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Cascade: No. 77, Spring/Summer 2011

Maintaining the Viability of Small-Scale Rental Housing

The need for better cooperation between rental housing owners, city housing inspectors, and tenants was highlighted at a recent roundtable at the Philadelphia Fed on maintaining the viability of the private rental housing sector of one- to four-unit buildings.

The context for the discussion was set by Alan Mallach,1 senior fellow for the Center for Community Progress and visiting scholar at the Philadelphia Fed, and Karen Black,2 principal of May 8 Consulting. Both said that national political leaders and policies have, for the past decade, overemphasized homeownership and paid little attention to rental housing.

They both indicated that rental housing has a stigma and is often associated with deteriorated housing conditions and communities. They pointed out that small-scale rental housing is important and that half of the rental units nationally are in one- to four-unit buildings.3

The seminar, which is part of an ongoing focus on rental housing issues by the Philadelphia Fed’s Community Development Studies and Education Department,4 was attended by 38 nonprofit and for-profit developers, lenders, government practitioners, and researchers in the rental housing field. It was cosponsored by the Federal Reserve Banks of Philadelphia and Cleveland and the Federal Reserve Board of Governors.

Some issues raised at the seminar involved acquisition and rehabilitation financing; compliance with new government regulations; challenges in working with absentee landlords; and tenant selection, retention, and eviction. The speakers and attendees focused on strategies and solutions for these and other issues.

Chris Krehmeyer, president and CEO of Beyond Housing in St. Louis, said, “Small-scale rental housing must be part of a larger comprehensive place-based strategy that includes both homeownership and rental housing. We’re proactive and we contact municipal code enforcement departments to ask how we’re doing.” The nonprofit’s staff members talk to both municipal officials and renters regularly and help renters set goals and create an action plan. The tenants have stayed an average of six years, during which time 70 percent increased their income and 90 percent pursued educational goals, Krehmeyer said. The turnover rate during that time was about 25 percent.

Ann Houston, executive director of Chelsea Neighborhood Developers in Chelsea, MA, said that municipal housing inspections should be rigorous because weak code enforcement results in lower sales prices. Inspectors are sometimes reluctant to go after the worst landlords, and that practice has an impact on the value of properties owned by both nonprofits and for-profits.

Houston added that municipal housing inspectors “have the power to convene and help build a culture for owners, city inspectors, and renters to work together.” She said, “We need a joint strategy in which each respects the other’s role.” Inspectors must rely on communication more because municipal budgets, including for housing code enforcement, are being reduced.

David Paulus, director of Building Standards and Safety for the city of Allentown, agreed that communication was key. He said, “I tell my inspectors, your biggest tool is your communications skills, not your badge. The goal is to have a good relationship with landlords.”

Martha Van Cleve, president of Meridian Property Services, a for-profit management company that owns and manages apartment buildings in Trenton and Hamilton, NJ, noted that government agencies often view landlords as adversaries rather than potential partners in the goal of providing good quality rental housing. She and other speakers emphasized that building partnerships is essential to maintaining a viable market and that long-term occupancy is better for everyone — the owners, the neighborhood, and the tenants.

For information, contact Alan Mallach at amallach@comcast.net E-Mail Address; Karen Black at kblack@may8consulting.com E-Mail Address; Ann Houston at ahouston@chelseand.org E-Mail Address, http://www.chelseand.org/ External Link; Chris Krehmeyer at ckrehmeyer@beyondhousing.org E-Mail Address, http://www.beyondhousing.org/ External Link; Martha Van Cleve at mvc@meridianservices.com E-Mail Address, http://www.meridianservices.com/ External Link; and David Paulus at paulus@allentowncity.org E-Mail Address. For information on future work of the Philadelphia Fed on rental housing, contact Erin Mierzwa at erin.mierzwa@ phil.frb.org E-Mail Address.