New rules would cap number of bedrooms allowed in Duluth rental homes

• John Peterson

Landlord John Peterson stands in the recently finished basement of a duplex to which he added fourth and fifth bedrooms. If a proposed ordinance had passed before he obtained his rental license, Peterson said he could have been out $25,000 on the property at 315 N. 14th Avenue East. (Bob King / rking@duluthnews.com)
• House before improvements

John Peterson’s rental house at 1117 E. Second St. before improvements. (Photo by John Peterson)
• House after improvements

John Peterson’s rental house at 1117 E. Second St. after improvements. This is a six-bedroom house he would not have purchased if he had been able to rent only four bedrooms, the maximum that would be allowed for future landlords buying such properties if a new city ordinance is adopted. (Photo by John Peterson)

Talk about it

An effort to amend Duluth’s city code could result in new restrictions on how many tenants will be allowed in conventional homes converted to rental properties.

The new rules are meant to address concerns about the proliferation of multi-tenant rental houses in what were once quiet single-family residential neighborhoods. But the proposal is drawing both praise and fire as a probable June 11 City Council vote on the ordinance nears.

The proposed ordinance allows no more than four bedrooms for rent inside a converted single-family home. That would make some larger, older homes unworkable as rental properties, landlords say.

“The bottom will fall out of the market for those kinds of properties,” if the ordinance passes, said John Peterson of Win-Win Housing Solutions. “You might just as well go in and tear them down now.”

Peterson’s firm owns and manages 17 rental properties in Duluth. He warned of unintended consequences if the city adopts stricter new limits.

He pointed to a house he purchased at 1117 E. Second St. and said he would never have considered investing in the property had he not been allowed to rent out all six of the pre-

existing bedrooms in the grand Victorian home, which was built in 1890.

“The only way a property like that (Victorian) would be profitable is with six bedrooms,” Peterson said, pointing to the considerable investment required to restore the run-down property and the high overhead to heat and maintain such a large home.

Some council members are hesitant to adopt new rules for that reason.

“From a landlord’s perspective, the math has to work for you to invest,” said City Councilor Jennifer Julsrud, who owns a couple of duplexes herself.

She is calling on the council to craft a more nuanced solution to residents’ concerns rather than another blanket rule.

“I don’t want to react to one problem and inadvertently cause another,” Julsrud said.

Changing neighborhoods

Other Duluth residents support the proposed ordinance as a needed safeguard after prior protections were removed this year in light of a package of recent rental reforms.

Robert Evans, who has lived in the 1800 block of East Fifth Street for 45 years, said that as homes around him have been converted to rentals, it has had a direct effect on the character of his neighborhood.

“It’s quite amazing. Things have really changed,” he said. “People are speeding on what used to be lazy streets.”

Evans said he also has noticed congestion due to additional vehicles parking on the street.

Then there’s the trash. Evans said many owners of rental properties seem content to let their tenants leave garbage receptacles on the street all week long, often resulting in strewn litter.

“I don’t want to run down my own neighborhood, but it sort of looks like a slum,” he said.

Jolane Sundstrom said she bought a duplex in 1985 as a defensive move to keep it from falling into insensitive hands. Her parents lived next door to the property in the 1900 block of East Fifth Street and had seen what happened when other homes in the neighborhood were converted into student housing.

Sundstrom said college students were part of the neighborhood’s resident mix when she was growing up in the 1960s, but they usually rented spare rooms from families who were living in the area. She said these students were by and large courteous, respectful and willing to lend a hand, shoveling or watching children when needed. Sundstrom said she saw behaviors change for the worse when landlords began converting properties completely to student housing.

“The amount of litter we saw and the behavior of students and their guests went over the edge,” Sundstrom said. “We even had students who went to the bathroom in people’s yards.”

Sundstrom predicted that allowing landlords to increase the density of student housing will only worsen issues in the neighborhood and said she supports the additional restrictions being proposed.

In addition to establishing a four-bedroom cap for new rental home conversions, the ordinance would limit the number of tenants to no more than the number of bedrooms on record when a rental license is issued. Existing rental properties would be grandfathered in, meaning they could continue operating at current capacities.

Interim solution?

City Councilor Patrick Boyle supports the 4-bedroom limit at least as an interim solution. He said there have been a few landlords who have rushed ahead with projects to bring unacceptable rental densities into certain neighborhoods.

“At least this won’t let someone turn a 1,200- to 1,500-square-foot house into a six-bedroom rental,” he said. “That’s not what we ever intended to allow as a council.”

The proposed ordinance could buy the council time by putting an immediate cap in place, according to David Montgomery, Duluth’s chief administrative officer.

“Then, we could look at how future limits could be established in a more thoughtful, inclusive way,” he said.

Councilor Sharla Gardner suggested an amendment stating that landlords be limited to renting out no more than the original number of bedrooms in a residence. This would allow some of Duluth’s larger homes to be put to productive use, she said.

But Montgomery said it may be challenging for city staff to determine what the original floor plans of homes in Duluth looked like.

Boyle said he appreciated the intent of Gardner’s resolution but wants to make sure the council comes up with readily enforceable ground rules for city staff.

“I think we could come back again very soon and figure out what to do with bigger houses. But let’s not shoot from the hip,” he said.

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