Home rental remains an issue for East Lansing City Council
Tweet
Editor’s note: This story was changed to reflect that the one property deferred in council will be moved to a later city council meeting, not a Planning Commission meeting.
In the face of neighborhood opposition and other restrictions, East Lansing City Council members are debating how to help residents put their homes up for rent.
It’s been an ongoing issue for the last three years, Mayor Pro Tem Diane Goddeeris said.
Rental is a potential solution for many East Lansing residents who are unable to sell their houses or owe more on their mortgage than the house is worth, she said. But other homeowners often fear the value of their property will decline if a neighboring home is licensed for rental.
At Tuesday’s council meeting, council members reviewed eight applications for rental licenses. Six applications were approved and one was deferred to a later council meeting.
Another was put on hold because of a neighborhood association’s request for the expansion of a current overlay district to include that property. Overlay districts prohibit rental properties in the area.
In the last few years, the council has seen many applications for rental licenses denied, Goddeeris said. Neighbors of the debated properties do not like the idea of rental houses nearby, often because it can change the atmosphere of the neighborhood, Goddeeris said.
“The people staying in their homes do not want the value of their homes to decrease,” she said.
When a resident cannot sell their house, currently the city council has two options, said Councilmember Nathan Triplett. The council can do nothing or it can grant a standard rental license, which makes the property permanently eligible for rental and often is unacceptable to the neighborhood.
“We’re trying to find a third way to address this without adding to permanent rental properties,” Triplett said.
The stagnant housing market is one of many reasons for the large number of rental licenses discussed at the Tuesday night council meeting, Code Enforcement Operations Officer Annette Irwin said.
The city of East Lansing faces a unique situation because of its proximity to MSU, she said. Many MSU staff, professors and students only plan on being in East Lansing for a few years and are reluctant to buy homes. About 60 percent of residential properties in East Lansing are rentals, Irwin said.
“For the size of our town, we probably have a larger number of people looking for places to rent,” she said.
East Lansing might face a difficult situation, but it is not unique to the area, Goddeeris said.
“A lot of houses, not just in East Lansing but across the whole state, have decreased in value by one-third,” she said.
If a resident’s house was worth $150,000 when purchased and is now valued at $100,000, for instance, the resident must pay off the $50,000 to be able to sell the house, Goddeeris said.
“The people either don’t have a job anymore or they had to move,” she said. “They see that renting their house will give them enough money to make their mortgage payment.”
Last year, the council discussed an ordinance which would have allowed for owners to rent their property until a sale can be made, Triplett said. The measure was met with overwhelming opposition from community leaders, he said.
The ideal situation would be for the council to create an ordinance allowing for exceptions to the current licensing process that both accommodates neighborhood associations and desperate homeowners, Triplett said.
“We’ve got to find (a) third option between doing nothing and issuing a full rental,” he said. “Clearly, the situation that we have now is unacceptable.”
Commentary
Add your $0.02, go to the comment form or follow the comment feed
Homeowner
(09/09/10 6:10am)Report
The third solution is to let the house go back to the bank and let the mortgage company deal with their mistake. Trashing a neighborhood with a rental to protect a bank’s ability to collect payments on an asset they overvalued is not worthing doing in today’s economy.
Unsold Houses
(09/09/10 7:34am)Report
Gee, aren’t these the folks who are so excited about their Avondale Square housing project in the middle of the glut? What about all the other new developments they are excited about? Ever hear of the law of supply and demand?
It shouldn’t be hard to come up with a “third” way, which is one year rental licenses that cannot be renewed once the % of homes on the market reaches a normal level, with licenses restricted to renting to no more than 2 unrelated persons or to a family. The problem is, there is no such rental market for most of the homes for sale at rents that would come close to covering mortgage payments. The only way to pull in $2000 a month or more is to stuff a house with students.
Cara
(09/09/10 7:52am)Report
What neighborhood association is involved?
@Unsold Houses
(09/09/10 9:37am)Report
I totally agree. If this were a question of “reasonable rentals,” i.e. families, the decline in value wouldn’t be so polarizing. But student rentals are what they are. And no one can deny the ugly truth that students simply don’t take care of the properties like homeowners, and they cause home values in the area to plummet. So if it’s between student rentals and no rentals, I don’t blame people for wanting to err on the side of no rentals.
ELHomeowner
(09/09/10 11:02am)Report
There are many, many responsible, employed, adults, over 25 years old who are going to be relocating to East Lansing as the FRIB project grows on MSU Campus. That is only one source of individual adults or families that may chose to rent a house rather than an apartment when relocating to the Lansing area. When my family moved here from another state 20 years ago, we had two kids in elementary school, two cats and a dog. Apartment rentals were out of the question with pets, and though I wanted to rent a house near campus for a year before buying, there were trashed student rentals and that was about it. I wish I had been given the option of renting a nice house where my kids and pets were welcome while I took my time looking for a house to purchase instead of hastily buying one in the whirlwind three day trip I made when my husband was offered his job here.
Maybe Realtors can help set up a classification system for rental homes declaring which are student rentals and which are for single families or adults. Rent fees should be in alignment with categories and if a home owner wants to be considered for the single family/adult rental listings, they should have to complete any repairs and renovations, street level improvements and after inspection they can apply for the new type of rental license.
Slum housing happens when greedy, cheap homeowners do the minimum repairs and renovations on their old buildings each year by slapping a bucket of cheap paint over bad repair jobs and calling it a day. Both of my now grown children have lived in EL rentals during college and I am sickened by the horrendous condition these buildings are in and the outrageous rent the owners charge! I don’t condone kids trashing homes, but it’s no wonder the students don’t care what happens to the house when it’s obvious the owners don’t care in the first place. Those houses are just giant cows to be milked for cash. Next to running a brothel, being a slum lord is a profession that hasn’t changed a whole lot over the centuries- people in both are being screwed for money.
Tax payers just bailed out how many financial institutions? How about a situation where they return the favor by arranging lower monthly payments to rental homeowners so they can pass the lower rates on to renters? (And that goes for commercial rentals as well!) Perhaps the banks can work out a mortgage payment plan that would allow a reasonable rental fee to be charged to renters so they continue to receive their mortgage payments, the owner holds on to their house and renters have a place they can afford to live in. Everybody wins. They can also offer a rent to own scenario as well.
In the next two years, every one of those old red brick apartments on Harrison Road just south of Shaw Lane are being torn down. Renters will be displaced for awhile until the new structures are up. The iron is hot right now. East Lansing needs to create a new family rental license for these nicer homes that are not selling and all those families will have a way to stay in walking distance from campus without having to live in the student rental ghetto housing that exists now.
Change happens when a city is bold enough to insist on it.
Empty Nester
(09/09/10 12:41pm)Report
There are many reasonable solutions to this issue outside of extending the overlay district, some of which have been presented above. Not all renters are students and some students are married and have families (particularly in this economy). Rather than making blanket statements and saying ‘no’ why not do the work to appropriately regulate rental status to an annual renewal or make some other limitation which provides quality rentals for those of us who want them while protecting property values? I’m a business professional in my early 50’s with two grown children. recently sold my larger home and am considering renting a smaller home because I love to garden and am still years from retirement.
Perhaps it would be better to consider that having a home rented to a responsible party is more desirable than allowing it to stand vacant and/or fall into foreclosure or short sale. I would think that being an informed association which protects one’s own investments while trying to aide one of their own would be a far better reputation for attracting new owners to the area in the future.
Not So Easy
(09/09/10 12:49pm)Report
People are forgetting two things:
1) East Lansing’s City Charter bans discrimination based on student status, so it would not be possible to limit rental of any given house to “families” only.
2) A rental license grants a property right to the holder that the city just can’t take away on a whim. Also, licenses are already renewed every year, but there only a limited number of reasons they cannot be renewed.
Unsold Houses
(09/09/10 2:10pm)Report
Ordinances can be changed. A property right is not a right to damage the property rights of others. The reasons for not renewing a license can be increased (and current reasons enforced), which would take away much of the opposition to rentals. It may also be possible to use the kind of conditional rentals that now apply to renting a house out while on sabbatical.
Licenses can be restricted to number of people. The trick is to find a way to allow a 4-person family but not 4 unrelated adults.
I assume the real opposition is from the landlord lobby that fears rules that would help desperate homesellers temporarily rent would be applied to slumlords.
re: Unsold Houses
(09/09/10 2:24pm)Report
Rentals are already limited to 2 unrelated or a family (regardless of size). The issue is no size, it’s that discriminating against students based on their student status in favor of families violates the City Charter. It’s not just an ordinance. It can’t be modified, except by a vote of the people.
The real opposition, from what I’ve seen, is from neighborhood associations and individuals faced with the possibility of having any type of rental anywhere near their home.
Unsold Houses
(09/09/10 5:26pm)Report
If rentals are limited to 2 unrelated, what are all those rentals with 4 or more students doing around?
Neighborhood associations aren’t afraid of a nice family or a gay couple or even an odd couple renting next door. They are afraid of the kind of multiple student slumlord house that drives down property values. Those have a lot more than 2 unrelated.
And yes, there is a slumlord lobby with lots of power in East Lansing.
EL Homeowner
(09/09/10 7:15pm)Report
Everyone loses if these houses go back to the bank—they are sold at significantly diminished prices, the homeowner takes a serious hit to his/her credit, and the house sits vacant for the months (years according to some reports) it takes for the bank to re-sell the property. A rental house has got to be better for the community than a vacant house. (does anyone know of any research that supports one position or another on this point?)
re: Unsold Houses
(09/09/10 9:58pm)Report
There are some holdovers from before the ordinance limiting rentals to 2 unrelated or a family passed. The city can’t arbitrarily reduce the number after the fact.
Neighborhood associations are afraid of any rental that any students live in. All these recent overlays are targeted against applications that would be limited to two unrelated students.
There may be a landlord lobby in East Lansing, but they don’t oppose finding ways to help those having trouble selling. It doesn’t seem to concern them at all.
Homeowner
(09/10/10 5:42am)Report
Perhaps the underlying issue is that it is not healthy for a community to have the sort of turnover cited in the article and above. Professionals and their families who are just passing through EL create churn in the housing market and schools. When houses could be bought and flipped short-term, the issue was masked. Now, they’re looking to rent a house in an established neighborhood, one that is rented and maintained not by a professional property manager, but by a resource-drained family caught in the mortgage meltdown game of musical chairs. That’s not a plan that will lead to a stable, prosperous community or a good neighborhood. And it’s not planned creation of rental housing that’s appropriate to the needs of itinerant professionals or students, it’s triage for homeowners caught in an economic shift. Thus, I’d argue the council has acted prudently thus far and that if anyone should be made to bear the brunt of the fallout, it should be the banks.
Philip
(09/10/10 10:52am)Report
The solution is for the fricking bank to allow a short-sale of the property. Short sales of these homes will create a short term drop in property values — but it will clear the market and allow for a natural housing market again. Prices will gradually increase once these houses are sold to long-term property owners who actually want to be here long term, and are not just transients.
Also, if you end the practice of turning existing single-family owned housing stock into beat up, poorly maintained, garbage-strewn, overgrown rental properties, you will create an economic incentive for developers to actually build more dedicated rental units near campus.
Now, if the City really wants to help these folks, they will give people in this situation a temporary property tax abatement, which would reduce tehir escrow payments and help them pay their mortgages. But, frankly, a foreclosed property that isn’t allowed to rent is better in the long run than one that is allowed to be a rental.
Philip
(09/10/10 10:57am)Report
The solution, as I said, is short sales. Mortgage holder must allow these folks to get out of the trap they are in and sell the house at a discount to a willing buyer. The problem is that banks don’t want to eat the loss. But, frankly, someone has to.
Once the house is short-saled, it stabilizes the market. yes, there is a short term drop in surrounding property values. But, prices will start going up faster when you stabilize the market and the available housing stock is reduced. Why a bank would go through the whole foreclosure process is a mysetry to me. They are better off allowing a short sale.
What we have are banks squeezing distressed homeowners into pushing for a solution that involves screwing the entire surrounding community rather than the banks taking a loss on the property either through a short sale or foreclosure.