Rental Housing License Fees Discussion

At the August 12, 2024 City Council work session, the Council received an update from staff regarding the Rental Housing Inspections Program. One of the topics discussed that was briefly brought up, but not fully discussed, was the city code requirement for background checks of property managers and, in some instances, property owners; and annual rental license fees.

Background Checks
There were a few City Council members concerned that background checks are being conducted on the property owners. According to city code, a background check is required to be completed if the property owner has access to the rental unit and acts as the property manager.  The city code is modeled after the code other municipalities have adopted as part of their crime-free housing programs; background checks are common in cities with active rental housing programs. The requirement is part of the Kari Koskinen Manager Background Check Act. MN Statutes 299C.67 to 299C.71 require that owners of rental property run background checks on prospective rental property managers. If the manager has been convicted of a serious crime (murder, rape, stalking, etc) the owner may not hire the manager or must discharge the manager if the manager has already been hired. The law was named after Kari Koskinen, a female renter who was murdered by her building manager. The manager had a previous criminal record that was not disclosed to her. City Attorney Knaak has given his legal option if the law pertains to property owners. His review is attached. Mr. Knaak's legal opinion is that the statute pertains to third parties (not owners) employed or applying for employment for such a position. "Manager" is specifically defined as any employee who has the ability to enter a tenant's dwelling unit as part of their job duties.  As Knaak stated in his response, the city code requires a background check on property owners, there is nothing in law that precludes the City from requesting this information; he is comfortable that the City's position is very defensible. City staff, including the Police Department, continue to support background checks on managers and property owners who have the ability to enter a tenant's dwelling unit for the following reasons:

1. As stated by Mr. Knaak, the same underlying reasons for the passage of the Koskinen Act related to managers also relate to the protection of Ramsey residents (renters) from owners who would also have the same kind of access to the rental premises. The goal of the background check is to protect Ramsey residents from predatory offenders.
2. This is common practice. Other cities which the Ramsey program is modeled after have successful rental and crime-free housing programs that require background checks on property managers and property owners who have access to the unit to ensure their residents have protection from predatory offenders.
3. The property owner background checks are supported by the City Attorney, who feels the requirement is defensible in court of law.
4. All background information is private information of which the Police Department is the only authority with access to the information. The police department is checking for predatory offenses. Other city staff do not obtain private information. Once the background check is completed, the information stays with the Police Department. Chief Katers notifies the rental housing staff if the background check passed or failed.

License Fees
This is a continued discussion of the rental license fees. The current license fees were established per direction and approval of the City Council to ensure that the program is fully covered without subsidies from Ramsey taxpayers. Current fees are attached for your review. There are a few property owners that have voiced concerns to staff and council members about the cost of the annual license fees. 

Currently, there are 512 active single family/townhome rentals and 9 apartment buildings (total of 994 units). To date,125 active single family/townhome owners and 1 apartment building have not submitted the new rental license and required fees. Out of the 521 rentals in the city, 38 of the owners live in Ramsey; so 13.7% of Ramsey rentals are owned by a Ramsey resident. 

 If the annual license fee is reduced to $300 per year, the total fees collected equate to $171,210 annually. If the licensee chooses to participate in the Crime-Free Housing Program, the fee could be reduced by 10% for phase II ($270 each year) or reduced by 25% for phase III participation ($225 each year). If each licensee chooses to participate in phase III, the total fees collected equate to $132,135 annually. These fees cover not only staff's time spent on inspections and administration, but also the staff time of the Police and Fire Departments to offer the required crime-free housing class and monthly resident training classes. At this time, Planning and police staff are working together to offer a crime-free housing class in late fall and a resident training class in December. 

There are options to reduce the annual license fees, depending on the City Council's discission to require the fees to cover the program or to provide assistance to the program. As part of researching the program, staff inquired with other cities. Attached is a list of some of the cities' fees and if the program is fully funded or not.
 

Community Development Department - Planning Division

Discuss and provide direction to staff in terms of background checks of property owners and rental license fees.