Urban EL Neighborhood Landlords and Homeowners Meeting

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Sunday, October 26, 2014, 12:55 pm
Alice Dreger

On Monday, October 27, at 7 pm, homeowners from five East Lansing urban neighborhoods and landlords who rent out houses in those neighborhoods will meet officially for the second time to discuss possible changes to property regulation in those neighborhoods. They will discuss a draft list of recommendations that may then be revised and sent “up” for discussion and approval by City government. (Click here to read the recommendations and the summary from the last meeting.)

The steering committee consists of two representatives each from Bailey, Chesterfield Hills, Oakwood, Red Cedar, and Southeast Marble, plus nine landlords and one representative each from the Planning Commission and Housing Commission. (To see the list of steering committee members, click here.)

At issue are many points of tension between the two groups, and also between the two groups and the City, but what motivated the convening of this “steering committee” is landlords’ complaints about being held back from making certain improvements to their rented houses.

House-owning landlords are frustrated that they are currently prohibited in many cases from making improvements to their properties that would make the houses more attractive to renters (thus producing higher income) and safer (e.g., by creating more bedrooms above ground and doing away with basement-level bedrooms which may be prone to mold). The prohibition occurs because many of their rental houses count as “nonconforming;” this means the houses are essentially zoned for homeownership (by being limited to a maximum of two unrelated persons) but in practice are legally being used as rentals (often for four unrelated persons).

How did this “nonconforming” situation emerge, wherein houses are zoned essentially for one use (homeownership) but are allowed to be used for another (rental)? Over the years, a series of official rules and interpretations of those rules have been put in place to try to stop the large-scale conversion and degradation of older near-university neighborhoods that were once almost entirely owner-occupied single family homes but have seen many houses turn into student rentals. These rules and interpretations include, for example, ordinances meant to limit the number of unrelated occupants in a house; historic districts meant to limit exterior changes to houses; overlay districts to stop conversion of owner-occupied houses to rentals; and interpretations by City staff that very strictly limit what improvements landlords can make to nonconforming rentals.

A subset of these rules in combination with market forces has resulted in a large number of “nonconforming” rental houses in urban near-university older neighborhoods, particularly Bailey, Chesterfield Hills, Oakwood, Red Cedar, and South Marble.

The consequence of all these rules has been a slowing of conversion of houses to rentals in these neighborhoods, but also a stopping of house-owning landlords from being able to do precisely the same kinds of improvements homeowners literally next door are allowed to do.

Many of the nonconforming rental houses at issue now have very few and outdated bathrooms, fewer windows than people today expect in a living space, and bedroom layouts that mean renters must share bedrooms or sleep in the basement. Landlords want to do things like add bathrooms, add dormer windows, and, in some cases, add driveway space and additional floors. They say they are not seeking to increase the number of renters in each building, just to make the properties more attractive so that the rent level can be set high enough to appropriately upkeep the property and to attract the quality of renter that otherwise may be more inclined to rent in one of the newer apartment complexes.

City staff has said that one advantage of keeping these properties relatively unattractive to renters is that then these neighborhoods can absorb renters who need or want cheap rental options.

That said, City staff "agrees with the landlords that if the properties were allowed to make structural changes to add bedrooms and bathrooms, the propety value would increase leading to more taxes for the City." (Click here to read about the City's $186,000,000 debt.)

Homeowners in these neighborhoods are nervous that prohibiting improvements might mean an influx of troublesome tenants drawn by very low rents, followed by property degradation. But homeowners are also nervous that allowing improvements in nonconforming rental houses may increase the problems they often face with student renters, including noise, trash, traffic, parking overflow, and ultimately loss of quality of life and property value. Some hope that by restricting improvements, and thus restricting rental income, the houses might convert back to homeownership. There is substantial evidence from history, including in East Lansing, that this is unlikely to happen without very large public subsidies, and even then it might not work.

As a consequence, the neighborhood representatives to the steering committee are seeking assurances that allowing improvements will improve their quality of life, property values, and neighborhood stability, not decrease them.

The steering committee had been set to meet for the second time last Monday, October 20, but because City staff provided the summary and recommendations only a few hours before that meeting, members of the group pushed (successfully) to delay the meeting. An unofficial meeting of landlords and neighborhood representatives instead took place at Beggar’s Banquet on October 20.

Three neighborhood representatives (including me) and about eight landlords met at Beggar’s and engaged in free-flowing discussion about the issues on the table. All seemed to agree we need much better communication lines between landlords and homeowners in these neighborhoods because, in fact, the two groups seem to share a number of values: safety for everyone; maintenance (and preferably growth) of property values; and maintenance (and preferably improvement) of quality of life in these neighborhoods. Organization between landlords and homeowners could theoretically bring appropriate pressure to bear on the City, on renters, and on delinquent landlords, with the outcome of advancing common goals of neighborhood stability, safety, and property value growth.

Five recommendations that will be considered by the group tomorrow include:

-- Changing zoning to essentially “give up” on areas that are now almost entirely rental. This would make the houses in these areas “conform” simply by recognizing them as rentals, and would then allow improvements and possibly also higher numbers of renters in houses, concentrating rental density in “rental neighborhoods” (or what some call “university neighborhoods”).

-- Allowing “reasonable improvements” in nonconforming rental houses with safeguards built in to stop any increase of density and associated problems. This might include requiring exterior improvements (e.g., fresh paint and attractive landscaping) when interior improvements are allowed.

-- Creating a system of “license mobility” to try to move rental licenses out of mostly-homeowner neighborhoods into almost-entirely-rental neighborhoods. The idea behind this scheme is to allow landlords to not lose value when they give up a rental house to sell it to become owner-occupied. In this scheme, there would be “donor” neighborhoods (mostly owner-occupied neighborhoods) where rental licenses could be taken from, and “recipient” neighborhoods (already almost entirely rental neighborhoods) where rental licenses could be moved to. “Buffer” zone “transitional” neighborhoods would function as donor neighborhoods so that they would not lose stability, although transitional zones might suffer from increase of rental density in the “recipient” area next to the transitional zone. If licenses marked for mobility in this scheme were sold on the open market, it could theoretically incentivize landlords to move rentals from mostly-homeowner neighborhoods to areas that area already mostly student rentals. At the unofficial meeting last week, there was strong interest among landlords in stopping the City from being in charge of this because of the perception that the City has played favorites and/or been irrational and idiosyncratic in implementation of rules.

-- Requiring local agents for rental properties, so that if there is a problem with a rental house, homeowners nearby can reach someone who can quickly remedy the problem. (The problem of absentee landlords has created a system wherein homeowners often feel increasingly hostile towards landlords and renters.) An open registry would also be necessary for this to work.

-- Create City-community collaborations to deal with the problems landlords and urban homeowners face.

Not on the list of written recommendations, but being actively discussed among the group, is development of a landlord-homeowner urban alliance which would operate separate from the City government but which might jointly petition for and against proposed rules, ordinances, site plans, etc., and might jointly insist that the City fairly implement existing rules. The alliance could also be used to convey a unified message to renters and all landlords about good behavior and enforcement of rules.

The meeting Monday night will occur at Hannah Community Center, Room 211, starting promptly at 7 pm. The last meeting included “observers,” including a number of City staff and local politicians, which suggests that anyone wishing to come and observe the discussion may do so.

Disclosure: Alice Dreger has been a homeowner in Oakwood since 1998 and is an Oakwood representative to this steering committee. She suggested the unofficial meeting at Beggar's Banquet when it became clear the October 20 meeting could not occur because of inadequate time between the meeting and the sharing by City staff of the draft recommendations.


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