Malicious Landlords & Problem Properties

Malicious Landlords and Problem Properties: A Policy White Paper Gordon R. Dymowski MAL Project Chair November 1, 2001

Malicious Landlords - 2

FOREWARD Within St Louis neighborhoods stand silent reminders of the gradual drain of vitality from the city. Abandoned and improperly maintained buildings are prevalent throughout the city of St. Louis. Even in the proudest neighborhoods, at least one property casually wears the neglect of its owner. Tenants often live in properties suffering from terminal neglect, and neighbors organize to address or alleviate the problem. In the worst cases, entire blocks appear lifeless, with boarded up buildings sharing space with poorly maintained structures. This phenomenon, if unchecked, has the potential to turn St. Louis into a haunted town. The issue of absentee landlords and problem properties - as well as their effect on St. Louis neighborhoods - has been in the public eye in the last year. During his election campaign, Mayor Francis Slay made this issue a key component of his platform. A news item on KSDK on March 23, 2001, focused on a woman paying rent to one landlord, only to discover that it was really owned by another landlord, and that the property had been foreclosed on. On March 17, 2001, Missouri Attorney General Jay Nixon cracked down on several building owners who were renting their condemned properties to residents. Finally, a December 27, 2000 article in the Riverfront Times focused on how Jack Krause - an absentee landlord with major property acquisitions along a single block - had a detrimental affect on the 4400 block of Vista in the Forest Park Southeast Neighborhood.

Malicious Landlords - 3 In 1999 Metropolis St. Louis approved the "White Paper on Absentee Landlords," an attempt to create community awareness of irresponsible property owners and to provide concrete policy recommendations to deal with the absentee landlord phenomenon. In addition, this project brought together community leaders and concerned citizens to collaborate in creating solutions to this problem. The white paper is the result of hard work, research, collaboration, and input from various sources, including landlords, property managers, housing and health advocates, homeless and housing service providers, legislative analysts, members of Metropolis St. Louis, and other concerned citizens. The mission of Metropolis St. Louis is to create an environment in the city of St. Louis that attracts and retains young people. After examining the absentee landlord phenomenon, we propose that abandoned and problem properties adversely affect the city's ability to attract and retain young people. The issue affects the city on various levels, from stability and aesthetic life of a neighborhood to its impact on the health and welfare of city residents. This paper will outline the incentives and disincentives for "absentee landlords," discuss the overall impact on the city and its neighborhoods, and propose specific policy strategies for dealing with the problem. DEFINITION OF TERMS For the purposes of this paper, we will distinguish among four distinct "types" of landlords. First, resident landlords are those who reside within the properties they own (making them "owner-occupied"), and who reinvest earning back into the properties. Non-resident landlords do not reside in their properties

Malicious Landlords - 4 (or on the premises), but reinvest financial resources back into the properties and perform appropriate maintenance on them. Absentee landlords may or may not reside on the premises, but do not maintain an active interest in the properties and grossly neglect and demonstrate apathy towards them. Finally, slumlords do not reside on the rental properties they own, neglect their responsibilities for them, and financially exploit their tenants. There are two types of "absentee landlords," distinguished by their motivations. One type consists of landlords who are inexperienced in property management. They do not understand the scope of their responsibility. They tend to have little education or professional training in being a landlord and little understanding of maintenance procedures. Such landlords may have acquired property through inheritance and/or become so overwhelmed that they cannot perform their duties adequately. These people usually can be assisted through remediation, education mentoring, and other strategies. The second class of landlords straddles the line between absentee landlords and slumlords (who can be considered malicious landlords). They are "opportunists" (when it comes to developing property) who often financially exploit their property. Initially, they may purchase distressed properties at reduced rates through foreclosures and/or tax sales. Then, they may perform low cost renovations, creating additional units and/or bedrooms to increase tenant density. They commonly refinance their properties for more than their initial investments in them and retain the difference without paying additional taxes.

Malicious Landlords - 5 Malicious landlords attempt to maximize cash flow and financially exploit their property. They will accept any tenants (especially Section 8 and/or financially stressed clients), regardless of rental history and/or level of responsibility, without adequate (or any) preliminary screening. (Since Section 8 clients do not require screening for admission, this may facilitate malicious landlords). Despite tenant's previous misconduct, such landlords do not evict them for any reason other than non-payment of rent. Usually, there are no management services on the premises, nor any ordinary or extraordinary maintenance on the structure. When cited for building code violations, malicious landlords attempt to manipulate housing inspectors and current systems to avoid facing the consequence of their actions. Gradually, their properties are economically exploited and the malicious landlord will abandon them when disinvestment is complete. Several key qualities distinguish malicious landlords. They are apathetic about their properties, their responsibilities for them and housing codes. In addition, they may be inaccessible to their tenants or unaware of the maintenance issues surrounding their property. (Although some malicious landlords may reside on the premises they own, many reside some geographic distance from their property). Often, malicious landlords create a "paper trail" to avoid accountability, utilizing multiple corporations and diversionary tactics to make contact difficult (e.g., listing a vacant lot as a mailing address). Finally, malicious landlords lack accountability and are irresponsible with their properties, sometimes defaulting on the mortgages for their properties, passing properties to

Malicious Landlords - 6 non-profit corporations without notifying them of needed repairs, and committing other such acts. The primary quality that distinguishes malicious landlords from their more responsible colleagues is their overall attitude towards the responsibilities of property ownership. Malicious landlords believe that renters are "less than human" and therefore disregard the safety and comfort of their tenants. Malicious landlords also tend to avoid renting to stable tenants, refuse to control tenant behavior, and disregard any confrontation by other concerned residents. To maximize their own economic gain, malicious landlords may try to thwart any movement towards neighborhood improvement in order to avoid a rise in property values resulting in higher property taxes. Finally, malicious landlords tend to disregard housing-related legislation and city codes or fight them when challenged. Neighborhood residents, rather than tenants, usually are the people who identify problem properties to appropriate authorities. In fact, qualifying a problem property is a "gray area" since visual confirmation may or may not be enough to indicate problems. Often, problem properties have multiple health & safety code violations resulting from a landlord's inability and/or unwillingness to repair or maintain the properties. When residents complain to agencies such as the Neighborhood Stabilization Office or the Citizens' Service Bureau topics include heating problems, leaky roofs, and noisy neighbors. It is often through this reporting process that problem properties (and malicious landlords) are identified. A private citizen contacts the Citizens' Service

Malicious Landlords - 7 Bureau, the Neighborhood Stabilization Office, or the police department to file a nuisance complaint. After three such complaints, authorities generate a work order for inspection, and a housing inspector visits the property to examine the exterior. Should this inspection uncover violations (such as lead paint or an unstable foundation), the property owner is notified by letter and is given 30 days to make appropriate repairs. Given mitigating circumstances, the inspector can extend the deadline; otherwise, the property owner may be summoned to the city Housing Court. There is great room for improvement in handling property inspections. Often, especially in Housing Conservation Districts, inspections are only conducted when a new tenant moves in, unless prompted by a complaint. Malicious landlords sometimes circumvent inspections by having new tenants move in secretly, in the evenings, etc. Inspectors vary in quality, and some can miss potential building faults (e.g., not seeing poor roofing when examining the overall structure). When violations are found, property owners typically have 30 days to perform needed repairs, although this is a "good faith" standard and not always adequate. There are methods to search records in order to identify malicious landlords and property owners and problem properties. For individual landlords, and to determine who owns a particular property, one can access the city Assessor's office, either going there in person or by using the online search engine (http://stlouis.missouri.org/assessor/lookup.cfm). With realty companies (especially if the owner is a corporation), information can be retrieved through the

Malicious Landlords - 8 Secretary of State's Office at http://168.66.2.55/missouribusinesses. Often, however, trying to locate a landlord can be difficult since many malicious landlords use such strategies as false addresses and multiple corporate holdings to avoid detection. Also, City Ownership of Property web site information often is updated monthly, so some information provided there might be outdated. Although the city Housing Court has been a last resort in dealing with malicious landlords, it sometimes is not as effective as it could be. In some cases, the court can be too lenient when dealing with problem landlords. Sometimes a fine is imposed only if a landlord is referred to court for failure to make repairs. In certain situations, it may cost less to pay court fines than to make appropriate repairs. If a landlord cannot be located and/or does not appear in court, a bench warrant may be issued and the judicial process may be extended for six months. In cases involving tax foreclosure, the city can receive abandoned properties, bringing them under the aegis of the Land Reutilization Authority. There are several concerns, however, when dealing with properties held by the LRA. First, the agency was not established to handle properties on a longterm basis, and thus frequently fails to achieve the proper maintenance of foreclosed rental properties, resulting in accusations that the city itself is an "absentee landlord." Second, developing LRA properties can be difficult, mostly due to inappropriate recommendations (e.g., requesting repair of a gutter before major structural renovations). The development process includes a funding plan, including a time line for completion, and other supporting materials. Although

Malicious Landlords - 9 most tax-foreclosed properties do not become available for "tax sale" for three years, this delay in sale of these properties allows the abandoned buildings to be stripped to their foundations and looted of various assets, including toilets, sinks, fireplaces, and pipes. After three years and with no purchaser of the properties at a tax sale, the buildings are then received by the LRA, which does not have the resources to prevent further decay of the structure. The LRA can only trust for a developer to come along and save the building. One major criticism heard by the authors of this paper is that landlords too often have been presented as the "bad guy," while inappropriate tenant behavior has been downplayed. Although tenant misconduct is a critical factor, ultimately property owners (and property managers) are responsible for the overall maintenance of their property, including regulating tenant conduct. In fairness, problem tenants are a relatively easier consideration and more appropriate interventions can be performed. Proper tenant screening - the primary method for avoid problem tenants - is often not utilized by malicious landlords. Some malicious landlords perform only cursory credit and police screening of tenants. The Neighborhood Stabilization Office provides "Good Neighbor" guides and landlord packets to people who request such materials. Although tenants do not receive special education, several resources are available to them through various sources, including Housing Comes First, the NSO, and the Missouri Attorney General's Office. Another critical issue in problem properties is lead abatement and the handling of lead-based materials. According to federal law, if a property was build

Malicious Landlords - 10 prior to 1978, the property owner must furnish a prospective tenant a completed "Disclosure of Information and Acknowledgment Lead Based Paint and/or Lead Based Paint Hazard" Statement and the booklet "Protect your Family From Lead In Your Home." If the disclosure statement indicates that the owner has an inspection report, then a copy of the report must be given to the prospective tenant. The tenant and owner must sign the disclosure statement and each keeps a copy. If such an inspection has never been performed, the owner must disclose that the status of the building is "unknown." However, there are gaps in this system, since malicious landlords may not perform the necessary paperwork, use professional building management, and/or be engaged in professional landlord associations. Current policy indicates a move towards further disclosure on the part of property owners, although it might be financially detrimental to do so. Some landlords do not see lead abatement as a problem and refuse to deal with the issue. Other major factors keeping property owners from following policies are buildings' age and cost of renovations. CASE STUDIES/IMPACT ON NEIGHBORHOODS To assess the impact of malicious landlords and problem properties in St. Louis neighborhoods, authors of this paper consulted with and sought input from a diverse group of individuals. Neighborhood Stabilization Officers from various areas of the city, viewing the problem from a variety of angles, were interviews for broad perspectives. Members of Metropolis St. Louis were asked to provide their insight and to examine the "ground level" effect. Several representatives from landlord associations provided input as well and clarified city policy when

Malicious Landlords - 11 appropriate. Neighborhood activists also made contributions and several officials from appropriate social service agencies dedicated their time and insight into assembling this paper. A list of acknowledgements for everyone involved from the initial launch of this project to the revival to its completion appears at the end of this paper. A remark from a neighborhood activist summarized the negative impact of the absentee landlord phenomenon on St Louis neighborhoods, “one building can ruin a block.” Over a period of time, one improperly maintained and/or abandoned property, coupled with a growing disenchantment with an inability to utilize “the system”, can cause a loss of middle-class, “decent” citizens from any given area). As a result, property values for the surrounding properties decrease and the malicious landlord benefits from lower property taxes. Other property owners become discouraged and disenchanted with the area. Residents gradually become discouraged as neighbors leave, and disappointment that “another good one has gone” results in a gradual disenchantment with the community. Consequent instability caused neighborhoods to lose their cohesiveness and become places where (to use St. Louis slang) people tend to “stay” rather than “live.” Another, more insidious, effect has been the correlation between health issues and the prevalence of abandoned properties and vacant lots. Various agencies behind Proposition H examined this correlation, focusing on three “hot” ZIP codes with a great prevalence of abandoned properties and vacant lots: 63118, 63107, and 63113. In ZIP codes with large numbers of vacant lots and

Malicious Landlords - 12 abandoned properties, the Proposition H team found higher incidents of lead poisoning, avoidable hospitalization (e.g., asthma and high blood pressure) and other health problems. Locally, the problem of malicious landlords was more prevalent between eight to ten years ago. However, these landlords are becoming less of a problem due to the implementation of creative solutions and some changes in policy. Earlier, a city program allowed residents landlords who acquired a property “next door” to receive tax incentives. Problem-property officers in the Police Department have also helped to reduce the number of malicious landlords. Perhaps the greatest asset has been the creation of a new Housing Court equipped with a “resource bank” for landlords who cannot afford or do not have the resources to bring their buildings up to code. Some successful strategies have helped rebuild neighborhoods affected by problem properties. One such strategy has been the reaffirming a sense of “community” among residents not only to reestablish cohesion but also to monitor potential problem properties. (“Calling circles” among residents of a particular block are helpful in identifying problem properties and motivating appropriate agencies to act.) In addition, those neighborhoods not adversely affected by problem properties seem to have more effective collaboration between differing entitles, including the NSO, the Citizen Service Bureau, the alderman, and other programs like Sustainable Neighborhoods and Weed & Seed. There seems to be an inverse correlation between owners who occupy their buildings and the

Malicious Landlords - 13 problems inherent in those buildings. Owner occupancy is not always feasible, but proper property management always is a key factor. POLICY - STRATEGIES & SUGGESTIONS Several obvious ways of countermanding problem properties and malicious landlords exist, although their practicality might be questionable. One method would be to encourage more owner-occupied properties; however, with several kinds of properties this might not always be workable. In those cases, encouraging appropriate property management might be sufficient. In addition, greater screening criteria for property owners would help to identify problem tenants. Façade improvement programs and loans to encourage property improvement also would act to counteract this trend. A revitalization of the "next door" program for property owners to acquire adjacent space and/or properties also would help stem the tide of malicious landlords. City policies that encourage further financial and emotional investment in St. Louis neighborhoods would allow for gradual improvement and stabilization to become the norm rather than the exception. We suggest several other strategies for dealing with rental and other properties in order to curb the tide of malicious landlords and problem properties. Encouraging professional management of buildings that are not owner-occupied, or across multiple residences owned by one person/corporation, would be extremely helpful. (Tax incentives might be one means to execute this idea). More frequent inspections preferably on an annual basis outside of external solicitation, along with resources for financial assistance for making appropriate

Malicious Landlords - 14 repairs, also might work to diminish problems. One idea for a potential tenant resource would be a "Better Business Bureau" of landlords, in order to facilitate decision making when choosing a rental property. (The Missouri Department of Professional Regulation has a web site that lists real estate brokers and realtors, which is an important "first step"). Another solution would be to encourage landlords to utilize professional tenant screening agencies to avoid potential problem tenants. In terms of economic development, we recommend significant changes in the way the Land Reutilization Authority is run. As it stands, problems have been reported with the city's mandates for property rehabilitation. For example, although major structural work might need to be performed on a given building, the LRA might make a gutter repair or replacement, ordinarily a low priority, a prerequisite for further work to be performed. In addition, it can currently take up to three years before the LRA receives a property for disposition. Although due process should not be denied, shortening the length of time for a "tax sale" might facilitate investment in these properties as well as avoid deterioration of existing structures. In terms of structurally unsound properties, facilitating demolition of such structures and encouraging further development of available land would also be judicious. One critical concern is the risk of retaliation to a tenant who calls for an inspection. Current State statues (RSMo 441.620, 501.308.2, 441.233.2) protects tenants against retaliatory decrease of services, including termination of utilities (gas, water, electricity, etc), for reporting of lead problems or building code

Malicious Landlords - 15 violations. However when some tenants complain to the city about code violations, their landlords may order them to vacate since the landlords can do so at any time without cause. Given the subject of problem properties, this may seem relatively tangential and inappropriate to this discussion. However many malicious landlords often will not perform appropriate repairs and intimidate tenants into not reporting problems. We recommend explicit city legislation prohibiting retaliatory evictions due to reporting building code violations, empowering tenants to take a more assertive stance when dealing with malicious landlords. Within the past two years, there has been critical city legislation that has attempted to deal with abandoned properties and problematic property owners (including landlords). These laws may prove potentially helpful. First, property owners (including landlords) will be charged under city ordinance # 64678 a two hundred dollar ($200) semi-annual registration fee if their property has been vacant for at least six months and which is in violation of the Building Code of the City of St. Louis. City Ordinance #65194, signed into law by Mayor Francis Slay on May 3, 2001, requires all owners of real estate to inform the city of St. Louis the street address of the principle place of residence for every owner of said real estate. A post office box shall not be accepted as a residential street address. A corporate officer will have to furnish his or her place of principle residence. This intends to diminish the "paper trail" that malicious landlords tend to hide behind, give them greater accountability, and inspire a greater sense of investment and obligation to care for their current properties.

Malicious Landlords - 16 Hopefully, perhaps no change is as significant as the new Housing Court, part of the Neighborhood Court and Corrections System headed by Administrative Judge James Sullivan. Its purpose initially was to handle "nuisance crimes" - small crimes that nonetheless affect the quality of citizens' lives. The new Housing Court refers Housing violators to a resource bank which includes architects, building contractors, labor unions, lenders and other resources for assistance in bringing their buildings up to code. However, if a violator does not appear in court or does not comply with the court's recommendations, special problem-property offices can arrest them and judges can sentence the offender to either community service or jail. Although this system is new and the outcome of its efforts has not yet been measured, this new approach encourages St. Louis property owners to maintain their properties and reduces the "naïve" landlord population. Active engagement, mentoring, and education can prevent naïve landlords (those who are undereducated and may be "over their heads" in maintaining properties) from becoming "absentee landlords." Although there is great frustration by some landlords about newer landlords entering professional associations, more direct mentoring and guidance should be encouraged. Several informal ways of networking also exist, from current city offices like the Neighborhood Stabilization Office to e-mail discussion lists (such at [email protected]), from Internet discussion forums to professional landlord associations. (In addition, the NSO runs a yearly landlord

Malicious Landlords - 17 conference that provides training, resources, and networking opportunities for regional landlords). Although problem tenants can also cause property disinvestment, one must be careful not to turn them into a "straw man" in avoiding other issues. Tenant education materials are critical and, as of this paper, Metropolis St. Louis is collaborating with the NSO on a "Good Tenant Guide" to inform young people of their rights and responsibilities as tenants. (This guide would be a preventative measure to avoid problems, thereby creating an environment that actively retains young people). In addition, we encourage landlords and property owners to utilize professional screening materials. CONCLUSION This paper attempts to discuss the problem of malicious and "absentee" landlords and problem properties in the city of St. Louis. The incentives, impact and implications on policy have been presented. However, any statements made in this paper should be considered the latest but not the last word. St Louis is adopting many ways of dealing with this current phenomenon. If the city is to survive and attract new residents, handling these abandoned properties is critical. Housing stock needs to be increased. Neighborhoods need to regain cohesion. Attempting to revitalize the city of St. Louis is a task that will require the collaboration of many individuals with a single mission. The slogan of Metropolis St. Louis is "The City is Back - Back the City."

Malicious Landlords - 18 By addressing the problem of disinvestment of properties and neighborhoods, people who wish to improve conditions in St. Louis demonstrate their commitment to the latter part of that slogan.

Malicious Landlords - 19

ACKNOWLEDGEMENTS This paper was the result of the hard work and dedication of a diverse group of people This is an attempt to say a collective "thank you" for those who helped complete this project, and any apologies to those who are unmentioned. First, I would like to express my sincere gratitude to Dave Drebes & Judis Santos, who initiated the project, and then handed me the reigns. It was a great opportunity, and I thank them for bringing it to my attention Extensive thanks are also expressed for those Metropolis members involved in the initial phases of this project in 1999, and who did much preliminary work. You left an excellent foundation to build on and move forward. Next, I owe Michael Chance a great debt - it was his insight into city policy, and well as his conceptualization of these issues, that informed and influenced the thinking of this paper. Thanks Hearty thanks to Dena Hibbard, Jim Hogan, Kathryn Woodard, and Joe Squillace, who took time out of their busy schedules to discuss these issues and share their insights. The bulk of the credit goes to the members of the Metropolis Absentee Landlord Project, who helped bring this project to completion. My sincerest gratitude to Faith Barnes, Janet Becker, Elizabeth Braznell, Mike Daus, Alderman Jennifer Florida, Marti Frumhoff, Dan Glazier, Jennifer Heggemann, Renee Hofer, Chris Howard, Maheshi Joshi, Kathleen Kelly, Jim Magnus, Angel McCormick, Scott Mills, Graham Prichard, Brooke Roseberry, Josh Reinert, Brooke Roseberry, Amy Shehi, Jason Stone, Steve Wilke-Shapiro (whose maps helped prove a picture truly is worth a thousand words), and Ajay Zutshi for their time, attention, and insight. Thanks for your help, your guidance, and your allowing me to fill your e-mail boxes. In addition, several organizations also lent their time and support, including Housing Comes First, Adequate Housing for Missourians, the Neighborhood Stabilization Office, Legal Services of Eastern Missouri, and the St. Louis Realty Property Owners Association (who graciously printed and distributed this paper). Special thanks to Doug Carr; Marlene Weeks, and Jim Magnus for their time and effort proofreading the paper, helping to make it readable and accurate. Gratitude is also due to the Metropolis Steering Committee, who helped facilitate completion of this paper. Finally, hearty thanks are due to my assorted Metropolis friends for their emotional and moral support. From the former coworker who listened to my worries taking on this project to the friend who mentioned that I had been working on it "forever", I was blessed with those who believed in the project and gave their support. You may not have done any direct work on this paper, but you provided something even far more valuable.

Malicious Landlords - 20

BIBLIOGRAPHY Hampel, Paul. "Nixon Obtains Order against City Landlords". St. Louis Post-Dispatch, March 17, 2001, p 9 Hogan, Jim. Personal Interview. March 26, 2001. Hibbard, Dena, Neighborhood Stabilization Office. Personal Interview. March 20, 2001. Squillace, Joe, Citizens for Missouri's Children. Personal Interview. April 11, 2001. Wilson, D.J. "The Homes Jack Destroyed." Riverfront Times, December 27, 2000, 14-18. Woodard, Kathryn, Neighborhood Stabilization Office. Personal Interview. February 28, 2001.

Malicious Landlords - 21

APPENDIX A - WEB SITES OF INTEREST City Assessor's Office http://www.stlouiscity.com/assess/lookup.cfm CIN Housing Site http://stlouis.missouri.org/housing/ Metropolis St. Louis http://www.mstl.org Missouri Attorney General's Office http://www.ago.state.mo.us Missouri Department of Professional Regulations http://www.ecodev.state.mo.us/pr/ Missouri State Legislative Search Engine http://www.moga.state.mo.us/statutes/ St. Louis City Ordinance Search Engine http://www.slpl.lib.mo.us/cco/ords/search.htm St. Louis City Landlords E-mail Discussion List http://groups.yahoo.com/group/STLCITYlandlords/ St Louis Landlords http://www.stlouislandlords.com State Business Database http://168.66.2.55/missouribusinesses

Malicious Landlords - 22

APPENDIX B - PROPERTY DENSITY IN ST. LOUIS CITY The following pages show four maps: • Renter-Occupied Housing Units In St. Louis City • Owner-Occupied Housing Units in St. Louis City • Vacant Housing Units in St Louis City • Vacant Parcels in St. Louis City (Special thanks to Steve Wilke-Shapiro for his work on putting these together)

Malicious Landlords - 23

Malicious Landlords - 24

Malicious Landlords - 25

Malicious Landlords - 26