Council exploring new fee for rental properties

The City Council is considering charging a new fee anytime a homestead is converted to a rental property and when rental properties change ownership.

A conversion would result in a one-time $1,000 fee to cover the cost of an immediate inspection and subsequent inspections that are often necessary. When a rental property transfers ownership, the city would impose a one-time $450 fee. These fees do not include annual license costs. Currently, new rental property owners can allow their property to be occupied without being inspected as long as they hold a provisional license –they have to apply for one and pay the fee. The property is inspected within a year to make sure the home is up to code.

The extra revenue generated by imposing the new fee – estimated at around $900,000 annually – would pay for 10.25 full-time equivalent inspectors, including one unlicensed property enforcement officer who would be responsible for searching for unlicensed rental properties.

Council Members Diane Hofstede (3rd Ward), Barbara Johnson (4th Ward) and Don Samuels (5th Ward) are seeking the change partly because of the foreclosure crisis.

According to the Department of Regulatory Services, it’s likely that properties being converted are in poor condition. There’s also a concern about flipping properties. In the past, the department has found enforcement challenges when properties change hands often.

Johnson said she wished she had proposed the ordinance change four years ago. “This is like trying to close the barn door after the horse is out,” she said. “We have to get a handle on this housing stock in our city or we are lost.”

Council Member Paul Ostrow (1st Ward) expressed hesitation about the proposed changes at a Public Safety and Regulatory Services Committee hearing this week. He believed the amendment may be too wide in scope. He also was concerned that the Department of Regulatory Services had not consulted with the Finance Department before presenting its proposal to the committee.

Rental property owners who commented at the hearing said they understand the mortgage foreclosure crisis in the city, but don’t think the ordinance change will solve the problem. There’s fear that it could hurt non-profit housing efforts, too.

Dan Hunt, director of housing for the nonprofit Urban Homeworks, said he would like to see a provision so non-profits wouldn’t have to pay the $450 or $1,000 fee.