Threatening to pull a landlord’s rental license used to be common practice at Columbia Heights City Council meetings. Up until two years ago, though, what usually happened was that by the time the landlord’s name and property address showed up on a meeting agenda, the item would be dropped because–after intervention by city staff, in the form of reminder letters and fines–the landlord had already fixed the problem.
How times have changed.
Now the council revokes rental licenses at every meeting. Fire Chief Gary Gorman, who heads the city’s housing inspections, said there are generally two reasons. The first is simple negligence: the landlord failed to make a repair or turn in money and paperwork on time. The second is foreclosure, a growing problem that has many residents, city, and state officials concerned.
The foreclosure problem isn’t limited to Columbia Heights or Anoka County. At last week’s Bottineau Neighborhood Association (BNA) meeting at the Eastside Neighborhood Services building in Northeast, Chris Gams, BNA executive director, passed out a list of 12 properties in the neighborhood that residents have submitted to BNA as problem properties.
Six of the 12 are known to be in foreclosure, and four of those have no rental licenses. Two others on the list were considered rental properties but had no rental licenses.
Gams also distributed a map he compiled from information from Hennepin County and the Center for Urban and Regional Affairs (CURA) on total foreclosures from January to May, 2007, in Northeast.
The total of foreclosures in Minneapolis during that time, he said, was 1,251.
In Northeast, he broke it down by neighborhood: Audubon, 11; Windom Park, 11; Northeast Park, 4; Beltrami, 7; Sheridan, 8; Holland, 16; St. Anthony East, 4; St. Anthony West, 4; Marshall Terrace, 6; Columbia Park, 3; Waite Park, 6; Logan, 4, Bottineau, 10.
Gorman said he hasn’t missed a city council meeting in two years, which means that the council has revoked licenses at every meeting, and he’s been there to answer questions about the properties.
“Starting January 1, 2006, we tightened up our rental licensing rules. It used to be that if your fees were late you’d get a second and third notice. We’d be chasing you continually. Now, you get one notice, 45 days ahead of when your license renewal is due. If we don’t get your paperwork, it automatically goes to license revocation. It’s a lot quicker process. A lot of people get their licenses revoked because they don’t get their paperwork in. It’s such an easy process, if they’d just do it; we send them last year’s information, they have to fill out a form, send a check and schedule an inspection. That’s it.
“But the bigger problem is foreclosures,” he added. “It is very hard for us to find anybody who’s got control of the property. When you look in the county’s real estate records, you’ll see the original owner’s information. When there’s a foreclosure, the property has to go through a legal process: the bank has to get power of attorney, it goes to the sheriff, there’s a sheriff’s sale, and then the mortgage company has to give the property owner a six month redemption period.”
Gorman said dealing with the banks can be frustrating. “The banks have different departments. Sometimes they ship it out to a contract company. I sit on the phone all the time to banks in California and Florida. They have no clue about a property in Columbia Heights, even when we’ve tracked it down to them. We can go a good six months without finding somebody to work with.
“About a month ago, we made a list of all the properties that the fire department knows are in foreclosure. There were 75. These are properties where we’ve been cutting the grass, the council has revoked the rental license. Those are only the ones we know about, there are probably at least that many again out there.
“Rental properties have become a real problem,” Gorman added. “About five or six years ago, when the real estate market was so good, houses were valued very high. A lot of our old time owners said, ‘I’m selling. I’m out of here.’ What we got in, then, was people buying up investment properties. Then the rental market got terrible. Landlords couldn’t even get close to what they needed in rent to pay the mortgages; they’d bought these houses at such inflated prices. What ended up happening was that people were just walking away. They couldn’t sell them.”
Gorman said he thinks things are starting to get better, however. “Rents are creeping up, vacancy rates are going down. But we’ve still got a big problem. How do you take a rental license away from a phantom bank in California? Our attorney says to just use the county records. Whatever most current mortgage company shows up on the records, that’s who we contact. We also post the buildings [with ‘no trespassing’ signs]. You can do it that way, and the legal process is recommending it.”
When asked if the fire department boards up abandoned properties, he said they generally don’t. “We’ve done a few vacant properties, maybe three or four, where people have broken in. Usually we’ll just board up a broken window or door. There are two on Tyler, in the 4600 block, where we’ve boarded up everything. People kept trying to get in. We found out that the landlord who bought the property had never made one payment. He went back to Egypt [where he had previously lived], and left us with this mess.”
When the city ends up taking care of an abandoned property, cutting grass, hauling away garbage, turning off the water, it assesses fees for the work it does. Also, there are usually back rental license fees added to the assessment.
“We cut a lot of lawns; the majority of them are vacant buildings,” Gorman said. “Foreclosures are a big problem. The Anoka County Union [newspaper] has long lists of foreclosures. First ring suburbs are getting nailed worse than any others right now. Columbia Heights lives and dies by the economy. It comes at a bad time for us, because we’ve been pushing to get our housing stock cleaned up and renewed. We’ve got some little houses in this town that are no more than 600 or 700 square feet. Most of the older houses in the city are anywhere from 900 to 1,200 square feet. We’d like to tear down the smaller ones and get something new in here.
“The fire department keeps pushing licensing, revocation, and abatement. We’ve revoked more rental licenses in the past two years than the previous 15, total.”
The June 15, 2007 issue of the Anoka County Union lists more than 200 residential properties that will be sold at sheriff’s auctions in July and August.
The notices list the legal address only, not the house number and city, for instance, “Lot 2, Block 4, Autumn Heights, Anoka County, Minnesota,” and give the name of mortgagors, mortgagees, original amount of mortgage and amount due plus taxes.
A brief search of the mortgagees’ names in the phone book came up with residences in Blaine, Columbia Heights, Ramsey, Andover and Ham Lake.
Much of the foreclosure problem, according to recent CURA studies, relate to predatory lending practices. According to its March, 2007, fact sheet on predatory lending titled, “How do predatory lenders affect communities,” “As the Minnesota Attorney General’s study group found [from the Minnesota Attorney General’s Predatory Lending Study Group, Final Report, January, 2007], ‘the problem can move from individual tragedy to self-reinforcing blight in the community.’ The Center for Responsible Lending estimates that one in five subprime loans originated in the last two years will go into foreclosure. [From its publication Losing Ground: Foreclosures in the Subprime Market and their Cost to Homeowners, December 2006.]
(A subprime loan is one made to people who might not qualify for traditional mortgage financing, often because of their income or credit history.)
“In Minnesota,” continued the CURA report, “subprime loans that originated in 2006 have a 20 percent chance of resulting in foreclosure. Because subprime loans are concentrated in low-income and minority neighborhoods, the impact of rising foreclosures can be devastating to communities. Currently, neighborhoods in Minneapolis and St. Paul are facing escalating rates of foreclosures–two zip codes in North Minneapolis accounted for almost half of the foreclosures in Minneapolis in 2006. However, this is not just a Twin Cities issue: communities in Greater Minnesota are facing a devastating increase in foreclosures as well.”