In debating the city's controversial rental market, including a vote to repeal the 300-foot rule, the Duluth City Council told Duluthians once again that Duluth is not business-friendly. And without regard to difficult economic conditions or today's historically negative real estate market, councilors last Monday chose to be unrealistic.
Mayor Don Ness suggested using a fee schedule similar to one in the Twin Cities, including a one-time charge of $1,000 to convert a single-family home into a rental. That made sense to me. But it apparently made little sense to the council, which voted to charge property owners intending to rent to single tenants a conversion fee of $1,000 while charging property owners planning to rent to multiple tenants a $3,500 fee. Is this community so special and privileged we should pay more, even three times more, than our Twin Cities' neighbors? How is that fair?
Councilor Todd Fedora, a highly respected businessman, hit the nail on the head when he called the higher conversion charge "absolute thievery." With an economy as bad as any anyone has ever seen, now would seem a time to take pause; business-as-usual won't succeed.
The need to convert single-family homes into rental properties often is not due to greed or profit but out of a need to survive and perhaps avoid foreclosure. The City Council wishes to preserve neighborhoods and values but fails to notice that a tremendous amount of foreclosed homes are negatively impacting property values in every part of Duluth, including the neighborhoods around the University of Minnesota Duluth and the Kenwood and Mount Royal shopping areas. If taxpaying homeowners incur financial and/or employment difficulties, it's very possible the only way to avoid foreclosure is to rent out their homesteads. The $3,500 conversion fee only adds to their financial difficulties and definitely could be a tipping point, causing them to finally walk away from their properties.
In case the City Council
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hasn't noticed, an epidemic is taking place in Duluth and in just about every other city.
A one-time, $1,000 charge to rent to a family vs. a one-time, $3,500 charge to rent to a group just doesn't make sense. A family of six that includes two college students and two high school students would be subject to a $1,000 fee while two medical students renting a two-bedroom house would be subject to the $3,500 fee. That doesn't seem fair, does it?
Councilor Sharla Gardner claimed the higher fee was fair because more services would be required. But how can she know that? Isn't the property owner already paying property taxes to cover city services? What if the $3,500 conversion fee was paid in 2011, and in 2015, with zero police or fire calls, market conditions improved enough to sell the property? Would it be fair at that time for the city to reimburse the property owner $2,500?
With the stated great need to increase income to cover cost increases, will the city of Duluth go door to door to confirm whether single-family homes are owner-occupied or tenant-occupied via licensed or unlicensed rentals? Will the city begin requiring churches to license housing occupied by priests and ministers who receive the housing as part of their salaries? Such homes aren't owner-occupied.
Without a doubt the City Council needs to rethink its position and get to a middle ground. Now is not the time to pad the general fund, not when taxpayers' cupboards already are bare.
Joe Kleiman is a broker for Kleiman Realty in Duluth.
