May 26

The Mayor and head of DNS discuss the “zombie” housing problem in  this Milwaukee Journal article.  The article is interesting, the comments even more so.

“City officials define [zombie housing] a bit more precisely: when title to a property remains with someone who believes he or she has lost the property as a result of foreclosure. “

“Both Dahlberg and Barrett say they don’t understand why banks allow the problem to proliferate. “

While zombie housing seems to be a new phenomena to the city officials, we discussed it since at least July 12, 2009.

https://groups.yahoo.com/neo/groups/ApartmentAssoc/conversations/messages/11702

https://groups.yahoo.com/neo/groups/ApartmentAssoc/conversations/messages/11828

http://justalandlord.com/?s=zombie

At that time I predicted the ordinances that had just been passed to make lenders more accountable would actually result in many more properties abandoned by both the owner and the lender.

The city also makes matters worse through reinspection fees.  I’m sure they think this is a cash cow, but it is a further cause of the abandonment problem.  On the front end these fees force marginal owners into failure and on the back end they make it less likely the lender or owner can sell the property.  Banks that control foreclosures in Milwaukee have adopted a policy of not paying taxes until the property sells.  When they receive offers they run title prior to accepting offers. Too many fees and they let the property revert to the city.

This was the case with two singles on one lot that I made an offer on a couple of years ago.  Bank ran title and rejected the offer due to reinspection fees (the front house was owner occupied, there was a sewer back up that they could not afford to fix and suddenly they were being billed $375 a month)   The city then foreclosed on taxes, the property was stripped of metal, druggies used it as a dry place to get high and finally they started the one house on fire, that in turned burned down a neighboring house, taking it off the tax roll too.  All along the city has had to mow the yard, shovel the walks, reboard it as it kept getting broken in.

Here is a post on how the city’s ordinances, no matter how well intended or logical on the surface, are actually contributing to the problem.

May 21

Perhaps I wasn’t clear in the original post.

This law only affects separately metered municipal utilities in tenant occupied units. Nothing has changed in how you handle utility cost for joint metered utilities. What you are doing now is permitted as long as disclosed in advance of signing the lease.

With the enactment of this legislation separately metered municipal services can now be directly billed to the tenants by the local governments, similar to how separate gas or electric accounts are billed to tenants by WE Energies*. This makes it more practical to have tenants pay their own sewer and water with less potential that you will find their unpaid bills on your property taxes*.

This change will initially affect many single family rentals where owners already have tenants responsible for their own sewer and water bills. With minimal costs owners of duplexes can take advantage of the new law by having a plumber separate the water supply and install a second meter. Then those duplex tenants could be billed directly by the municipality.

I would be surprised if many multi unit owners will incur the costs of this work, at least initially. But just like separating gas and electric, duplexes were the first to be retrofitted followed by more and more multi unit buildings

The net result should be more conservation, that ultimately results in more rate increases. ;-(

“The additional revenue is needed to offset declining water sales in the face of rising costs, officials said.”

*This is now similar, but not exactly the same as how a WE Energies account is handled. The new law does NOT completely eliminate the ability of the municipality to place the charges on the property.

May 15

Sewer, water and municipal service fees have become a major operating expense.  I’m sure these runaway fees have lead to the failure of many newer, under capitalized owners.

Last month the law changed on municipal utility charges, making it more practical to have tenants be responsible for these charges.  We owe a lot of thanks to the work done by Gary Goyke in making this law a reality, as well as the support of the members of the Wisconsin Apartment Association, the Apartment Associations of South Central WI and of course the members of the Apartment Association of Southeastern WI

In addition to the potential financial benefit to owners, there is a societal and environmental benefit as this will certainly result in conservation.  No more walking into a unit, only to see the tenant thawing dinner by running cold water over frozen meat for half an hour.  Remember when you paid for heat and would find windows open on sub freezing days or when you paid for hot water and found your basements being used as a laundromat for friends and family.

The most important aspects of the law effect the 2015 billings.  However there are some things we as owners need to do now to ramp up.

First, you cannot bill tenants directly for utilities that are not separately metered.  This means for multiple unit properties the water needs to be separated and an additional meter added.  In older Milwaukee duplexes this is not going to be a major job.  The two plumbing contractors I spoke to felt it would be a $600-1000 per duplex  to separate the water and install a second meter horn.  Remember that in this style building you only need to separate the cold water to the lower unit faucets and toilet as well as the feed to the lower water heater and possibly laundry facilities.

Older side by sides and four families will take more work, read $, as they typically have a single cold feed to the upper units.

Second, for the benefit of tenants, owner occupants and the city’s ability to collect their utility bills; we must urge the city to go to monthly billings

Attorney Tristan Pettit shared the attached doc from the League of Wisconsin Municipalities that should be the first step in the road map to making the change.

May 11

Wolf Richter writes:

 

Steps in the Fed, and trillions of dollars get printed and handed to Wall Street, and asset prices become airborne, and Wall Street jumps into the housing market and buys up hundreds of thousands of vacant single-family homes, drives up prices, and armed with free money, shoves aside first-time buyers and others who would actually live in these homes, and turned them instead into rental units. Now in over 1,000 cities, prices are, or soon will be, as high as they were at the peak of the last housing bubble.

The difference? Last time, all that craziness was called a “bubble” with hindsight. This time, it’s called a “housing recovery.”

If you are planning to buy now and catch the rising market you should read this and think 2006…

May 01

Long time AASEW member, Attorney Cheryl Baraty passed away yesterday after a difficult battle with cancer.  Many times I thought she would win the fight.

Cheryl represented quite a few of our members in eviction court and other actions, as being active with the Association in some legislative battles.  She was a close friend to former board member Kim Queen.

One of her more interesting achievements was finding that the Department of Neighborhood Services (building inspection) court section was “robo signing” court docs  long before anyone noticed that banks were doing it also.  That resulted in a number of cases being dismissed.

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