Wellington Could Require Licensing For Single-Family Home Rentals

The Wellington Village Council last week unanimously directed its staff to prepare an ordinance requiring owners of single-family rental homes to get a license similar to one that regulates multi-family rentals.

At the Sept. 9 meeting, Village Manager Paul Schofield said that Wellington had instituted a successful program several years ago for licensing multi-family rental units.

“That was our biggest issue then,” Schofield said. “One of the things that has happened over the past several years, is we’ve had corporate buyers purchasing large numbers of properties. I think today we have a little more than 1,400 single-family units that we’ve identified as rental properties. Going through and looking at those, what we find is that rental units have code enforcement issues at about twice the rate of owner-occupied units.”

Schofield said that about half of those rental units have code enforcement cases. “The question really is, given where we’re at, and the number of institutional buyers, and the number of times that we have repetitive institutional buyers on the special magistrate’s agenda, do we want to consider instituting the rental licensing program for single-family units that are being rented?” he asked.

The idea is not to penalize the single-family homeowner who is renting his own home seasonally or is in the process of selling, but to regulate people or corporations that are making a business of it, Schofield said.

The cost to run the existing multi-family rental license program is about $70,000 a year for staff time, and Schofield said the numbers of multi-family and single-family units are not far apart. He said the biggest advantage is that the rental licensing program gives Wellington a local agent to contact if there are issues with the home. “We’ve had really good success with it in the multi-family neighborhoods,” he said.

Vice Mayor John Greene favored regulating rentals for code enforcement purposes and having a readily available contact if an issue arises, but did not want to place another financial burden on homeowners.

“What I won’t support is what I’m going to call an unnecessary tax,” he said. “You can call it anything you want, but essentially it’s a tax and a financial burden that we’re going to place on homeowners.”

Greene asked about the $100, one-time registration fee in effect for the multi-family program.

“It’s not intended to be a revenue stream?” he asked. “It’s really about being able to control the neighborhoods and monitor the activity, preserving the integrity of those neighborhoods?”

Greene said he would support single-family rental registration but is uncomfortable with the proposed fee.

“I’d like to have some discussion about the fee associated with it, because I don’t like the financial burden that it places on the majority,” he said. “Yes, when you look at the number of homes, it’s significant, but when you look at the businesses, we’re only targeting this group.”

Planning & Development Services Director Tim Stillings said a majority of the single-family rentals appear to be business ventures and investments.

“I would say that a smaller percentage are those who are either trying to sell and have no other choice but to rent, or they can’t make the mortgage and they don’t want to lose the home, and are therefore renting out the house and living somewhere else,” Stillings said, explaining that individual rentals might have been the case when the housing downturn first began, but that investors since have been buying up the troubled properties.

Stillings stressed that the $100 is a one-time-only fee.

“The $100 fee is pennies per day, so we don’t see it as a financial burden,” he said. “It barely covers the staff time to administer the registration and the inspection of the property to make sure it meets the code.”

Greene was also concerned about changing the feel of the community if more and more homes become rentals.

“You’re not renting out your house because it’s profitable to do it that way,” he said. “The way you make money in rentals is having blocks of homes the way these corporations have come in. I’m OK with what you guys feel is another tool in your toolbox to preserve and protect the integrity of our neighborhoods.”

Councilwoman Anne Gerwig said the fee does seem like a tax, especially if the home has no record of code infractions. She said she would feel more comfortable if the village could separate the individual homeowners from the investors, especially those with code violations.

“If a code violation is what triggers this, if that’s possible, I would support this, because I think it could have what we’re looking for, which is to improve the neighborhood,” Gerwig said. “But if we’re capturing everybody, the good guys and the bad guys, it’s going to be harder for me to get on board.”

Councilman Howard Coates said he has opposed the idea in the past but has come to believe that the single-family neighborhoods need to be protected. “I think my biggest hang-up has been that I do think of it as a tax and a way to get something from the residents,” he said. “I’m not going to support anything that’s going to have a charge imposed up front.”

Coates said he would support regulations that guarantee rental homes are as well-maintained as other homes in the neighborhood.

“I think that we’re seeing some decline in those neighborhoods, in part because of the increase in rental units,” he said. “I think that neighborhoods have the right to expect that rental properties are as well-maintained as owner-occupied properties, so I would support a council policy that would support that goal.”

Coates said he did like the ability of the village to inspect a rental property to assure that it is maintained in compliance with village code, both to protect the neighborhood and the tenant.

“My view is that the first time around, there should be no cost,” he said. “The only thing that should be required is that the rental application should be completed, the village does its inspection, and that’s it — there’s no charge to the homeowners.”

He added that rental properties that have code compliance issues should trigger the right for the village to conduct another inspection, and that there should be a charge at that point. “That places the cost on somebody who has actually violated our code,” Coates said.

Councilman Matt Willhite agreed that both single-family and multi-family neighborhoods need to be protected.

“This is not a tax, and I’m not targeting a business,” Willhite said. “What I’m trying to protect is the resident on either side of that place. Let’s also talk about protecting the tenant moving here to potentially become a long-term resident, and making sure they’re protected. Nothing right now says that a single-family house has to be safe for anybody moving in.”

Willhite recounted situations where tenants have complained to the village that they cannot get their water turned on or code problems fixed. He looked at the fee as more of the cost of doing business than a tax.

“Whether you’re making much on it, whether you’re covering your mortgage, it’s still a benefit to you that someone is covering those costs for you,” Willhite said.

Gerwig made a motion to direct staff to develop a single-family rental ordinance using the multi-family regulations as guidelines. The motion passed 5-0.