Review Tools and Work Proposal to Review Strategic Plan Tactic 18) “Expand and Improve Residential Rental Licensing Program”
 

Purpose:
 
The purpose of this case is to receive work direction from the City Council regarding the Strategic Plan Tactic to Expand and Improve the Residential Rental Licensing Program, as part of pursuing the initiative of  improving and maintaining the safety of the community. The City Council is being asked if review shall be taken to the next step to determine if a program change is necessary. The City Council is not choosing an outcome or alternative at this point, but rather giving direction to staff on how (or if) to continue pursuing this issue.

Background:
 

The Reasoning behind Rental License Programs
               
Cities have developed rental license programs to accomplish different goals. Simple registration programs are designed to keep track of landlord’s contact information and to develop a database of units are being rented out in the city. More advanced inspection programs have been implemented to maintain the physical appearance and safety of the housing stock. Some studies have suggested that absentee landlords invest less in properties than owner-occupied units, possibly because they do not benefit as directly from the improvements or observe the property on a daily basis.

Many metro area cities began or strengthened their licensure/registration programs after encountering problems during the depressed housing economy of the mid-2000s. Often times, owners wanting to sell their homes due to underwater mortgages were unable to find buyers and made the decision to rent their homes instead.

Most programs have a tenant safety component as well. The thought is that renters are often at the mercy of their landlords and may not be able to advocate for themselves or demand enforcement of their tenant rights out of fear that they will lose their housing. A goal of Ramsey's current program would be to protect renters from unscrupulous landlords, while taking steps to minimize the inconvenience for good landlords. For example, many programs are structured in such a way that they charge very low fees and have infrequent inspections for properties that have good records. Additionally, some cities’ programs have a crime prevention component and use mandatory landlord trainings, background checks, and crime free lease addendums to crack down on what they perceive as vulnerabilities in rental housing. Single-family home rentals, when compared to apartment complex rentals, are thought to be vulnerable to certain crimes such as drug production due to their increased privacy and not having an onsite manager's oversight.
               
Ramsey’s Existing Rental License Program
 
Ramsey has a rental license program in place but exempts single-family homes and townhomes. Ramsey requires multi-family rental property owners to obtain a license from the city at a cost of $75 per unit. These licenses are good for two years and an inspection of each unit is required for the initial license and for each license renewal. Ramsey also requires that multi-family property owners designate a local agent (empowered to respond to maintenance requests, emergencies, and code violations) if they live more than 75 miles away from the city.

What Purpose Might a Program Change Serve in Ramsey?
 
Ramsey does not currently have a crisis situation concerning poorly-maintained rental properties the way many of its peer communities have experienced. Part of this may be a result of Ramsey’s historically very low rate of renting which was just 3% of properties in the 2000 census. The prevalence of renting has been increasing in Ramsey, however, and the 2009-2013 American Community Survey now estimates that 10% of units are rentals. Ramsey is not expected to quite reach the rental rates of neighboring cities like Anoka (45% rental) but the trend towards an increase in renting is expected to continue for the foreseeable future. For Ramsey, a rental licensing program that affects all rentals would be largely a proactive and preventative measure aimed at keeping the city’s relatively young housing stock from slipping into decline through lack of maintenance as it ages. The city could establish a performance-based program with tiered fees and tiered inspection frequency to help ensure that it was not imposing an undue regulatory burden on good landlords. In many ways, this modified program would be friendlier than the existing rental licensing program which offers no performance-based incentives to multifamily property landlords who are good stewards of their buildings.
 
Rental Licensing in Other Metro-area Communities
 
The majority of cities larger than 10,000 people in the Twin Cities metro have some sort of rental licensing or registration program in place although there are notable exceptions including Edina, Lakeville, and Minnetonka. Ramsey’s exclusion of single-family homes and townhouses from licensure appears to be highly unusual. Several surveyed communities reported that single-family home rentals are actually more problematic and prone to code violations than apartments since they lack on-site property management and often have absentee or accidental landlords (defined as a property owner who becomes a landlord by necessity for financial reasons).

Rental licensing/registration programs in other metro cities vary widely in terms of program requirements, program goals, and fee structure. There are a few cities, Apple Valley and Eagan for example, that require only that landlords register their property with the City and provide up-to-date contact information. These programs do not charge fees and are intended mostly to connect landlords with city resources and ensure that contact can be made in emergencies. Many cities, Coon Rapids for example, began their licensure programs in this bare-bones format but later realized that these programs were not very effective for reaching more advanced goals such as maintaining the quality of the housing stock. Cities such as Andover and Roseville have gone a step beyond simple registration and perform exterior inspections of rental properties every two years, looking to prevent visible blight.

The most common licensing program type is essentially what Ramsey already has in place for multi-family rentals, a rental licensing program that requires interior and exterior building inspections. Most cities require inspections for single-family homes but they vary somewhat in terms of frequency. A few cities such as Elk River and Mounds View require yearly inspections. Bi-annual inspections are most common and cities such as Columbia Heights, Spring Lake Park, East Bethel, Saint Louis Park and Chaska have adopted that frequency level. There are also a few cities such as Maple Grove and Blaine that perform inspections every three years. Minneapolis, Champlin, Saint Paul, and Brooklyn Center all have tiered inspection schedules and reward their good landlords by requiring less frequent inspections. In Minneapolis, good landlords might go as long as seven years in between inspections. Bad landlords with serious infractions might have inspections every six months.

Fees for licensure vary but generally range from around $50 per year to $190 per year for a single-family home. Unlike Ramsey, which charges $75 per unit regardless, most cities offer a steep licensing discount for additional units within a rental building. Some cities have instituted one-time conversion fees of as much as $1,000 for any property owner that is seeking to convert their owner-occupied single family home into a rental. Some cities use performance-based fee reductions to reward good landlords.

In Minneapolis, stellar properties not only get less frequent inspections but they also get fee reductions. Blaine gives out fee discounts to property owners who pass inspection without any code violations. The City of Saint Paul does not have rental licensure program, per se, and instead requires that landlords get their property a certificate of occupancy from the fire inspector. Landlords do not have to pay any yearly registration fees but are required to pay $100 every time the fire inspector visits which ranges from every 6 years for stellar properties to every year for ones with lots of major violations.

Some cities have implemented additional steps beyond inspections in order to achieve their local goals, largely focused on crime prevention. Several cities including Coon Rapids, Brooklyn Park, and Shakopee require landlords to take Crime Free Housing crime prevention training. These cities report that while landlords often complain initially about this requirement, most end up giving high marks to the training after completing it and say it was well worth their time. Cities such as Columbia Heights, Maple Grove, Bloomington, and Shakopee require that landlords build crime-free language into their leases that mandates the eviction of tenants who break certain laws. These same cities also require background checks on tenants to ensure that landlords know who they are renting to.
 
Other Cities’ Reflections on the Effectiveness of their Programs             
               
Ramsey city staff interviewed representatives from fourteen metro area cities to gain insight into the effectiveness of their programs and public reaction. The sentiment was overwhelmingly positive in favor of rental licensing programs. The only people who dislike the programs, according to most cities, were the landlords that encounter multiple infractions. No cities were able to provide empirical data in support of their programs but most of those surveyed indicated that the city was seeing the results that they wanted, either improved home maintenance or a reduction in police calls. The only city surveyed that has repealed an established rental licensing program, Chanhassen. This community did so because they felt that all of the problem properties had been brought up to code and the City Council decided that the program was no longer a good use of staff time. It is also worth noting that Chanhassen’s program was unusually burdensome and had very frequent mandatory inspections that made it unpopular in the community.
 
 Existing Tools for Property Maintenance and Tenant Rights

In the event that the City Council chooses not to move forward with further analysis, it is important to note that other tools exist for the City and its residents. These programs include, but are not limited to:
 

• Ramsey Public Nuisance Code
• Ramsey Property Maintenance Code (condition of buildings)
• Ramsey Off-Street Parking Ordinance
• Ramsey Zoning Code
• Ramsey Building Code
• Anoka County Community Development/Housing and Redevelopment Authority
• Attorney General

Notification is not required at this time.

Observations:

As step 1, Staff is seeking authorization to begin a work plan to first answer the question as to whether or not changes need to occur to the City’s current Residential Rental Licensing Program. The plan would be to follow the City’s standard citizen engagement platform for land use policy. Each step in the process would center around a citizen-focused engagement process.
 
Alternatives

Alternative 1 - Direct Staff to begin analyzing with the public whether or not a change to the City's current Rental Licensing Program is warranted. By taking this step, it does not obligate the City Council to make a policy change. In addition, the City might learn efficiencies and better effectiveness even if no other program changes are made.

Alternative 2 - Direct Staff to better define the Problem Statement before working with the public to determine is a program change is warranted. Staff believe considerable research has been done on this topic, and the discussion likely needs to focus on public analysis at this stage.

Alternative 3 - Direct Staff to take no further action or research at this time. This would retain the program in its current form.

This case is being handled as part of normal Staff duties.

Staff recommends that this subject be discussed with the community. Staff recommends that this be done through at least one public workshop in addition to other mediums for input such as emails, letters, phone interviews, etc. No more than three workshops should be held without staff first consulting with the City Council and presenting the input gathered from the initial workshops.

Motion to direct Staff to further analyze potential changes to the Rental Licensing Program and discuss ideas with the community and stakeholders.