Posts Tagged City of Milwaukee

GUEST POST: Is the Apartment Association of Southeastern Wisconsin Against the City of Milwaukee?

Is the Apartment Association against the City of Milwaukee?

After a recent meeting I received an email from an irate member who was offended by some of my commentary regarding the city of Milwaukee, it seemed the association had an anti-Milwaukee tone to its messages. Having committed much of my career to making Milwaukee, especially its central core, a better place to live I was initially surprised by the feedback, nonetheless it is a legitimate question and one deserving of a response.

First let me remind everyone that the association is an all-volunteer organization and we welcome the participation of all landlords (in fact we will be holding officer elections soon so please email me if you are interested). I would encourage anyone unhappy with something we are doing or saying to speak up and be heard. Write an article in the Owner, email me, or better yet join a committee or board of directors. We are an organization of almost 1000 members and the diversity of our perspectives and experiences is a strength we should draw from. That being said I will address this issue head on after first making the obligatory disclaimer that the thoughts expressed below are solely mine and in no way constitute an official position of the AASEW.

I am not against the City of Milwaukee, however I have significant concerns with its view towards residential property owners/investors. Having lived in the city my entire life I have witnessed first-hand the deterioration of many of our communities and the City’s inept response to address this crisis. A common refrain cited for this decline is absentee landlords who allow their properties to fall into disrepair and if only we could force them to be accountable our problems would be solved. While there is some truth to this it would be tantamount to saying our City’s larger decline is due solely to shifting macro-economic trends that decimated American manufacturing. While it is certainly part of the issue, a narrow focus on either cause over simplifies the problem at hand and leaves one ill equipped to develop effective solutions to address the problem.

Are absentee landlords who neglect their properties an issue in many communities? Absolutely but maintaining your property and being responsible to your neighbors should be a standard imposed on every property owner including owner occupied buildings. Focusing exclusively on landlords obfuscates the true nature of the problem and does nothing to solve it. This is a fundamental flaw in the thinking at city hall and has done as much to harm property values in the city as the financial crisis.

In my early 20’s I bought a house in Lindsay Heights that I did a first rate renovation on and was proud to call home. After years of battling with neighbors from hell, who were owner occupants, and receiving no succor from DNS, my alderman, or anyone else at city hall I rented out the property and moved to the suburbs. Ironically had this very property been subjected to the same standards of compliance as non-owner occupied properties in Lindsay Heights, I would probably still be living in the city of Milwaukee.

Further evidence of the City’s “tolerance” for landlords is their response to their growing portfolio of tax foreclosed properties. City hall has proposed a variety of creative solutions to deal with this problem including allowing tenants to use their Section 8 check to pay the mortgage the city would carry. Ironically very few of their solutions involve investors and established landlords within the city. Ponder this, our association alone as the wherewithal to buy every last city owned property and turn them back into productive assets, yet the city has not reached out to us once to have a serious conversation about how to make that happen.

It is clear to me as an investor that the city does not view our industry as a strategic partner in which to work hand and hand  to deliver low cost, high quality housing to its residents. It is a position that has led to disastrous results in many of our neighborhoods; one can only hope they understand the definition of insanity: doing the same thing repeatedly yet expecting a different result.

In conclusion Joe Dahl loves the city of Milwaukee and will stand next to any person and compare my investment and efforts to make it a better place. However I am very troubled by our leadership and its “tolerance” of landlords. It is my desire to see Milwaukee thrive, yet I am not naïve enough to ignore what happened to our counterpart in Michigan. It is my sincere hope the city recognizes it needs all hands on deck to achieve the former and avoid the latter……and yes city hall that includes landlords!

Joe Dahl

President AASEW

 

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GUEST POST: The Importance of Rentals In Milwaukee

Below is a very thought provoking guest post from fellow blogger (and friend and fellow AASEW Board Member) Tim Ballering:

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The Journal is reporting:

Over the next three years, Barrett said raze orders in the city are expected to grow to 1,600 homes, with a cost of $24 million.  ”We have a very severe problem right now,” Barrett said.

No kidding we have a “severe problem ”  This a problem that continues to grow rather than moderating.  The number of abandoned and foreclosed houses was bad nine months ago and with fresh snow on the ground you can see even a greater number of unoccupied properties than ever before. At least here on the Southside of Milwaukee these numbers are far worse than what is being reported by the city.

How much of the $24 million of anticipated razing costs could be avoided by making it more favorable to rehab properties and restore them to the tax rolls?

Perhaps the city would do better by working with, instead of against people willing to invest their own money, time and effort into putting foreclosures back in service.  I’m not even suggesting a hand up, just not the current beat down attitude. Not only would there be less spent on bulldozing, but more of the tax base would remain plus the positive economic impact for the community due to spending by owners to maintain and operate this housing.

Between taxes and the sewer and water bills the city gets  at least $5-6 million per year from 1600 functional properties. In the three year period Barrett defines this is a potential of $18 million in city revenue if the buildings were returned to occupancy. Add this to the $24 million to bulldoze and you are north of 40 million dollars.

Can every property that is deemed to be worthy of razing able to be salvaged, of course not.  But many that are in the pipeline today can be.  Every day that a property sits unattended is a day closer to the wrecking ball being the only option for that property.  There are many properties sitting vacant today that are worthy of repair, but will not be so six months or a year from now.

Additionally every time someone like you or I take on the challenge of putting properties back in service the local economy sees a benefit through the wages and materials we pay to get the job done.  All but one of my employees live in the city.  While the money you spend at the Home Depot doesn’t stay in Milwaukee,  the person who is employed by the Home Depot lives in the area and spend their wages here.

A downside for us, but an upside for the community is a greater amount of housing stock available holds rents down.  A more competative market also forces owners to do more to properties to get and keep them rented.

Once the property is back in service ongoing maintenance similarly impacts the local economy in a positive manner. It is estimated that repairs and improvements to rental properties represent $90 -120 million a year in the city of Milwaukee alone.   (These numbers are derived from our company’s experiences, the experiences of other long term owners that I’ve discussed this with and data from the Census Bureau’s Property Owners and Managers Survey.  Our data and that of many other owners indicate a slightly higher number than the Census)

Our company has the capacity and had the will to do 10-12 such projects a year without any government monies.  Heck if the environment was more favorable I could see us doing two properties a month.  We have not made an offer in MIlwaukee since November due the unfavorable policies adopted by the city. See my prior post on buying foreclosures in Milwaukee.  I talk to a lot of other owners with similar capacities that say the same thing.

Milwaukee acts like they are the only girl at the dance – as though real estate investors need to accept their petty obstructions and poor treatment because they are the only game in town.  But there are many other places to invest that treat owners much better.  One of our members is doing a big rehab in Beloit.  When I asked his project manager how it was going with the city he said they were unbelievably nice and truly seem they want to see the project succeed.  We are actively looking at the South Florida market today.

A few notes:

These 1,600 properties must be city owned or near to being city owned.  If they were bank owned the city could and would force the banks to demo the properties on the bank’s dime.  A growing trend is banks that  simply walked away from the mortgage rather than be subjected to the bad side of city regulations and fees. In another instance I spoke to an owner who the bank sued- he thought he lost the properties to foreclosure only to find out later that it was a money judgment only suit.  This adds to the zombie housing effect.  And you though only borrowers walked away.  ;-)

Our police chief is in the news speaking about the link between foreclosed and abandoned housing and crime.  I am certain he is correct on this.  But the Milwaukee Police do not do what they should in cases of property vandalism. See my prior post on property vandalism and the lack of police response.  This vandalism accelerate the rate of properties that are no longer viable for rehab.

 

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Milwaukee’s Amended Smoke Alarm Ordinance To Take Effect June 1, 2013.

On November 8, 2012, Milwaukee’s Common Council passed a revised smoke alarm ordinance by a vote of 13 to 2.

Effective June 1, 2013, all battery-operated smoke alarm must be powered by 10-year or more non-removable (sealed) batteries.  Compliance with this requirement must be met when replacing any current battery operated smoke alarm after June 1st next year or by October 1, 2017 — whichever is sooner.  The AASEW was successful in getting the effective date of the revised ordinance delayed so as to allow landlords some  additional time to use up their current supply of non-sealed smoke alarms.

The remainder of the ordinance which requires a “hush button” be present on the smoke alarm if it is located within 20 feet of  the kitchen and the requirement of annual testing and recording of when the testing occurred and by whom, remained unchanged.

 

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New Milwaukee Smoke Alarm Ordinance To Require Sealed Lithium Battery Units In Residential Rental Housing

The City of Milwaukee has introduced a change to the residential smoke alarm ordinance.  If passed, the revised ordinance will require the use of sealed smoke alarm units with 10 year lithium batteries in all city residential rental housing.  The proposed ordinance would require landlords to install the sealed unit when replacing a current removable-battery unit or by October 1, 2022, whichever occurs sooner.

In is unknown what the impetus behind the revised ordinance was but most likely it was the fact that tenants still continue to remove the battery from their smoke detectors to use for other things . . . like their kids toys.  While the “hush button” requirement a few years ago partially alleviated tenants removing the battery when cooking, it still did not prevent tenants from removing the battery to power little Junior’s Talking Elmo.

The cost of the sealed unit will run approximately $13 more per unit than current smoke alarms.  Those landlords in an effort to reduce costs who decided to buy smoke alarms in bulk now find themselves facing a huge loss as they will have difficulty using up their stockpile before the new ordinance requires replacement with the new sealed units.

The current ordinance states:

214-23. Battery-Operated Smoke Alarms. 
Every battery-operated smoke alarm shall be 
tested by the owner not less than once every 
calendar year. The owner shall provide a copy of 
test results to the commissioner or the 
commissioner=s designee upon request. Test 
results shall include the date on which testing was 
performed and the name, telephone number and 
property relationship of the person who performed 
the test. Testing shall be performed in accordance 
with the manufacturer=s specifications for testing. 
By September 21, 2005, every owner shall take 
the actions necessary to ensure that any smoke 
alarm located within 20 feet of the primary cooking 
appliance within the unit has a silencing switch 
(hush button).

The proposed revised ordinance is below:

Part 1. Section 214-23 of the code is repealed and recreated to read:

214-23. Battery-Operated Smoke Alarms. 1. TYPE. Every battery-operated smoke alarm shall be powered by 10-year or more non-removable batteries. Compliance with this requirement shall be met when replacing an existing battery-operated unit according to the manufacturer’s recommended replacement date or by October 1, 2022, whichever is sooner.

2. SILENCING SWITCH. Any smoke alarm located within 20 feet of the primary cooking appliance within the unit shall have a silencing switch.

3. TESTING. Every battery-operated smoke alarm shall be tested by the owner not less than once every calendar year. The owner shall provide a copy of test results to the commissioner or the commissioner’s designee upon request. Test results shall include the date on which testing was performed and the name, telephone number and property relationship of the person who performed the test. Testing shall be performed in accordance with the manufacturer’s specifications for testing.

Part 2. Section 214-27-3 of the code is amended to read:

214-27. Smoke Detectors and Smoke Alarms for Residential Dwellings Built Prior to January 1, 1983. 3. TYPE. Smoke detectors and alarms required under this section shall be single station devices, either battery operated >>as provided in s. 214-23<<, plug-in or directed wired A/C units unless otherwise required by the code.

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UPDATE 10/9/12 — The hearing was held earlier today and it was referred to ZND committee for a hearing in November sometime.  The ordinance was amended to require that the sealed lithium battery units go into effect in 2017 (5 years) rather than 2022 (10 years).  A request was made by AASEW counsel Heiner Giese to delay the effective date of the ordinance to June 1, 2013 so that landlords could use up their current supply of non-sealed battery units – one alderman supported this request.  Several alderman expressed concern that this proposed modification to the current ordinance would be expensive for homeowners who do not have to deal with tenants that remove the batteries from smoke alarm units

- Thank you to Heiner for the updated information.

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For Those of You Who Thought The Installation of A Smoke Detector Was Simple . . . READ THIS.

AASEW Board member Tim Ballering wrote the City of Milwaukee Department of Neighborhood Services (DNS) back in June to ask for clarification about the proper placement of smoke detectors in his residential rental units in the city of Milwaukee.

Ballering was prompted to write to DNS becasue he felt there was some confusion among DNS inspectors as to where smoke detectors should be installed.

Below is the entire text of Ballering’s email to DNS:

 

> Subject: Smoke Detectors

> There is some confusion among DNS inspectors as to where smoke detectors belong.

> Most code enforcement inspectors are of the opinion the detectors should be outside the bedroom, within 6′ of the door. Some are of the opinion that having the detector only on the inside of the bedroom does not meet code.

> Your code seems to be worded in a way that supports installing detectors outside the door at 214-27: “For floor levels containing a sleeping area, the required detector or alarm shall be installed within 6 feet of the sleeping area.”

> However construction inspectors believe the smoke detectors are required to be inside the bedrooms and units installed outside the bedroom door do not meet the code.

> The DNS Smoke Alarm brochure seems to say either is okay:
> “Either in each sleeping area of each unit or elsewhere in the unit within 6 feet of each sleeping area. If the unit contains 2 or more separate sleeping areas, each sleeping area shall be provided with a smoke alarm.”

> It obviously doesn’t matter to the property owner where the detectors are put as long as a second inspector doesn’t come along afterwards demanding they be relocated.

> So which does the code require, inside the bedroom or outside?

> And if the code doesn’t care, then which is most effective in saving lives?

> I will have the Association publish the response so more owners are knowledgable as to what you require.

> Thanks

> Tim Ballering

 

The City of Milwaukee emailed its 8 PAGE response to Ballering on October 21, 2011.   Here is the letter response from DNS.

While I know your time is valuable — I beg you to read the entire 8 page answer.  I want to see if you can finish reading it all the way through.  Afterwards, I would like to know if you are able to tell me where you should place the smoke detectors in your City of Milwaukee rentals.  I like to think that I am moderately intelligent person —- and I read and review statutes, case law, and ordinances several times a week as a lawyer —- but after reading this 8 page response my eyes glazed over and my brain went to mush.

The drafter’s of these codes, ordinances, statutes, regulations etc. need to realize that if they want landlords  — or anyone, for that matter — to understand them and be in compliance, they need to make it a bit more simple to understand and follow.  One should not be required to be a brain surgeon to know where to install a smoke detector and you shouldn’t have to synthesize 4 different laws in order to arrive at an answer — thank you Todd Weiler for doing that for us.  It is a relatively simple question:  where should I install a smoke detector in my rental property to best protect my tenants.  It shouldn’t take 8 pages and many hours — which I am sure Weiler had to spend compiling the answer — to answer.

But don’t fret, you probably will never have to re-read that 8 page answer again.  Instead just turn to the city’s recently revised brochure on smoke detectors.  Sometime during my reading of the brochure, my eyes regained focus, my grey matter firmed up a bit, and I felt as if I actually knew where to install smoke detectors in my rentals again.  Thank God for brochures : ).

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New Report States What Landlords Already Know – That Milwaukee’s Regulations Hurt Businesses

This past weekend I read a very interesting report which was drafted by the Institute for Justice as part of its City Study Series entitled Unhappy Days for Milwaukee Entrepeneurs: Brew City Regulations Make It Hard For Businesses To Achieve the High Life.

The report is 40 pages long (excluding footnotes) but I encourage everyone to read it.  The report touches on the following issues:

- How the city rigidly restricts the ability of entrepeneurs to operate businesses from their homes

- How the city abuses the custom of aldermanic privilege in order to deny businesses licenses and permits thus preventing businesses from opening and operating

-  How the city imposes restrictions on food-related businesses that make it next to impossible to get a business started

- How the city overburdens successful businesses with so many rules and fees that many businesspersons are contemplating moving out of the city

- How the city arbitrarily enforces building codes and historic preservation provisions making it too costly to rehabilitate old buildings

- How the city severely limits a businesses ability to place signage on its storefront

- How the city requires an expensive license in order to go out of business.

While landlording is not specifically discussed in the report several of the topics addressed clearly affect landlords.  One that comes to mind is the arbitrary enforcement of certain building code provisions – what landlord has not dealt with that?  Additionally I believe many landlords would agree that the city overburdens them with so many rules and fees that many are contemplating leaving the city.  I know of several landlords that have sold off all of their Milwaukee rental properties and now only own and manage rental units outside of the city.  I know of even more landlords that would love to do that very same thing if only they wouldn’t lose their shirt (and their pants, belt, socks and underwear) by selling their rentals in this poor climate.

Landlording is one of the most regulated areas that I am aware of, if you don’t believe me just take a look at this memo that was published by the AASEW board of directors on the topic.

The city’s new Residential Rental Inspection ordinance is another example of the city making it difficult for landlords to survive.

The Journal Sentinel’s Patrick McIlheran wrote about how difficult the environment in Milwaukee is for landlords not too long ago, which I blogged about.

According to the Institute for Justice’s report, landlords are not the only businesses that Milwaukee is making life, success, and survival, difficult for.

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Business Journal Article Addresses Fallout of the City’s RRI Ordinance To Date

I was recently interviewed by Business Journal reporter Sean Ryan regarding the fallout of the dismissal of three landlords’ lawsuit against the City of Milwaukee regarding the unconstitutionality of its Residential Rental Inspection (RRI) program.  My most recent post on the subject can be read here.

On October 1, 2010, The Business Journal published  its article entitled “Judge Upholds Milwaukee Home Inspection Program.  Reporter Sean Ryan spoke with the primary plaintiff, Joseph Peters, Alderman Nik Kovac (sponsor of the ordinance), Todd Weiler (of the Department of Neighborhood Services) and myself for the article.

I found Mr. Weiler’s comments to be very noteworthy.  He was quoted as saying that to date DNS has inspected over 800 properties in the two target areas (Lindsey Heights on the north side and the UWM-area on the east) and that during those inspections 8,550 violations were found.  Apparently 1/2 of the the properties inspected – or 400 – had no violations at all.

I wonder if all 8,550 of the violations that were found — and which the landlords were cited for – pertained to life-safety issues?  If you will recall, life safety issues were the “alleged” original impetus behind the ordinance being introduced. 

In speaking with several landlords that I know who own proeprties in the target areas, I was informed that the violations that they were cited for involved very minor issues — such as peeling paint on the outside of a building, torn screens, and failure to paint some wood that had been properly sealed but not painted.  The lead plaintiff, Jospeh Peters, was quoted in the article as saying that the Orders To Correct that he received on his 10 buildings also involved very minor repairs – such as torn screens.

Just how many of the 8,550 violations dealt with life safety issues?  How many illegal attic bedrooms were found?  How many poorly maintained second story porches that could collapse at any minute were identified?  Don’t forget the overloading of circuits by the improper use of extension cords – how many of those were found?

If you will recall the testimony that was offerred by both Alderman Nik Kovac, who sponsored the ordinance, and Art Dahlberg, Commissioner of the Department of Neighborhood Services, at the public hearing before the ZND Committee way back when, the focus of this program was to make these affected properties safe and prevent unnecessary deaths. 

I’m not sure how many lives have been saved as a result of the RRI ordinance to date, but at least we wont have to worry about any of those deadly torn screens, inherently dangerous unpainted wood, and the lethal peeling paint on the outside of a duplex. 

Not sure about you but I feel a lot safer already.

This ordinance is now being shown for what it really is — not an attempt to save lives and improve properties — but rather an way for the city to get inside one’s private property without the need to obtain a warrant or even receive a tenant complaint, a way to make additional money (through the required filing fees and reinspection fees), and a way to further harass landlords that are having a difficult enough time making ends meet. 

Sometimes I just wish that all of the landlords in the city of Milwaukee had the ability to just walk away from their rental properties.  I wonder if the city would then realize, once all the landlords are gone and there is no one to own or operate rental housing, that we provide a much needed service and that most of us do a good job of providing that service.  Would they try to work with us then . . . . ?

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