suits by the City against those corporations is going to cost more than $300,000.

The other point about that case is even more compelling. You admit that the current process employed by the city was effective. As soon as the complaint was made by the tenant to an existing compliance officer, the matter reached a resolution. Why do we need an entirely new program to accomplish something that, in your own words, was possible before?

Finally, I don't care what other cities have done. Why? Because Bellingham's proposal is clear-Landlords must meet the requirements of the International property Maintenance Code (Pasco requires meeting a different code (Uniform Housing Code)). Speculate all you want about how that works in cities other than Bellingham, but in the end, the Bellingham ordinance is the Bellingham ordinance. It won't matter what Pasco or Sacramento or any other city does . . . it will matter what Bellingham does.

If you think you are going to inspect for compliance with an International code using a note card as the Council suggests, and have that inspection withstand scrutiny when you try to enforce against it, you are dreaming.

You may not intend to look for banister or window heights, but if they are in the code, then they must be enforced, whether you intend it or not. I don't make these rules up, Dick, the courts and the City do.

I think it is very instructive that your comments are formulated without caring about how the landlord/tenant relationship really works or what it is really like to be a landlord. Based on that, I'm looking forward to your future posts. Perhaps you will post some results from the survey with those "unbiased" questions phrased with the answer already included? That will be much fun!

The Zonemaven: The space heater story is from the landlord but even if we accept that version, the fact is that the heating system in that house was inadequate in the first place. Otherwise, why would the tenants be plugging in extra heaters AND how are they to know that the electrical system was inadequate for the load? As for the smoke alarms, we tend to forget that these are warning devices for when inadequate or unmaintained systems (electrical here) fail.

The heater in the house on Ellis was not being maintained by the owner. How is the tenant to know about heaters? As for the rewiring of the house without a permit, that was not a factor in this particular case but it does demonstrate that landlords do cut corners placing their tenants at risk. How many of your colleagues would want your kids to move into a home that was rewired by the owner and not permitted by the city. And how would you ever know that?

The issue of corporations, liability and having the name of a real person to contact are not synonymous. Nobody is suggesting, nor have I heard it said during council committee meetings, that the city wants to go after an individual behind the corporation. They do want to have a contact, a person who can respond to issues regarding the condition of the rental. The legal issues with respect to LLCs as corporate entities can still be recognized.

As for the current complaint-only system being effective as evidenced by the Canadian rental being cited by the inspector, you forgot to mention the history of the place to begin with and the horror story behind the young woman's fight to get something done over a long period. You also fail to recognize that tenants are not experts in housing conditions and are often living in units that are substandard because they are not aware of problems that might cause illness, injury or worse.

Well, Pasco and other cities also work under the International Building Codes and local requirements and they manage to inspect rentals without going into the minutiae. Look at the Pasco checklist and go to the Sacramento, CA website and you will find that these checklists are not onerous. If there were such great problems with Pasco's program, how can you account for the fact that it works?

I am not weeping for landlords. They are in business and must accept the risks. Since they offer a service/product to the public, what they offer must be safe and that safety should be verifiable. I suggest that the landlords do as they tell the tenants to do all the time - take action under the current Landlord-Tenant statute. If you continue to suggest that the current law is good enough for tenants then you must also accept that it is good enough for you. If it is not, then you and your associations can lobby for a stronger code. But don't look to me to do that for you.

As for the survey, it was intended to be a window into the state of rentals in this city and not a scientific product. You did not point out to the readers here that about two-thirds of those who took the survey were satisfied with their rental. Clearly those taking the survey were not steered into complaining about their units with tricky language or deliberately biased questions.

Friday, June 17, 2011

Rental Rates Rising? Not Because of Rental Licensing

For years now, landlords and their associations have been telling the citizens of Bellingham of their concern over rental rates increasing if licensing and inspection of rentals is put into effect. The Zonemaven, not having been taken in by their feigned anguish, countered by saying that landlords have been raising rental rates for decades for reasons that have nothing to do with licensing. But the landlords stuck by their guns, so distressed were they with the thought that they might have to pass to their renters a $24 per year licensing fee.

Now we discover that, because rental availability is tight (the vacancy rate is 2.4% - or as low as 1.6% last fall), rental prices will be going up. (See the Herald article on the subject by clicking here.) The reason for the rise in rental rates has nothing to do with any factor other than the mere fact that landlords are taking advantage of a tight market. Nothing is forcing them to hike rates. So much for their concern for the pocketbooks of Bellingham's renters.

Friday, June 10, 2011

“Twenty-Three Years of Rental Licensing — Observations”

The following is a letter to the citizens of Aurora, IL from Albert Dennis, Sgt-at-Arms of the American Association of Code Enforcement. The original can be found on the site of the City of Aurora, IL by clicking here.

"Rental licensing is one systematic tool used by municipalities for maintenance of income housing stock. The City of Aurora adopted its licensing program in 1982 during my second year of employment. Aurora’s population was 90,000 (currently 157,000). Aurora modeled its ordinance on ideas from programs used in Oak Park, Illinois (program begun in 1958); Cedar Rapids, Iowa; and Ann Arbor, Michigan, among others.

The initial ordinance pertained only to rental properties containing three or more units (1000 buildings). Inspections of rental properties prior to 1982 were complaint driven. City Fathers determined that approach was insufficient. The City Council passed the licensing ordinance over protests primarily from the local board of realtors.

Aurora has amended the ordinance over the years adding: All rental units in the downtown core (1990), rental condo units in complexes having at least fifty units in which at least fifty percent of the units are rental (1990), rental two-units (1995), rental portions of owner-occupied two-unit buildings (2003) and single-family rental units (2004).

Positive observations relating to twenty-three years of participation in rental licensing:

The lion’s share of complaints prior to adoption of rental licensing were from the thousand buildings containing three or more units. Today very few complaints originate from those buildings. The overall building maintenance is drastically improved. Many unsafe and ghastly living conditions have been eliminated from those multi-unit buildings. Property values have escalated in buildings that once appeared destined for demolition. Potential property buyers know the buildings have had regular minimum standard inspections.

Licensing gets us into all the units over time. Prior to licensing many tenants failed to complain about dreadful conditions for fear of landlord retribution. That was a much bigger issue in 1981 than now. Rental licensing has weeded out the old time, do nothing, rent collecting slumlords that infested the City of Aurora when I hired on in 1981. Regular inspections also aid in enforcing occupancy standards in rental properties.

Additionally, the registration process for new owners affords us the opportunity to educate them about code requirements and encourage them to attend the local landlord training school offered by the City of Aurora. Many landlords have improved their tenant screening practices as a result. Registration also provides an owner/agent database for easier contact should the need arise. Licensing can bring in some income depending on the fee schedule. Aurora’s rental license fees are low and do not cover the cost of the program.

Negative observations relating to twenty-three years of participation in rental licensing:

From my point of view the number one negative issue regarding rental licensing is the intrinsic bureaucracy that comes with it. Initially notifying and registering property owners is a major event. The better your database capabilities and relationship with your computer people the easier this task will be. Monitoring owner changes and registering the new owner must be done. Making inspection and re-inspection appointments is time consuming. You must have enough inspectors and support staff to operate the program.

Getting a licensing ordinance adopted can be difficult. Many municipal rental-licensing programs are started because of neighborhood activist initiation and support. Some have been blocked due to the town’s “old boy” network and connections with the council.

Initial inspections of poorly maintained buildings can be lengthy. I recall spending two or more hours in three and four unit buildings in 1982-85. Those inspections generated extensive violation notices and time-consuming follow-up inspections. Licensing also forces you to expend manpower on buildings that don’t really need it. In Aurora, this is offset by granting one or two-year waivers of fees and inspections on buildings found to be up to code. (Note: some municipal rental licensing program licensing periods are two, three, four or even five years, rather than annual, as in Aurora.)

Weighed together I believe the positives have outweighed the negatives in Aurora. Frankly, we had some deplorable rental buildings twenty-three years ago. Some still aren’t palaces, but they are much improved."