The murals in the St. Paul City Council chambers were lit during the public hearing. They had been dark during the tour taken last year. It was amazing what a difference the lights made to the intensity of the pictures. They almost came to life. Ah, but my camera was safely shut off for this serious and very austere meeting. The formality itself was intimidating without knowing opposing views were about to be expressed.
Better than an hour was spent interviewing the Chief of Police and the "use of force" trainer regarding tazer use. The Chief had an appointment, so the first item on the agenda had been pre-empted to allow his quick escape. The interview process was interesting but lengthy. The public was only given 15 minutes in total to express their views for each side . . . not 15 minutes each, but 15 minutes corporately.
Finally, the vacant housing amendment was presented to the council. The amendment was as it was summarized to me. The proposal is to prevent property title from being transferred on a category 2 or 3 registered vacant building. Both of those categories require a complete code compliance upgrade before someone can legally occupy the premises. The fear is that too many houses have been abandoned in St. Paul and like everyone else including me, the council wants to keep the quality of St. Paul's housing high.
To support his concerns, Councilmember Bostrom played a short video of 3 blocks on the east side of St. Paul showing 10 out of 23 homes as condemned. In his film was a beautiful old Victorian home that I had found for a rehabber 10 years ago. That house was condemned when he bought it, and it became, and still is the gem of the block. Under this new policy, that beautiful old Victorian may have been torn down for lack of repairs. Today it is proudly owner occupied . . . the goal of both the City Council and me!
The 15 minutes devoted to opposition of the amendment was shared by a resident/landlord, Pat Ruble from the St. Paul Area Association of REALTORS®, three local bankers who spoke as a team from their bankers' association, and myself. It was scary to say the least. The bankers were clear that they, as owners of some of the abandoned properties, would be hesitant to invest additional money into properties that have already cost them so much. Only one resident spoke in favor of the amendment.
Dan Bostrom's summary statement of the opponents who spoke was to say he had heard concern for the REALTORS® and their commissions, concern for the investors losing money, concern for the rehabbers, but none for the neighborhoods who have to suffer this blight. I was appalled and felt like shouting out, "Who said anything about REALTOR® commissions!" So, after 24 hours of cooling off, here is the summary of my concerns:
- Lender owners of foreclosed properties will not invest thousands more dollars into the homes to get them back to code. Some of these homes have been vandalized because they were vacant. Some were vandalized by the angry owners before they vacated. Some have experienced a long time of deferred maintenance. The lenders have already taken a significant financial hit and are not going to gamble that putting $20,000 or more into the house is going to guarantee a future buyer.
- Absentee owners who have already abandoned their properties for various reasons, have made the choice to abandon them and take the financial hit. They have moved on. That's what abandoned means! The City can fine and raze the properties. The house is abandoned.
- The City will continue razing the category 2 and 3 abandoned houses. This is currently being done at about 20 a month according to one of the staff members.
- St. Paul will lose some of its beautiful old houses that are filled with character and make St. Paul what it is.
- Dirty vacant lots will eventually become City property because of unpaid fines, taxes, and penalties.
- Tax dollars at work: administrative and inspection costs to identify vacant buildings, administrative costs to research and contact owners, cost of demolition, cost of clean-up, cost of maintaining the vacant lot for absentee owner, cost of recording fines and penalties, loss of property tax income, eventual ownership by the City, auction or marketing costs for lot sale.
- Some of the vacant lots will have new homes built on them at a cost far exceeding the price of the former house causing displacement of new buyers who can't afford new construction.
It was my suggestion that the City find a different way to regulate this problem. Minneapolis has a point of sale inspection that requires repairs be done before the title can transfer. This includes homes that need a code compliance. Minneapolis has deemed that title can transfer in cases where the buyer is willing to accept responsibility for the repairs the City requires including code compliances. The buyer is given 6 months to complete the repairs or suffer fines. If a title transfers without the repairs being made prior to closing or with no approved responsibility agreement, the City goes after the seller, the title company and the real estate agent. It is a serious matter and their ordinance has "teeth". Their ordinance allows professional "rehabbers", or owner occupants with expertise and deep pockets, to legally obtain the property to fix for resale in the future.
Some of the vacant buildings in question truly need to be torn down, but others are beautiful examples of St. Paul's rich architectural heritage and need to be saved from the bulldozer. The ones with good "bones" only need some love and thousands of dollars to make them shine once again.
Casey, what you are describing is certainly a struggle. I have seen a lot of work done by handymen and homeowners that is less than quality. I've seen a lot that is excellent quality as well. I'm guessing the city is trying to maintain a high standard of quality in their housing by requiring permits.
What you are talking about regarding the vacant houses is one of the reasons the city is trying to take this action. They recognize the harm the vacant homes are doing to the neighborhood. I think the city council and everyone is in agreement about the harm that is occurring from the vacant homes. The problem comes in determining how to solve the problem and get back to normal safe neighborhoods.
Posted by: Bonnie Erickson | March 04, 2008 at 08:34 PM
We recently bought a vacant house without too much info from our realtor who hired a crappy inspector telling us not big repair need to be made. As sad as it was, we later found out the repair indeed does not need much money if we could use the unlicensed contractor. But only the licensed and insured contractors could get permit from the city and they all charge sky rocket price. For example, an unlicensed contractor charge 2500 to replace a boiler but a licensed one charge 9000$. Now I personally work for a bank, from a cost perspective i could see why the bank don't want to do it. It looks to me the city inspector and council just teamed up to charge whoever owns the house tons of money. Add each permit extra 500$. Who says they care about the city? Then tell me why their phone can only be reached from 7:30 to 9am? If it is my house, why can't I decide who is going to do my repair or how? Why can't I repair the small stuff later but I have to bring everything? The vacant house caused the local crime rate to go up and nobody is caring that any more. What is wrong with St Paul?
Posted by: Casey | March 03, 2008 at 09:56 PM
Andy, you're right about the rehab to rent scenario now. Landlords have been saving their shekels for just this market because they all knew it was coming. If I had not bought a house that needs extensive fixing, I'd be right out there buying up property to fix and hold myself. The key is that it has to be held for a few years until the market settles down again. At these prices, who wants to sell anyway. One can easily cash flow with conservative rents.
Posted by: Bonnie Erickson | February 26, 2008 at 11:49 PM
I know as a banker, I have been financing a decent amount of rehab-to-rent properties on the East side. There is certainly demand for rental units in the area from my experience.
Granted my borrowers are typically getting tremendous prices from the banker's (Lender owners) you are referring to who don't want to put any additional money into these homes. It is really too bad because sometimes it isn't that much TLC and the lender could save much more on the losses they will undoubtedly incur.
Posted by: Andy | February 23, 2008 at 08:17 AM
Actually, Carole, the comments about commission were made by the author of the bill, not the opposing parties. In Minneapolis point of sale inspections are done by private inspectors that are on the city's approved list. They are not city employees. If permits are required for the repairs, then the re-inspection is done by the city employees.
Posted by: Bonnie Erickson | February 22, 2008 at 09:42 PM
So during comments the people on 'the other side' have to make a crack about agent commissions that have nothing to do with the issue? Lordy! Anyway, Point of Sale could work well, and also, I imagine, employ a few more people since more inspectors would be needed, as well as helping to keep the housing stock up to standards. Lovely photo!
Posted by: Carole Cohen | February 22, 2008 at 07:44 AM