Initial Thoughts on Licensing Wausau Landlords

If you have read this Sunday’s Wausau Daily Herald or watched the news last night on Channel 9, you are aware that the City of Wausau, yet again, is starting to make some noise about licensing rental properties.

The Wausau Housing Task Force (which I am a member of representing landlords) has been tasked by the Mayor with coming up with a licensing program.  I nearly quit the Task Force after this directive, but was convinced by others that even if I am dead set against this, my voice needs to be part of the conversation.  Our first Task Force meeting when we are going to start addressing this issue is today.  However, a few weeks ago I decided to come up with my own personal thoughts on a licening program.  I emailed this to the Task Force for consideration, and have also shared this with the Wausau Area Apartment Association.  Below was what I sent to both groups:

Instead of trying to take someone else’s rental unit licensing program and make it fit for Wausau, I personally believe that if Wausau is going to do this, they should design a program that addresses the specific needs that Wausau has.  It has to…

1)      Obtain the ultimate goal of ensuring that residential rentals are all safe and code-complaint.

2)      Determine which residential housing units are, in fact, rentals.

3)      Create a punishment for residential housing providers who refuse to provide safe and code-compliant housing.

4)      Create an incentive program for residential housing providers who want to provide safe and code-compliant housing but currently fall short of that.

5)      NOT create an undue burden for residential housing providers who are providing safe and code-compliant housing.

In addition to the above items that I feel this program needs to do, some other items that I feel a rental licensing programs should do include…

1)      Create an enforcement tool for residential housing units that sit vacant for extended periods of time, which include bank-owned “REO” properties and properties going through a foreclosure action.

2)      Create additional incentives for residential housing providers whose housing do meet minimum standards to increase the quality of housing beyond those minimums.

3)      Take into consideration current and future staffing levels of the City of Wausau Inspections department, in order to ensure that the program can actually be managed.

 

The following is just some conceptual guidelines that I would use if I were going to set up a licensing program that meets all of the issues listed above.  I would request that this document be used as starting point and possible frame work for a licensing program.  Of course, the devil is always in the details.  But if the general concept can be agreed upon, it does make working out the details much easier.

 

I believe a one size fits all license is not applicable because we do not have a 1 size fits all housing blight problem.  Therefore, I would suggest creating various classifications of residential housing licenses, including:  License Exempt, Provisional License, General License, Probationary License, Preferred License, and Suspended/Revoked License.

LICENSE EXEMPT – All residential properties are assumed to be rentals and will require a license.  However, if a property is owner occupied the owner/occupant can fill out a short form acknowledging that fact and that particular property will then be exempt from licensing for a total of 10 years, or until the title transfers to a different party.  At the end of the ten years, the owner would just renew the simple form.  If the property is sold to a new owner occupant, that person would do a new simple form.

A primary problem that the City has is identifying properties that are actually rental properties.  Through the current rental registration program, the Inspections department estimates there are 15% of the rentals that have not yet complied, but that number could be greater or smaller because it is often difficult to determine if a property is a rental.  Those properties that are the hardest to identify as rentals are most likely to be owned by landlords either unaware of applicable laws affecting them, or are aware and don’t care.  Therefore, the ones hardest to license would be in the most need of having a license.

This would help make sure that all rental properties are identified as we assume all are rental unless the City is told otherwise.  A problem that the city has is when properties are sold, they are turned into rentals and no one knows.  By making the exemption end with any title transfer, the city would be able to identify any new rental properties that were owner-occupied homes.

Another way to lose the exemption would be if the property sits vacant for an extended period of time (a year for example).  The property may not be a rental per se, but it is not technically owner-occupied if it is not actually occupied.  Water usage is probably the best way to determine it is unoccupied.

 

PROVISIONAL LICENSE – Because the logistics will not always allow for a timely inspection of units (either when the program goes into effect, or when a license expires), the rental property owner should not be punished because of city staffing levels.  Therefore, all residential rental units will be issued a provisional license.  This allows them to rent the property and is valid until the license is either upgraded or downgraded.  There would be no cost for this provisional license.  At the start of the licensing program, all of the residential properties that have not requested an exemption would be issued a provisional license, UNLESS there were open repair orders already in the system.

At the time this licensing program would go into effect, you would have somewhere between 4,500 and 5,000 rental units that would need licenses.  If you didn’t grant a license until the unit was inspected, and it took 2 hours to do a full inspection, it would take nearly 10 years go get every unit inspected assuming one person did this as their only full-time job.  Also, assuming re-inspections will need to be done to renew the license, again a landlord should not be punished if the city does not have the staff to take care of this in a timely manner.  The issuance of the provisional license follows the “innocent until proven guilty” concept.

 

GENERAL LICENSE – This license is granted upon passing an inspection.  The inspection criteria are to ensure that the rental unit meets certain minimum standards for safety and code compliance.  The term of the license is something that needs to be determined.  I would propose a 5-Year term for properties where lead paint is not an issue (1978 or later) and a 3 year term for pre-1978 properties.  There would be no license fee for this General License.

Although no license fee, I do anticipate their being a cost involved in the inspection of the property.  One of the challenges is getting the rental housing stock inspected based on the current resources available to do the inspecting.

A condition of granting of the general license is the inspection.  However, the Inspections Department should not be the sole authority capable of doing inspections.  Once the inspection guidelines have been set, any properly licensed property inspector should be able to also do this inspection, assuming the property inspector is not the property owner.  It will be the job of the property owner to hire their own inspector at their expense (they can hire the city’s inspector, but the city should establish a reasonable, competitive fee).

If an inspection is done based on complaint or based on the right to inspect (covered later), that will not be able to be used to issue a general license unless the inspection fee is paid.

In order to motivate those with the provisional license to go through the effort of having their units inspected, the City should work with various non-profits in town that provide rental assistance (NCCAP, Salvation Army, Catholic Charities, Job Center, Women’s Community just to name a few) and come with an agreement by those agencies to NOT give rental assistance to properties that have suspended/revoked licenses, or provisional licenses only.  Based on the expected cost of the inspection versus the amount of assistance normally given, it would make sense for a landlord to spend $200 to $300 for an inspection to get a $500+ rent assistance check.

When a General License expires, if it is not renewed, it will revert back to a Provisional License.

 

PROBATIONARY LICENSE – A rental property that has found to not meet the minimum standards will first go to the probationary license stage.  This license will have some type of license fee and will be subject to a more frequent inspection program.  This license can be updated to a general license after a certain amount of time with no further issues, or if problems persist, this can be downgraded to a suspension (or even revocation).

This is going to be the most complicated part of the program and the part that will require the closest attention if this licensing system is going to work.  This is for those rental properties that don’t come up to par, but the property owner appears willing to make the efforts needed to comply.  There would be an annual license fee and the inspection criteria would be more often.  If a landlord had an inspection done and issues were found, they could fix these issues themselves and get reinspected and getting the General License avoiding this.  But if the landlord was just going with the Provisional License because they didn’t want to spend the money on the inspection, and if they were then inspected by the City and were found non-compliant, the General License was now not an option.  The cost of the provisional license should be high enough that landlords would be money ahead getting inspected so they could go to the General License, but should not be so high as to make it un-affordable to do the repairs needed to get the property compliant.

 

PREFERRED LICENSE – This a short time license, that would have a fee, that had higher standards than just the basic license.  Preferred License holders would be listed on the City Website.

In addition to motivating sub-standard property owners to bring their units up to code without harming property owners who aren’t being a problem, I think this would make a nice motivational tool for property owners who want to be better than minimum standards.

The free advertising on the city website would be a nice feature especially for those very small landlords with just a few units who don’t have a big marketing budget.  An ad in the Wausau Daily Herald can run $300 or more a month depending on how many days a week it runs, and internet advertising is out of reach for most small operators.

What I would see happening is that a small operator might do what they need to do to hit this preferred status when the unit came vacant with the hope that it would fill up much faster by being on the city’s website as a preferred license holder.  This would give incentives for small operators to not only do needed repairs but go above and beyond.  This might include updates beyond code, it might include aesthetic items, it could also include landlord training and education.

If the Preferred License was not renewed at the end of its term, it would revert to a General License until the end of the General License term.

 

SUSPENDED/REVOKED LICENSE – This entire program will be useless unless there is an enforcement mechanism.  Depending on violation, or violation history, at some point the city needs to be able suspend a license, or in worst cases completely revoke a license.  This would be the hardest part of the ordinance to create.

In addition to listing suspended and revoked licenses on the city’s website, once a quarter a notice should be mailed to “Tenant” at the property address indicating that there is not a valid license in place.  Also, a list of all of these properties should be mailed to the various non-profits that provide rental assistance.

 

OTHER GENERAL CONCEPTS

RIGHT TO INSPECT – A goal of the licensing program is to give the City Inspections department an easy tool for being able to get into a property to do an inspection.  I would see as a condition of any of the licenses discussed here that the inspections department has the right to enter and inspect on some type of reasonable notice.  A refusal by the property owner to allow the inspections department to enter to inspect could result in the suspension of the license.

 

OPERATING WITHOUT A LICENSE – The biggest potential problem I see with any licensing program is what is going to stop someone without a valid rental unit license from renting out that property?  Just telling someone they can’t do it isn’t going to stop the problem.  The city will already post a property uninhabitable only to have the property owner take down that posting and move in a new, desperate renter.  Of course there will be some kind of fine involved, but if the fine doesn’t get paid what are you going to do?  I would propose tying in this particular violation with Wausau’s rent abatement ordinance and making a suspended or revoked license an automatic abatable item at the 95% rate.  Of course, we would still need a program to catch offenders, but hopefully the list of suspended/revoked licenses will not be a long one and these are properties that can be driven by semi-regularly to ensure they are not being lived in.  This driving by (especially at night when it is easy to see if a place is lived in because of lights on) could be something that alderpersons could do in their district.  Also, water usage could be monitored.  There should be very little usage in a vacant property.

 

LONG TERM VACANCIES – Speaking of vacant properties, part of the housing blight problem is not rentals but is instead long time vacant properties that are in some stage of foreclosure or already owned by the bank.  A lot can happen to a property if it sits vacant for an extended period of time.  If the water department determines that there has been zero water use at a property for 12 consecutive months, that should flag a property for inspection.  If this was an owner-occupied property that was exempt from the license and therefore inspection, a long term vacancy should result in a loss of that exemption.  This would then revert to a provisional license and that would allow for the ability to inspect.

Another possibility is that any occupancy permit that was originally granted for a property is no longer valid if that property sits vacant for a certain period of time, and before the property can be re-occupied (as a rental or an owner-occupied property), a new occupancy permit would need to be issued.

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About drrent

Wausau, Wisconsin Landlord, past president of the Wisconsin Apartment Association, Host of the Dr Rent Radio Show on WNRB-LP, 93.3 FM, Wausau, WI
This entry was posted in Abandoned Property, Apartments, Blight, Chronic Nusiance, City Council, Foreclosure, Housing Codes, Housing Task Force, WAAA, Wausau and tagged , , . Bookmark the permalink.

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