Just a Landlord

From Rebecca Knox at Brew City REI Club

********Brew City: If you are concerned about the MPS referendum suggesting a SIGNIFICANT PROPERTY TAX INCREASE 64-128% and want to relay your thoughts on this, the LAST MEETING with the task force will be at 5:30 p.m. at Bradley Tech High School, 700 S. 4th St, Dec. 10.
********

All of the meetings will be open to the public. The panel is expected to make a recommendation to the school board in December 🤨😲 This is the last meeting they are having.

We spoke to District 4 elected MPS board member, Annie Woodward and she said there are a lot of agendas going on and encourages everyone to share their opinions.

The current conversation across our industry is Evictions.

What will happen to tenants who are already near failing, when tax bills force widespread rent increases?

What will happen when rental owners, who are already operating on slim margins, cannot find tenants that can pay the increased rents that mirror the increased taxes.

What will happen to homeowners who are barely keeping up with expenses today?

If property taxes double, which is the mean predicted increase, Milwaukee, and Milwaukee alone, could easily see a foreclosure/failure rate comparable to 2008.

Owners in the rest of the metro will be unaffected, making rentals and homes there more valuable and desirable, furthering the exodus from, and the decline of, the City of Milwaukee.

The Journal reported just two weeks ago of the harm caused by 28% of City workers leaving the city for the burbs.

Read a great article at Forbes on Rent Control. Hat tip to WI Landlord Tenant Law Attorney Tristan Pettit for sharing the article with us.

“Because the downsides of rent control are all born by other people in the future, while the upsides of rent control, be they either real or imagined, are conferred on renters today. Politicians would gladly accept that someone else pays you Tuesday for a hamburger today.”

The article is good, but better is his full analysis. You can read it at:
http://www.seattleforgrowth.org/rent-control-politics-less-housing/
or download it at:
http://www.seattleforgrowth.org/wp-content/uploads/2019/11/Rent-Control-Analysis-Ver1-Complete.pdf

Additionally, the benefit of having rent lower than market rent may or may not help people that supporters intended to help. In a study of New York rent control in the 1960s, found that the “benefits were higher for older tenants, richer tenants, and white tenants than for their counterparts,” and “the cost to landlords exceeded the benefits to tenants by about 75 percent.

Even when apartments are price controlled, if they aren’t abundant, and one can’t pay more for them, then people must wait in line for them. Bread lines in the Soviet Union were symbolic of the fact that bread was cheap, but there wasn’t any bread to be had. Because of this, people with plenty of money to spend end up in rent-controlled apartments they won’t leave.”

There is talk of national rent control, with maximum rent increases of 3%, as well as only just cause evictions..

If your rents are below market, they could remain so forever. When it comes time to sell and you are getting $600 a month and the neighbor $800, the value of your property will be gravely diminished.

This punishes owners who allow long term tenants to remain below market. Eventually this will punish those tenants as well.

In some markets perhaps owners are evicting to gentrify, but in our market when an owner uses a 28 day no cause notice it generally means there is a behavioral problem. This will result in bad tenants staying and annoying their neighbors longer as well as more contentious relationships between owners and people that are problematic.

https://www.bisnow.com/national/news/multifamily/whats-in-aocs-national-rent-control-proposal-101041

“The economists are right, and the populists are wrong,” the Washington Post wrote in an editorial. “Rent-control laws can be good for some privileged beneficiaries, who are often not the people who really need help. But they are bad for many others.”

Specifically, the Place to Prosper Act calls for a cap of 3% or the annual U.S.. Consumer Price Index increase, whichever is greater, for rents in housing markets nationwide.

https://www.politico.com/news/2019/10/19/ben-carson-hesperia-california-discrimination-charge-051504

The ordinance also mandated unannounced annual inspections and criminal-background screenings by the sheriff’s department. The county sheriff’s department enforced the ordinance in a way that targeted minorities and evicted some residents who were the victims of crimes, including people who had called the police, HUD alleges.

HT: Tristan Pettit

This is similar to, Magner v. Gallagher a case that went to the SCOTUS. St Paul withdrew under political pressure from the Obama Administration.

Five years ago almost to the day, I shared the comments of Attorney John Shoemaker who represented the property owners in Magner. You can read that here:

California rent control does a forced roll back of rents increased after the bill’s introduction.

This penalizes landlords who left long term tenants at below market rent and then raised to market at turn over, a common practice in our industry as well as a benefit to long term tenants.

From the National Law Review:

[California] AB1482 will apply to all rent increases occurring on or after March 15, 2019. In the event that an owner increased the rent by more than five percent (5%) plus the percentage change in the cost of living, between March 15, 2019, and January 1, 2020, the applicable rent on January 1, 2020, will be the rent as of March 15, 2019, plus the maximum permissible increase.

It is worth reading the full article

What the anti screening crowd misses is that screening for criminal behavior is not for the direct benefit of the property owner, but for the safety and security of the other tenants and neighbors.

Minneapolis Doesn’t Want Landlords to Check Tenants’ Criminal History, Credit Score, Past Evictions

Under the inclusive screening process, property owners are forbidden from rejecting a potential tenant for having an insufficient credit score, or for having insufficient credit history.

Landlords are also forbidden from turning down potential tenants for any misdemeanor convictions older than three years and for most felony convictions older than seven years. The law does allow landlords to reject applicants that have been convicted of murder, manslaughter, kidnapping, or first-degree criminal sexual conduct, but only if those convictions were within the last 10 years.

The inclusive screening process also prevents landlords from rejecting tenants for evictions older than three years.

Milwaukee Journal has an article about Milwaukee’s new ordinance that requires deconstruction, as opposed to bulldozing, pre 1929 single families and duplexes.

A Milwaukee ordinance went into effect in January requiring single-family homes and duplexes built in 1929 or before to be deconstructed.

…
The extended timeline and need for more workers causes deconstruction to often cost nearly twice as much as demolition.

Bloomberg just had a piece on how recycling in general is failing.

Similarly a decade ago or so one of the Milwaukee TV stations followed a couple of DPW trucks full of recycling bin plastics to a landfill. The response was they were ‘just storing them underground’ until they could reuse the plastic.

None of these well-meaning things work as government mandates, but often take off when they are profit motivated.

Look at the electric car. Great for the environment but little interest among the general population. Then along came Musk with his Tesla Roadster. Not a utilitarian, save the planet vehicle, but a quick, sharp looking sports car that enthusiast liked, oh and it also happened to be electric. That changed the topic. His later vehicles are like little high tech spaceships from the Jetsons. Today, there is even Formula E racing, similar to F-1. The buying public, including gearheads, is now getting excited about electric cars and all the major manufactures are racing to beat Tesla. Soon gas may be a thing of the past.

Deconstruction will only work well when there is similar economic motivation to do so, such as a marketplace for used lumber and consumer desire for the materials.

But deconstruction of older properties has the additional problem that many of the materials cannot be reused due to containing lead, asbestos and who knows what other chemicals that will prevent its direct reuse.

Follow up to the Milwaukee County Proposal on making Rent Assist a protected housing class.  with a hearing is Monday March 12th, 9:00 AM at the Milwaukee County Courthouse building, Room 201B,  901 North 9th Street,  Milwaukee, WI 53233

My company accepts,  and likes the Rent Assist program.  We also have not found the inspections particularly cumbersome.  In our market we see Rent Assist as a benefit to both owner and tenant.

Yet, I oppose the bill.

1. Mainly because it attempts to hide the fact that the true reason that people do not get Rent Assist is that Milwaukee County does not provide as many vouchers as there are folks eligible to receive vouchers.If Ms Dimitrijevic wanted to help tenants in need of Rent Assist she would look at her own branch of government and say ’We need to increase the available vouchers.’  If that was her proposal the Association and I would fully support her, as would most tenant advocates.Instead she tries scapegoating owners, making it look like discrimination against voucher holders is the problem.
   Ask Ms Dimitrijevic if there are more applicants than vouchers and how many months or years the Rent Assist waiting list is.The other reasons I oppose this are:
2. Rent Assist does not allow for month to month occupancies.  Owners are more likely to take a chance on a questionable applicant if they can use a month to month and terminate tenancies that are not working as expected.  If you are a tenant, I’m sure you do not want to live in an apartment next door to a disruptive neighbor and when you complain the owner tells you that this person that is making your apartment less enjoyable has to stay for 11 more months due to a year lease.
3. Another issue is that per the RA contract an owner must serve both the tenant and the RA agency with notices of default, such as non payment.  This creates an additional opportunity for an eviction for good cause to have problems.
4. Finally, an owner may have to wait for the first payment.  While not a concern to our company, this is a big problem for mom and pop owners who are often under capitalized.

What the bill actually does.

Supervisor Marina Dimitrijevic, the bill’s author,  states on FaceBook:  “This change to the ordinance does not mandate acceptance of certain sources of income rather it makes it illegal to discriminate against tenants based on source of income.”  The bill is worded consistent with her statement.

Currently.

Prospective tenant:  ‘Hi, I have a Rent Assist voucher.  Will you accept my app?‘

Landlord:  ’Sorry.  We do not do Rent Assist.’

Prospective tenant:  ‘Okay,  There are thousands of other owners that love the program and I am one of a few tenants who are eligible.’ and under her breath says ‘What a donkey’

Result: The tenant does not waste time and possibly money apply for a unit they will not receive.  Everyone understands upfront.  And the owner who does not accept the Rent Assist voucher holder loses a  great tenant, and the accompanying revenue,  that we end up with. 😉

Image what a terrible experience this will be for the tenant under the new law if they apply with an owner that will not accept Rent Assist vouchers.

Prospective tenant:  ‘Hi, I have a Rent Assist voucher.  Will you accept my app?‘

Landlord:  ‘Of course you can apply. I follow all laws.’

Prospective tenant: ‘Was my app approved?‘

Landlord:  ‘Why yes.  You met all my requirements and seem like a wonderful tenant!’

Prospective tenant: ‘Great!  Here is the Rent Assist app you must sign.’

Landlord:  ‘Sorry.  I do not accept Rent Assist, but I did accept you.’  and legally the owner could say ‘By the way, because you are accepted I expect you to take the place or forfeit the earnest money’

Prospective tenant: ‘WTF! This is an outrage.

Landlord:  ‘Sorry. This is the unintended consequences of  Ms, Dimitrijevic’s law.’

Result:   Confusion, a terrible experience  and possible negative financial consequences.

Instead of this bill, a true tenant advocate would require that owners disclose in advance of taking an app if they will accept Rent Assist or other programs.  That is what is fair and equitable, not some non discrimination code that will harm and confuse tenants.

Note: While Affordable accepts Rent Assist, I personally am opposed to mandating its acceptance.  Proposals like this reenforces the falsehood  that people who need Rent Assistance and not receiving it due to landlords not accepting the program.  This would make one believe that hundreds of eligible families are suffering  because no one would accept their voucher.  The truth is the waiting list is due to the County not providing enough vouchers to meet the demand.

This is more of the anti landlord posturing used by politicians to shift the blame for government actions and inaction onto our industry and make us look like the cause.

Here’s a legislative alert from AASEW Attorney Heiner Giese:

Here’s a big alert:

Milw Co. Supervisor Marina Dimitrijevic is proposing an ordinance to REQUIRE all landlords to accept Section 8 housing vouchers or any other kind of voucher for rental assistance. This would mean landlords would have to get a property registered under a section 8 program and submit their property for inspections. It would also require you to use one year leases — you could not rent month to month anymore because the Section 8 program mandates one year leases.

Further, it is so loosely drafted that a landlord could not evict a tenant who is behind on the rent if they get an Emergency Assistance check.

This may be coming up for a hearing before the County Economic Development Committee next Monday, March 12, starting at 9:00 AM.

We need people to appear and speak against this. Also, contact your County Supervisor..

The Milwaukee County Board of Supervisors does ordain as follows: 
 
Section 1. Chapter 107 of the Milwaukee County Code of General Ordinances is hereby amended as follows:
 
107.01. – Intent.
 
It is the intent of this chapter to render unlawful discrimination in housing and to enact this chapter pursuant to the authority granted to counties by s. 66.432(2) 66.1011, Wis. Stats. It is the declared policy of the county that all persons shall have an equal opportunity for housing regardless of sex, race, color, disability, religion, creed, national origin or ancestry, marital status of a person maintaining a household, lawful source of income, receipt of rental or housing assistance, age, sexual orientation, as defined in s. 111.32(13m), Wis. Stats., status as a victim of domestic abuse, sexual assault, or stalking, gender identity and gender expression, or status in a domestic partnership.
 
 
107.02. – Definitions.
 
(9) “Receipt of rental or housing assistance” means the receipt of any form of financial
contribution from a third party for the purposes of creating or keeping affordable housing for tenants, purchasers, or other potential housing recipients, including but not limited to, assistance provided pursuant to Title 42, United States Code, section 1437f (commonly known as the “Section 8” housing program), the HOME Partnership Program, the Community Development Block Grant program, or any other public or private rental assistance vouchers or programs.
 
 
Section 2.
The provisions of this Ordinance shall become effective upon passage and publication.

Atty Heiner Giese
1230  N. Prospect Ave.
Milwaukee, WI. 53202-3014
Tel. 414-276-7988 Fax: 414-276-8342

An ordinance was proposed that would impose a requirement that all downtown construction with 20 or more residential units set aside units for affordable housing.  10%, if privately financed, or 20% if government subsidies.  If the developer was unwilling to do so, then the city would charge a fee of $125,000 per required affordable unit, PRIOR to issuing the permit.

While providing housing to struggling families is a noble concern, the problem with this type of proposal is it discourages development.  When you have the capability to do a $100, $200, $400 million dollar project, there are a lot of communities vying for the influx of development (I’ll assume as I never did anything close to that big)

Years ago I was in Vegas helping my wife do an event there.  I was standing in line to buy something and started talking to the guy in front of me. He was a large developer.  When he asked where I was from, I said Milwaukee.  His response was ‘you do not have a decent skyline and never will as your city is too hard on developers.”

Fortunately, this proposal was shot down by the Milwaukee city attorney  But there will be further attempts to keep Milwaukee at the economic bottom, I’m sure.