Thursday, February 27, 2014

Slumlord Business Plan

The piece below first appeared in the Cascadia Weekly*.  The column is by Dave Hopkinson of the York Neighborhood who has supported legislation in Bellingham to ensure the health and safety of renters.  Dave, himself, is a landlord.


After the lease has been signed, it is up to you, the tenant, to identify safety hazards and ask the landlord to fix them. If the landlord fails to do so in a timely fashion, you can file a complaint with the city, and an inspection will be scheduled. Safety code violations that are verified will then be subject to enforcement.

It is ridiculous, said one tenant, to have to go to so much trouble just to get the landlord to do his job. The landlord-tenant law is appropriate for disputes such as a retained deposit, but less so for landlord failure to comply with building safety codes. Instead of creating an incentive for the landlord to attend to the safety hazards of the building, landlord-tenant dispute creates an incentive for the landlord to defend himself.

The City of Bellingham receives relatively few complaints. Some believe this means there are few rental hazards. Actually, hazards are under-reported. Tenants cannot accurately identify hazards, nor will they reliably report them. The Centers for Disease Control and Prevention (2008) says tenants do not complain for fear of landlord retribution. That a hazard may be dangerous does not seem to make any difference. Many tenants will not report it to the landlord, and many more will not file a complaint. The CDC says that tenant complaint systems are “highly ineffective” and “foster the decline of rental housing.”

To find a safe rental home, prospective tenants must depend upon gossip, rumor and hearsay to guide them. What tenants need is what we take for granted whenever we eat at a restaurant: consumer safety. Food vendors undergo inspection for compliance with health and safety codes. Imagine a restaurant for which inspection occurred only after you filed a complaint. That would be similar to the archaic tenant complaint system that now regulates
rental homes.

An owner-occupied building is a long-term investment that is maintained to protect its value. Slumlords turn this upside-down with rental buildings. Deliberate neglect is the business plan. Costs are reduced by putting off repairs. Maintenance is ignored. Rent continues to be collected from tenants who have no other place to go. Buildings deteriorate and become increasingly dangerous. When no longer rentable, due to deterioration, the slumlord can sell the remaining husk of a building or demolish it.

The slumlord business plan is a form of resource extraction. Deliberate neglect is non-sustainable business practice that exploits tenants and places them at risk. The rental industry defends the existing situation by insisting that most landlords are doing a good job. Without inspection, there is no way to know whether any particular landlord is, or is not, doing a good job.

Doing a good job is faint praise for landlords who struggle to use sustainable practices, while being undercut by slumlords, who do not.

It is said that the costs of a rental licensing program will be passed on to tenants. This presents with an implicit false choice. Given capable landlords and strong regulation, why can’t there be both reasonable rent and safe rental homes? More than half of this city’s housing units are rentals. A license would be an incentive for every landlord to do a good job.

In 2011, a rental licensing program was researched by city staff and modified by Bellingham City Council, but the proposal did not go forward at that time. How about now? City-supported rental licensing would level the playing field for landlords by eliminating the utility of deliberate neglect, protecting tenants from an unsafe home environment, and slowing the loss of rental stock in the city.

A single email on rental licensing will reach all members of Bellingham City Council:

*Reprinted with permission of the Cascadia Weekly. 

Thursday, February 13, 2014

Meth Contaminated Rental Shut Down

Methamphetamine contaminated rental
If the Bellingham City Council finally gets around to enacting a rental health and safety ordinance in 2014, they can add another item to the health and safety inspection checklist for all rentals in Bellingham...contamination with methamphetamine.

On 6 December the student newspaper, The Western Front, reported on a rental home occupied by several WWU students that had been contaminated with methamphetamine, presumably from actions of a previous renter.  You can read the Western Front article here. [Photo by Dick Conoboy at left]

The house is located at 618 E. Myrtle St near the WWU campus and is owned by a couple who live in Blaine according to the Whatcom County Assessor's site.  (Click here to view the property report.)  County records also reveal that the couple owns another home on Pine St. in Bellingham that is also a rental.  As indicated in the Western Front article the rental on E. Myrtle St. was managed by All County Property Management (sic).   According to the Western Front, the property has since been condemned for further occupation, a fact that I was able to confirm during a phone call with All County Properties owner, Bethany, on 9 December. Bethany also stated that the owners of the rental were not aware of the contamination issue.  As of 21 January, the house was still unfit for occupancy according to Jeff Hegedus of the Whatcom County Health Department. 

The property management firm, All County Properties (the actual name of the firm), also claimed ignorance of the contamination according to the tenants.  This I confirmed during my phone conversation with the management company's owner.  It is not altogether clear how the tenants learned of the contamination (there are competing stories), the fact is that it is the tenants who contacted the Health Department and paid for the testing.  It is good that they did so given that the house walls contained 13 times the legal limit of methamphetamine contamination. [As far as I am concerned, any contamination regardless of the level is unacceptable.] A basic test kit costs about $80 and can be used to test one or two areas.  Testing more surfaces or objects will require more test kits. This scenario reinforces my contention that landlords cannot be depended upon to discover or even act upon, on their own, dangerous defects in their own rentals.  

So, these unfortunate students then found themselves scrambling for lodging at the end of the fall quarter when they should have been reviewing and studying for final exams that week. The management firm's owner did tell me that she offered some alternative housing to the tenants but that they refused.  I have not been able to confirm this with the renters but they have all since relocated. 

According to the Western Front, one of the renters stated that "even though they have a good case against the property management, their lawyers don’t believe they have a strong enough case to get more than their rent back and compensation for personal damages." With an effective rental licensing and inspection ordinance, renters might avoid having to take landlords to court.  This state of affairs is the result of a toothless and ineffective Washington State landlord-tenant law which largely states that landlords and tenants alike have the right to duke it out in court - if you have the money.  Court is an expensive process as attorneys do not work on the cheap.   Therefore, not many renters, be they students or not, have the wherewithal for legal action.  That is the reason for which the city must step in by enacting a comprehensive ordinance to preclude dangerous rental units from being on the market in the first place.

Tuesday, February 4, 2014

Mayor's Rental Health and Safety Proposal Inadequate

On January 27th the Bellingham City Council again took up the issue of rental health and safety during a Committee of the Whole meeting.  The decision was made to hold, yet again, Planning Committee sessions on the topic as was done last year by committee chairman, Jack Weiss.  

[You can review the committee meeting of January 27th by going to the city website here and forwarding to counter number 127.20.  The discussion at the evening council session can be found here at counter number 108.14.]

Last year the discussion turned on the outline of a proposal developed by Jack Weiss and the Planning Committee (read more about that proposal here).   The Planning Committee voted then to take the discussion into 2014 and ask the mayor to place the issue on the work plan of the Planning Department.   In response, the Planning Director, Jeff Thomas produced a memo that presented the administration’s notion of a framework for rental registration.  You can read that memo here.   Unfortunately, it outlines an inadequate plan for ensuring the health and safety of the tens of thousands of tenants in Bellingham.

The memo speaks to a system of registration rather than licensing.  The city, it seems, does not want to get into the business of licensing rentals so it is proposing to merely register them.  As Council Member Lilliquist pointed out, mere registration may not allow the city to withdraw a landlord’s privilege to operate rentals.   Registration is not necessarily a license to operate.  This issue must be resolved to ensure the city has the capability to take action against landlords who do not meet standards by withdrawing some sort of authorization to rent.

The memo also speaks to a program that is “performance based”.  It is not altogether clear what that means.  Are we speaking of the city’s performance, the landlord’s performance, tenant performance?  And what is being measured?  

There is a stated “focus on public outreach and education”, which can be part of the program but the main focus ought to be on inspection of units.  More on that later.

Among the more troubling aspects of this memo is the watering down of the focus by “improving the current code program for all violations, not just rental related as these types of violations comprise les than 10% of the total.”   First of all, the focus must be on health and safety of tenants of dwelling units not commercial establishments where nobody actually lives.  If the city wants to launch a program for that aspect of code compliance, it can surely do so but it ought not be conflated with rental safety and health with its thousands of providers, that is landlords.  Second, the reference to the current complaint statistics is grossly misleading and tends to minimize the extent of the problem that tenants experience.  The 10% figure is based only on the last two years of the present complaint only system that is severely limited by the ability and the willingness of tenants to complain. Furthermore, one must ask “10% of what?” and that is missing in the memo.  I have asked the Planning Director, who authored the memo, to provide backup numbers for the complaint figures.  As of the writing of this blog entry, he has only referred me to the testimony of Mr. Tinner, one of the city’s code inspectors. Before the council’s Planning Committee on 22 April 2013  [you can watch his testimony here at 92.45 on the video counter] That testimony is as vague as the information provided in the memo and does not answer the question regarding the data that was used for the conclusions presented by Mr. Tinner. The city council would be wise not to base any decisions on rental health and safety on these meager statistics. 

There are many reasons for which a tenant does not complain, not the least of which is ignorance of an existing problem.  Tenants are not code inspectors and, for that matter, neither are landlords.  No amount of education by the city will provide enough information to either party to make a judgment about the condition of a rental property.   Asking a tenant to inspect a unit for safety violations prior to occupancy is nonsensical.  Some severe problems only become apparent after having lived in the unit for a period of time. Who among the tens of thousands of tenants in Bellingham can even begin to determine if housing has issues with wiring, structural integrity, fire safety, noxious gases, etc.  Tenants may also hesitate to report obvious issues for fear of retaliation by the landlord.  We hear this from student renters regularly.  Even the use of a “confidential” hotline is extremely problematic as any landlord with an ounce of savvy will know that his tenant has complained.

Among the “guiding principles” outlined in the memo is that of “least cost”.   The real and overriding guiding principle ought to be “tenant safety and health” upon which the program is built to ensure that the principle is upheld.   Similarly, the use of existing resources unnecessarily limits the program from the outset and is inconsistent with the city’s call for tenants to be more forthcoming with their complaints.   More complaints require more assets for response. Even now responses to code infractions regarding rentals are handled in an ad hoc manner with the problem not receiving attention for several days at which time an inspector can work it into his schedule.  The Planning Committee at one point asked how many inspectors there were at present, however, that question was sidestepped by the Planning Director and Mr. Tinner.     

Additionally, the call for inspecting a small sample (½ of 1%) of the city’s 17,000-18,000 rental units each year is completely inadequate, especially if the choice of units to inspect (supposedly at random) is based on the complaints received the previous year.   As I indicated earlier, the complaint based system (the one we have at present) has already proved to be grossly inadequate.   Why base a “new” program on a system that has already failed?   And what will the inspection of a mere 85-100 scattered units tell the city about the overall condition of the entire rental stock?  Such a paltry number is de facto unrepresentative and one cannot reliably extrapolate from that point.

Last is the Planning Director’s list of Next Steps, most of which are reasonable and applicable to almost any project.  The exception is the step that reads “The compilation of a list of third party, qualified inspectors.”   This flows from the city’s desire to operate a program of “rental inspections-lite” without adding inspectors who are city employees. True, the law allows landlords to choose to have inspections done by a state qualified private inspector.  However, the city does not have to rely on such private inspectors to flesh out its program.  I explained this in my blog entry of last July that you can access here.  

Last July I also wrote to the mayor and the city council about inspection of rentals.  The mayor did not respond but Jack Weiss did by saying to me and the mayor, “Dick's concerns about this approach [relying on private inspectors] are similar to mine.  I agree with all of his points.”  Here are the points I made to the mayor in the email to which Jack Weiss was referring:

“I gave some more thought to your position that the inspections of rentals ought be done by private inspectors at the expense of the landlords  who will still have to pay a fee to register their units.  If I am mischaracterizing your position as you formulated it to me …, please let me know. Here are my thoughts: 

1.  A problem with relying primarily on private inspectors for periodic inspections is that the city neither gains nor retains any institutional knowledge of the city’s rental units.  Paper reports from private inspectors are no substitutes for the experience of a city inspector whose employment is, for all intents and purposes, long term.  You and the Planning Director will have no group of Jim Tinners [a city code inspector] to whom you can go for experiential knowledge. 

2.  Yes, the use of private inspectors is allowed under law.  In fact, this was one of the challenges to the Pasco ordinance [in the late 90s], that city inspectors would be the sole inspectors.  As I understand, the landlords wanted the option to hire their own.  They have that option now and [that] is written into the state law passed a few years ago.  I am not sure how that serves the landlords since a properly structured program with a revenue neutral fee system (the program fees will pay for the program) will spread the cost of inspections over all landlords and result in much lower per inspection costs.  I think you and the city council are underestimating the capability of a small team of city inspectors over time.   Again, I bring up Pasco.  They have the institutional experience of these inspections that are based on an inspection checklist that we can easily adopt without re-inventing the wheel.  I am sure they also have cost data and performance data regarding the time necessary for an inspection of a unit.  If my memory serves me correctly, the Code Inspector in Pasco told me that one inspector could do 8-10 inspections per day.  For more info see my blog entry here.  If you have not already done so, you may want to read the study prepared by Mark Gardner in 2008 entitled  “Options for a Rental Housing Licensing and Quality Inspection Program in Bellingham”  [Click here to read that excellent 27 pg. study]

3.  Reliance primarily on private inspectors for the verification of our rental units is a de facto privatization of an inherently governmental function, that of health and safety. (Fire departments were once a private sector function and we know how that worked out.)  Such a reliance invites collusion between the inspector and the inspected while depriving all landlords of a well supervised and even-handed inspection regime whose inspectors are accountable as city employees.”

I would also add today that using private inspectors in lieu of several specialized city inspectors will virtually assure a variety of results that will be unfair to some rental owners and by default, their tenants. A city program provides consistency and fairness in the application of a list of critical health and safety standards.  It provides certainty for the rental industry.  In addition the city would not have to train, license, audit and/or supervise this wide collection of private inspectors, presumably, at city expense.

Jack Weiss continued in his reply to my email to the mayor:  “The proposal brought to Council in 2011 was not made in a vacuum.  It was the result of three years of work at the Council and staff levels, paying attention to the comments received of a low cost program that targets, in a fair and effective way, critical violations in health and safety while registering all qualified rentals.  I used my own career experience in the rental industry to feel that this approach was correctly measured and appropriate.”  

Unfortunately, the memorandum from Jeff Thomas to the mayor outlining the administration's proposal on rental health and safety misses the mark by a wide margin.  The council needs to be much more demanding to ensure a rental health and safety program in Bellingham will result in a rental stock in good condition through regularly scheduled inspections by city employee inspectors.