Affordable Housing

Markets change.

Left to their own devices, markets for pretty much anything will move in some kind of cycle or another.

Remember Beanie Babies?  As demand boomed, the prices skyrocketed; when supply couldn’t keep up, fights broke out as the demand curve shot out past the bounds of reason.  Then the supply caught up, and a huge collectors market – let’s call it a “Beanie Baby Bubble” – erupted.  People, awash in “irrational exuberance”, started banking lots of money on the future upside of the Beanie Baby; there were even stories of people betting their retirement funds on the Beanie Baby market.

The bubble deflated, eventually. First, the supply of Beanies caught up with, then surpassed, and finally obliterated demand, as the supply of common sense finally caught up with the supply of duuuuuhhhhhh.

Today, Beanies have a respectable market.  As toys.  Not as investment products.Stores, adjusting to the demand, changed what they stocked;  more XBox 360s, less Beanies.

But then, RT Rybak wasn’t mayor at the time.  Had he been, perhaps – to try to prop up the city pension fund’s investments in Beanies (one can imagine), or to punish stores for having participated in the bubble, he might have instituted policies as stupid as this one:

As New Prague and other cities see more single-family homes changing over to renters because of the national housing market meltdown, many are enacting tougher rental policies. Since February, Minneapolis has decided to collect a $1,000 fee when a home is converted to rental.

The Minneapolis fee will cover costs such as inspections.

Leaving aside the first, obvious question – does it really cost $1,000 per house to send a city droog to “inspect” the property?

What’s the percentage for Minneapolis stifling a sane, rational response to the situation?  Given a choice between renting a house out and leaving it sit vacant, isn’t it better for the neighborhood, the city’s tax base, the crime rate, and “affordable housing” situation to have rentals than block after block of those blue (in St. Paul, anyway) “Vacant Building” posters?

I know – that’d require a city government that believed in the market – or was at least well-enough informed about it to hate it articulately.

25 thoughts on “Affordable Housing

  1. $1000? Brilliant. Makes me want to rush out and buy rental properties in RT Land. What a maroon.

  2. AC’s still sore over that “pet rock” collapse.

    That, and trying to short-sell “Guitar Hero” stock. That hadda hurt.

  3. Are you freaking kidding me! $1,000 to convert a house to rental? I already pay higher taxes and have a rental license. The rental inspector holds my rentals to a higher standard than owner occupied residences.

    Rybak and the morons on the city council are doing everything they can to ruin Minneapolis.

  4. “Given a choice between renting a house out and leaving it sit vacant, isn’t it better for the neighborhood, the city’s tax base, the crime rate, and “affordable housing” situation to have rentals than block after block of those blue (in St. Paul, anyway) “Vacant Building” posters?”

    Wouldn’t that depend on who the landlords and tenants were? Certainly any long time city resident like you can remember houses we would have preferred to sit vacant rather than to continue the current landlord/tenant situation. Certainly a row of vacant properties is preferably to a row of crack houses. If the $1000 fee discourages landlords who let a property become an active nuisance and/or if the $1000 fee provides the extra municipal services required by nuisance properties, then it would be a net plus.

  5. It probably never entered what passes for RT’s mind that the $1000 will be passed on to the renter, placing a further burden on people stupid enough to want to move into Minneapolis.

  6. Certainly a row of vacant properties is preferably to a row of crack houses

    Rick at the very best this statement is a distinction without a difference; I don’t have any numbers immediately to hand, but I’ve heard from cops and housing wonks that vacant houses are vastly more likely to become “crack houses” or some other kind of nuisance property than a rental is.

    and/or if the $1000 fee provides the extra municipal services required by nuisance properties, then it would be a net plus.

    A fee and “services” (city droogs writing tickets that nobody will ever pay, or will eventually serve as inhibitions to anyone actually rehabbing a vacant property) are better than renters?

  7. Lemme guess, RickDFL – your expertise on landlords comes solely from that guy who kept your damage deposit when you and your college buddies slouched off to find sinecures in government unions.

    He was such a jerk, man, he could have fixed that damage in no time and besides it wasn’t that bad and the place was a dump to begin with, so that proves landlords are just out to make money and don’t care about the peeeeple, man. F ’em. Run ’em all outta town.

    Then there will be nothing but middle-class owner-occupied homes and government housing projects like that one on Franklin Avenue.

    Oh yeah, that’s what we need more of.

    .

  8. Mitch said:
    “vacant houses are vastly more likely to become “crack houses” or some other kind of nuisance property than a rental is”
    But that is not the point. No one disputes that the average rental situation is better than the average vacant house. The question is whether some increase in the number of vacant houses is preferable to the renter/landlord combinations deterred by the $1000 conversion fee.

    To answer that question you need to do all kinds of economic analysis.
    How many owners will not convert due to the $1000 fee? How many owners will continue to live there if they can not convert? How many will abandon the home if they can not convert? Who would rent the houses if they were converted? Where will would those people live if they can not rent converted units? But would require more thought than vague allusions to the ‘free-market’.

    If you think the only municipal services negligent landlords require are ‘tickets’, you really should not be having this discussion.

  9. Nate:

    Never failed to get my damage deposit fully refunded that I remember. My favorite landlord was the nice couple that refunded the monthly rent every time my basement apartment flooded.

  10. No one disputes that the average rental situation is better than the average vacant house. The question is whether some increase in the number of vacant houses is preferable to the renter/landlord combinations deterred by the $1000 conversion fee.

    I’m not sure where you live, but as a rule it is ALWAYS better to have renters than vacant houses. The bad landlords are a code enforcement issue (and it’s much easier to pay to support them with taxes on viable properties than with punitive fees); the bad tenants are a law-enforcement issue (although it’d be great if we could roll back some of the DFL-sponsored laws that have made it almost impossible for landlords to deal with bad tenants).

    To answer that question you need to do all kinds of economic analysis.

    Oh, goodie!

    How many owners will not convert due to the $1000 fee? How many owners will continue to live there if they can not convert?

    More or less irrelevant – at least, in initial intention.

    This proposal, on further reading, seems not to be aimed at single homeowners putting their houses up for rent to pay the bills. It seems to be aimed at banks with big inventories of foreclosed houses in a softer-than-soft market, who might be tempted to hire management companies to rent the houses out while they wait out the market – the ones that now own all those houses with the “vacant” posters on ’em that are soggying up their balance sheets.

    Oh, of course like all actions aimed at “big business”, the unintended (?) consequences will smack the ones who can afford it least; the renters that’ll have that fee passed down to them; the small homeowner who MIGHT otherwise be able to consolidate his family into a different place and put the house up for rent; mostly, the small entrepreneur who is going out and buying foreclosures and putting them on the rental market, both as a money-maker and an investment. (If you weren’t a DFLer, Rick, I’d cite the notion of “buying low and selling high”; I think the analogous liberal notion is “pay any price and bear any burden that you can pass on to the taxpayer”). THEY will get hit.

    How many will abandon the home if they can not convert?

    If my scenario is accurate, and I suspect it is, this would only apply to a small number of the cases.

    Who would rent the houses if they were converted?

    It looks as if you’re calling for profiling, Rick!

    Where will would those people live if they can not rent converted units?

    I thought the DFL approved of “affordable housing?” Anything that constricts the supply given constant demand makes housing less affordable.

    But would require more thought than vague allusions to the ‘free-market’.

    Which, in turn, requires the time and, frankly, interest to write and research in greater detail, in a venue where general principle generally suffices.

    If you think the only municipal services negligent landlords require are ‘tickets’, you really should not be having this discussion.

    And if you think the city does a whole lot more than harass property owners in these sorts of situations, whomever they are, then you’re right. I shouldn’t!

  11. RickDFL said:

    “To answer that question you need to do all kinds of economic analysis.”

    RickDFL (and Google) to the rescue! Ahahahahaha!

  12. Mitch wrote:
    “as a rule it is ALWAYS” ??? How about ‘sometimes it is always’ or ‘usually it is always’, they would make just as little sense.

    “it is ALWAYS better to have renters than vacant houses”. That is just not true. There are plenty of situations where a vacant house is preferable to a tenant e.g. crack houses, serious nuisance landlords, ect. I am sure it would not take too long to find one Midway resident who would prefer a vacant house to their current neighbor.

    “the unintended (?) consequences will smack the ones who can afford it least”
    How do you know this? For example, if banks suddenly convert large numbers of foreclosed owner properties to rental, it will hurt many current small rental landlords who see their rents go down.

    “I thought the DFL approved of “affordable housing?”” Sure, but we also approve of an orderly and efficient market in both rental and owner occupied properties. Whatever small impact on overall rent/prices the fee will have may be offset by slowing a potential flood of new rental conversions that would dissrupt and undermine the rental market.

    “Which, in turn, requires the time and, frankly, interest to write and research in greater detail, in a venue where general principle generally suffices.” Glad to see you confessing your ignorance.

    Just because the radical economic theories of Phil Graham and Alan Greenspan gave us the housing bubble, that is no reason the City of Mpls. should not try to slow and moderate the spill over into the rental market. Not to mention recouping some of the eventual costs from speculative buyers.

  13. “as a rule it is ALWAYS” ??? How about ’sometimes it is always’ or ‘usually it is always’, they would make just as little sense.

    Nope. Always it is. There are exceptions, but as a rule, I’ll stick with always.

    “it is ALWAYS better to have renters than vacant houses”. That is just not true. There are plenty of situations where a vacant house is preferable to a tenant e.g. crack houses, serious nuisance landlords, ect. I am sure it would not take too long to find one Midway resident who would prefer a vacant house to their current neighbor.

    Ask my neighbors.

    But Rick, you offer a false choice; the only choices aren’t between vacancy and criminals or nuisances. The vast majority of renters are neither and, again, the means exist for dealing with both. And – since you seem to have missed this – a vacant house is much more likely to become a criminal front or nuisance than an inhabited one.

    Don’t make me keep repeating it.

    How do you know this? For example, if banks suddenly convert large numbers of foreclosed owner properties to rental, it will hurt many current small rental landlords who see their rents go down.

    Yes, and…? Fluctuations in supply against constant demand causes prices to change. It’s not government’s job to support landlord income (and it’d be deeply disingenuous for the DFL to try to claim it, since they’ve been actively attacking the small landlord for a generation.

    “I thought the DFL approved of “affordable housing?”” Sure, but we also approve of an orderly and efficient market in both rental and owner occupied properties.

    Which is a fine and dandy platitude, sure – although statist interventions to make markets “orderly” and “efficient” are almost always counterproductive. At any rate, the platitude has nothing to do with the reality of this fee, which won’t make anything either orderly or efficient – merely inconvenience banks at the expense of both small landlords and tenants.

    Whatever small impact on overall rent/prices the fee will have may be offset by slowing a potential flood of new rental conversions that would dissrupt and undermine the rental market.

    So RickDFL wants to use the power of government to artificially jack up the price of housing at a time when people desperately need it to get cheaper?

    Interesting.

    “Which, in turn, requires the time and, frankly, interest to write and research in greater detail, in a venue where general principle generally suffices.” Glad to see you confessing your ignorance.

    Your self-perceived mastery of rhetoric and of puerile “gotchas” like that may make you feel like a legend in your own mind, but they tend to make you write logical checks your facts and reasoning can’t cash.

    Just saying.

    Just because the radical economic theories of Phil Graham and Alan Greenspan gave us the housing bubble,

    Wow. Is that the talking point the Top Borg has given you this week?

  14. Mitch:

    ‘as a rule’ means, ‘generally’, or ‘usually’. Claiming something is the case ‘as a rule always’ the case makes no sense. But then your whole argument depends on conflating the two.

    No one disputes that, normally, occupied houses are better than vacancies. But these may not be normal times in the housing market. Bad renters are more likely when large corporate owners suddenly need to offload large numbers of rental units. If as you admit, there are some cases where vacancies are better than renters, then it is fair to ask whether the fee is especially likely to prevent those sorts of renters.

    “Fluctuations in supply against constant demand causes prices to change”
    And the current housing market is well outside the historic norm. It hardly stretches the imagination to think it might require some small city interventions, like the fee, in order to respond to the current crisis.

    “this fee . . . won’t make anything either orderly or efficient – merely inconvenience banks at the expense of both small landlords and tenants” Your welcome to your opinion, but it seems likely that lots of smart people at the City of Mpls. think differently. Since they study the economics of municipal housing regulations pretty carefully, I am inclined to give them the benefit of the doubt.

    “So RickDFL wants to use the power of government to artificially jack up the price of housing at a time when people desperately need it to get cheaper”
    If the GOP wants to be the party of ‘lower housing prices, faster’ in the middle of the biggest housing crash since the Depression, don’t let me stop you. There are plenty of ways to improve the stock of affordable housing, but the sudden and unregulated conversion of large stocks of foreclosed homes to rental properties does not seem like one of the better options.

  15. as a rule’ means, ‘generally’, or ‘usually’. Claiming something is the case ‘as a rule always’ the case makes no sense. But then your whole argument depends on conflating the two.

    Only if you want to argue pointillistic, obtuse semantics.

    The only conditions under which your absurd claim that vacant houses are better than rentals would be true is if the ONLY options were vacant or full of crack-dealer rentals.

    Entertaining (to you), perhaps, but hardly realistic.

    No one disputes that, normally, occupied houses are better than vacancies.

    Wow. It took how many comments to get to that?

    But these may not be normal times in the housing market. Bad renters are more likely when large corporate owners suddenly need to offload large numbers of rental units.

    You state that as if it’s a cause-and-effect relationship. What the heck, it might be. Please elaborate.

    If as you admit, there are some cases where vacancies are better than renters, then it is fair to ask whether the fee is especially likely to prevent those sorts of renters.

    The fee will “prevent bad renters” in the same way that killing ones’ dog controls fleas.

    And the current housing market is well outside the historic norm. It hardly stretches the imagination to think it might require some small city interventions, like the fee, in order to respond to the current crisis.

    You’ve shown us no way that this fee would be remotely helpful.

    Your welcome to your opinion, but it seems likely that lots of smart people at the City of Mpls. think differently.

    Well, maybe the voters of Minneapolis should try electing and/or hiring some of those smart people. God knows none of them are running the city today.

    Since they study the economics of municipal housing regulations pretty carefully, I am inclined to give them the benefit of the doubt.

    Appeal to authority is a bit of a logical fallacy, Rick. I don’t care that a couple wonks whose jobs depend on obeisance to a political party whose entire economic philosophy is based on trying to repeal the market claim that this fee is a fine idea. There’s reason to believe it’s not. And until the Democrats complete the repeal of the First Amendment for conservative dissent, I’m going to point that out.

    If the GOP wants to be the party of ‘lower housing prices, faster’ in the middle of the biggest housing crash since the Depression, don’t let me stop you.

    Rental prices and house purchase prices aren’t the same thing.  Indeed, housing rental prices have been quite high in the Metro, after having been relatively low up until the early nineties.  Or don’t you remember the DFL whinging about the lack of affordable housing?
    There are plenty of ways to improve the stock of affordable housing, but the sudden and unregulated conversion of large stocks of foreclosed homes to rental properties does not seem like one of the better options.

    Which is a nice, general platitude, but you’re trying to evade the original point; that this fee is a stupid idea.  Whatever the “better options” are, this isn’t one of them.

  16. Mitch wrote:
    “Wow. It took how many comments to get to that?”
    Exactly one, see 12:42 post.

  17. I think vacant house is many times more dangerous than a bad neighbor or landlord. The fact that RickDFL thinks otherwise is just more evidence that he will write at length on topics he knows nothing about.

  18. I happen to know a bit about the licensing process in Minneapolis. It’s pretty thorough, at least in the small units (the fire department handles multi-unit buildings, and is reputed to be somewhat less strict).

    Before, all you had to do was pay the $61 fee for a provisional license. The inspector would get to your place sometime between next month and two years from now. Now, your $1000 will get the inspection done within 60 days.

    The inspection itself works like this: the inspector sends a letter to the landlord, and works to set up an appointment to view the property. It may take several tries to set this up. The inspector meets the landlord at the property, does the inspection, and writes up the results. If there’s no problems, the full license issues. If there are problems, there will be reinspections.

    Considering what city employees get per hour, it could easily get up around $1000 in expense to certify the unit.

    There are some other factors–the city is trying to encourage owners to stay on the property, as well as discourage landlords who buy up many places, and then do no maintenance.

  19. And again with your huge assumptions.

    I DO pay for everything involved.

    And you have the issue entirely wrong.

    And sinceyouv’e opted to remain anonymous, I’m filing you under “spam”.

  20. Mitch:

    You can not accuse some one of the ‘appeal to authority’, if they are appealing to a proper authority. You can and do dispute the grounds for considering the administrative staff at the City as proper authorities. Your ground are:
    1. “whose jobs depend on obeisance to a political party”. Most of the staff at Mpls. are non-political appointees who have full civil service and union protection to express any political idea they want. I would say the average City employee has more freedom to propose a ‘free-market’ solution to a housing problem than an employee for the Chamber has to propose more government regulation.
    2. “whose entire economic philosophy is based on trying to repeal the market claim that this fee is a fine idea”. No one is proposing rent control or municipal ownership of the housing stock. Municipal regulations of housing property (zoning, inspections, code-enforcement) is a well-established part of all property markets around the industrial world. The $1000 fee is a small addition to those structures.

    “You’ve shown us no way that this fee would be remotely helpful.”
    From a quick look it looks like there are two general ideas. First a rapid influx of new rental units will drive down rents too quickly. The fee slows the process and allows all owners to deal with new conditions in a more orderly way. It is sort of like when they put the ‘circut-breakers’ on the stock market and temporarily shut it down to give everyone a breather. Two, given the banks huge need for cash, the fear is that they will rent to anyone (even bad tenants) and invest nothing in upkeep. In the previous market conditions, there was an assumption that almost all rental owner had the long term condition of the property as their primary interest. Under current conditions, there are a large number of owners whose short-term cash needs outweigh their long-tern interest in the condition of the property. The $1000 fee may be a small step to try to bring their short term interest in line with the long term interest.

  21. Rick,

    I’m heading into a meeting, and I’ll have to wait until later to answer the bulk of your, er, bulky comment.

    But I had to touch on this:

    You can not accuse some one of the ‘appeal to authority’, if they are appealing to a proper authority.

    The authority may be proper, but your appeal was not. You wrote “Since they study the economics of municipal housing regulations pretty carefully, I am inclined to give them the benefit of the doubt”. In other words, “they’re the experts, and I state that they agree with me, so there’s no point in further conversation”.

    Which is not a proper appeal to authority so much as pleading “my dad’s bigger than your dad”.

  22. I don’t understand. Do you disagree that Mpls city administrators are experts on the economic impact of municipal housing regulations (if not them, who) or do you disagree that they approved the $1000 fee.

  23. Obtuse as ever, Rick.

    Your quote said, basically, “they’re the experts, I defer to them, that’s all that needs to be said”.

    I disagree that invoking an “expert” body with no elaboration grants your argument any weight.

  24. Mitch:
    I did say they are experts and explained why I did. I did defer to them, because I think they know more about the economics of municipal regulations than you or me. For the same reason, I would defer to your knowledge of guitar equipment. But in what world does “I am inclined to give them the benefit of the doubt” become “that’s all that needs to be said”? If there is good evidence against the fee, lets take a look at it. But you seem strangely unwilling to engage in the substance of the debate. As for “no elaboration”, I have elaborated why, in addition to my confidence in the city administrators, the fee increase seems to make sense to me.

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