Memorandum

City of Lawrence

Planning & Development Services

TO:	David L. Corliss, City Manager
FROM:	Brian Jimenez, Code Enforcement Manager
CC:	Scott McCullough, Director Planning & Development Services
Date:	February 7, 2013
RE:	Rental Expansion

On November 27, 2012, staff presented a memo, dated June 13, 2012, to the City Commission regarding the exploration of expanding the rental licensing ordinance to include dwelling units located in other areas of the city. Two options were identified, one being expansion to structures 50 years and older and the other being a city wide expansion to include all rental units.

At the conclusion of the presentation and public comment, a motion carried unanimously to direct staff to draft an implementation plan for the Commission to consider that would expand the program to all rental units, regardless of structure type or zoning, with implementation phasing options, as close to cost neutral as possible, and to include a bonus/incentive for compliant properties.

On December 18, 2012, staff mailed notice to a broad and varied mix of rental property stakeholders, but not to every property owner, throughout the community advising of a meeting to be held on January 7, 2013 to discuss the expansion of the program. Staff mailed out 81 letters to property owners of apartment complexes as well as known property managers that staff works with on a frequent basis. In addition, Megan Gilliland, Communications Manager issued a press release informing the public of the meeting and the Lawrence Journal World published an article concerning the meeting.

Stakeholders Meeting

The meeting took place as scheduled and was well attended with many landlords in attendance. Staff presented the proposed expansion plan which included a review of documents that were made available in paper form to those in attendance. In summary, the documents identified the following items of discussion.

Annual license fee of each rental unit.
Three categories of number of rental units and how that translated into number of units to be inspected every three years.
Incentive schedule for the three categories of rental units.
Cost example chart for 6 units, 20 units and 100 units for first 3 years.
Cost example chart for years 4-6 for incentive eligible properties.
Revenue generated vs. cost of program.
2013 Implementation schedule to expand the program.
Total cost of the program for first year of implementation.
Identified minor and major violations.

Staff also provided comment cards for attendees which yielded 7 comments. Staff received two additional comments via email and all comments have been provided for review.

Following staff’s presentation, a question and answer session was held for approximately 30 minutes. Much of the discussion from those that asked questions focused on the need to expand the current program to other areas of the city.

Staff’s general response is that the need is conveyed in the continual request from neighborhood groups to expand the current, successful program, to reduce the impacts of rental properties to neighborhoods; the need as observed by staff through our working relationship with KU Legal Services for Students Office referrals and referrals from Housing and Credit Counseling, Inc.

Staff has compiled the statistics of tenant complaint inspections from 2002-2012. Of the 898 inspections completed during this time period, 651 (72%) were for dwellings not located within residential single (RS) dwelling districts and/or not required to participate in the current rental licensing program.

Year	# of Inspections	# of complaints in RS zoning	# of complaints in Non-RS zoning¹	Percentage of Non-RS
2002	67	18	49	73%
2003	118	22	96	81%
2004	141	32	109	77%
2005	127	42	85	66%
2006	123	41	82	66%
2007	75	23	52	69%
2008	55	18	37	67%
2009	45	19	26	57%
2010	66	17	49	74%
2011	44	12	32	72%
2012	37	3	34	91%
Total	898	247	651	72%

1. There are dwelling units counted, such as mobile homes, that are located in RS zoning but not regulated by the current Rental Licensing ordinance.

· It is important to note that the number of rental units located in RS zoning that were not licensed under the program at the time of receiving tenant complaint is unknown. A reasonable conclusion is there were numerous unlicensed properties that staff identified as a result of receiving a tenant complaint request for an inspection.

An indication that the current program would aid in protecting the consumer and surrounding neighborhoods is the success of the current program. The current program has produced over 8,200 violations from inception that would have presumably gone unreported and would have contributed to a less healthy housing stock in the city.

Additionally, the number of complaints in RS districts has declined during the reporting period, presumably due to the inspections conducted as part of the rental licensing program in RS districts. By extension, a reduction in the number of complaints in RM and other districts should occur over time as an outcome of expanding the rental licensing program.

Applying the same program to all structures would extend this benefit and help maintain safer living conditions throughout the city. While data is lacking, Staff inspection experiences have shown that rental units located in zoning districts other than RS typically have a higher number of violations per structure. Furthermore, staff often finds licensed units that have had the initial inspection conducted with violations cited and corrected to have fewer or no violations upon their scheduled three year periodic inspection.

Program Highlights

Subsequent to the stakeholder’s meeting, Ordinance No. 8840 was drafted. The highlights/changes include but are not limited to the following:

Expands licensing and inspections to all rental units, except as noted in the ordinance.

Adds new definitions in Section 6-1302.
Requires rental license displayed as identified in Section 6-1307.
Annual license renewal schedule has been amended.
Includes certain administrative fees to aid in compliance with regulations.
Includes a provision that newly constructed rental units shall be licensed but are exempt from inspection requirements for three years.
The inspection frequency for three types of premises is identified in Section 6-1310(b).
A financial incentive for properties with only a certain number of minor violations is identified in Section 6-1312.
Section 6-1315, Notice of Violation, has new language that requires a violation to be identified as minor or major.
An owner that wishes to appeal a notice of denial or notice of violation goes before the Building Code Board of Appeals rather than the governing body.
Under Section 6-1319(b), it shall be unlawful for any owner or tenant to maintain a public nuisance as identified in Section 6-1313(a) or any violation of Section 6-1313(b).

Proposal to Expand to all Rental Units

As previously mentioned and identified above in program highlights, staff received direction from the Commission to present a proposal to expand the program city wide. Subsequently, staff performed research and discussed how a city wide expansion would move forward. Staff decided to break dwelling units located on a premise into the following three categories:

Properties with 1-10 dwelling units.
Properties with 11-50 dwelling units.
Properties with >51 dwelling units.

Each dwelling unit, regardless of category, would be assessed the annual license fee of $15. An inspection fee of $50 would be paid in the year that a unit is due for inspection. Additionally, rented premises can qualify for the financial incentive program of paying 50% of the inspection fee by maintaining properties that are viewed to be in a sound maintained condition based on having an average of 5 or less “minor” violations per dwelling unit during the inspection of the entire rental premises. Properties that exceed an average of 5 minor violations or are found to have even one “major” violation would not be eligible for the reduced inspection fee. A list of minor and major violations has been created.

The inspection frequency, however; would be different for each category. The proposed inspection schedule is identified below.

# of dwelling units on premise	# of dwelling units to be inspected on 3 year cycle
1-10 units	All units
11-50 units	11 units or 50% of all units (whichever is greater)
>51 units	26 units or 33% of all units (whichever is greater)

Staff utilized the 2010 U.S Census population and housing data released by the city which identified a total of 37,502 total housing units. The number of occupied housing units was 34,970. Of the occupied housing units, there were 18,623 renter-occupied housing units, which is 53.3 percent of the total occupied housing units in the city.

The following table provides a breakdown of total dwelling units for the three categories that are proposed for the ordinance that are not located in RS zoning districts. The data was derived from an analysis of the base zoning district categories found in the Lawrence Development Code and a parcel-based dataset containing the number of living units obtained in the July 2012 from the Douglas County Appraiser’s Office.

# of Parcels	# of Dwellings	# of Dwellings on Premise
7,378	1-10	9,878
106	11-50	2,436
77	51+	8,899

There is a total of 7,561 Parcels with a total of 21,213 dwelling units. It must be noted that in the category of 1-10 units, it is unknown the number of owner occupied units.

To implement the Commission’s direction to establish a fee structure whereby the program pays for itself but no more, staff recommends that the fees be reviewed periodically to compare the program costs with the fee income generated. A program this size will never be in perfect balance, but should be able to be within a reasonable range. Analyzing the income compared to the program costs over time will help achieve this mandate.

Implementation Timeline

Q1 – Adopt ordinance and begin the licensing of properties. Begin outreach to landlords on the inspection program.

Q2/Q3 – Continue the licensing process and hire/train staff.

Q4 – Continue licensing properties and begin inspections.

Promote licensed properties through website and KU.

Morgantown, WV

The Commission requested that staff review the Morgantown, WV rental licensing program for guidance. Information on their program can be found on their website: http://www.morgantownwv.gov/government/city-government/development-services-department/code-enforcement/rental-services/.

Staff spoke with Chris Fletcher, Director Development Services for Morgantown, and learned the following about their program:

Population 30,293 (July, 2011 U.S. Census Bureau).
The rental licensing program was implemented in the 1970’s.
Approximately 7,000 licensed properties currently.
Licensing fee $25 for structures with five or fewer dwellings; $15 for structures with six or more dwelling units

Per Mr. Fletcher, fees have remained the same since implementation and are far too low. Program is heavily supported through the general fund.

Units are inspected every 3 years under the ICC property maintenance code, as well as reviewed for occupancy limits under the zoning code. Corrections must be made within 20 days to avoid citations.

For buildings with 3+ units, the Fire Marshall’s office accompanies

Recommendation

Staff recommends that the City Commission adopt Ordinance No. 8840, if appropriate.