Facing foreclosure? Don't count on becoming a landlord

Columbia Heights is putting a six-month halt on new rental applications. Says The city has enough, the mayor says.

By LORA PABST, Star Tribune

Last update: May 15, 2008 - 11:43 PM

As more and more foreclosed single-family homes are becoming rental properties, cities are scrambling to deal with all the new "for rent" signs.

But one city, Columbia Heights, has simply said, enough.

For the next six months, new landlords won't be able to rent their properties because the city has stopped handing out rental licenses.

"It may sound a little rash, but by the same token, we have plenty of rentals already," Mayor Gary Peterson said.

The City Council decided to act quickly.

Columbia Heights has seen a 25 percent increase in rental license applications in the past three years.

In the mix are almost 300 foreclosures in the past 15 months and 5 percent of the city's duplexes and single-family homes currently in foreclosure.

Council members this week unanimously approved an emergency six-month halt on rental licenses, which will apply to any new landlord. Anyone who has had a rental license in the past two years will still be able to renew or reapply for a license.

Community Development Director Scott Clark said the city decided to pursue an emergency action rather than wait the 60 to 70 days it normally takes for a council action to go through the approval process.

"We're not saying rental property is a bad thing," Clark said. "But we're having some concern about single-family homes being turned into rental."

Now the city staff will begin the task of collecting and organizing crime data, rental rates, home values, foreclosures and code enforcement actions in almost every neighborhood. The city will use the data, in part, to find out where foreclosed homes are being sold under value and dragging down neighboring property values, Clark said.

"If there are neighborhoods with stress, then maybe we need to focus more time, energy and resources on those neighborhoods," Clark said.

Looking for solutions

At the end of the city's six-month hold on rental licenses, officials will consider introducing new programs for neighborhoods that are dealing with high numbers of rental properties and foreclosures. The programs could include first-time home buyer assistance, rehabilitation money for homeowners and kits for first-time landlords, Peterson and Clark said.

"What we're trying to do is preserve the integrity of our neighborhoods," Clark said.

The city is already preparing for an increase this summer in maintenance needs, such as lawn care, at foreclosed houses.

"We're going to have our hands full maintaining properties that are vacant now," Peterson said. "Rather than just exacerbate a problem, we thought we'd hold back and look at the whole problem."

As part of a 10-year plan to aid homeowners in maintaining older properties, the city has started several programs that provide financial assistance for rehabilitation and remodeling projects. Last fall, the city also enacted stricter property maintenance regulations for residential and commercial properties. City officials are currently looking at a point-of-sale inspection program.

Peterson said the city is concerned that foreclosed homes will be purchased by investors looking to rent them or individuals who don't have experience as landlords.

"We've been working very hard and we don't want to take a giant leap backward," he said. "It's self-preservation."

Lora Pabst • 612-673-4628

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