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City code enforcement rethinks rental housing strategy

May 9, 2013

Indianapolis code enforcement officials will have to rethink their strategy for cracking down on negligent landlords after the Legislature came close to banning any city or town from collecting fees for rental inspection programs.

The long-term issue of rental-property regulation will be taken up by a summer study committee, but in the meantime, a one-year moratorium has been enacted on any new fees. The moratorium, which expires July 1, 2014, removes the city’s first, and probably only, option for funding a rental-housing registry because the Department of Code Enforcement is entirely funded by fees.

Indianapolis had considered setting up a registry, which would allow the city to more easily track down property owners in the event of an emergency or code violation.

“We’re just kind of regrouping,” Department of Code Enforcement spokesman Adam Baker said. “We want to make sure when we move forward with an initiative that it’s the right thing to do.”

Baker declined to answer questions regarding the cost of the registration fee or whether a regular inspection program was in the works before Indianapolis Rep. Mike Speedy introduced his rental-property legislation.  

The delay is a disappointment for southeast-side neighborhoods, which have been pushing the city for years to set up a rental-property database, Republican City-County Councilor Jeff Miller said. The idea is that a database would allow the city to connect the dots among problem properties and levy larger fines or bring a nuisance case against the landlord, who are often veiled by different ownership entities.

"It's just really hard to get your hands around the problem," Miller said.

Speedy, who works as a consultant to apartment-complex builders, introduced his bill in response to actions by the town of Merrillville, which imposed a $100-per-unit registration fee on landlords and planned to spend the money on its police department.

Fourteen other cities and towns have rental registries and inspection programs, but in most cases the fees don’t even cover the cost of maintaining databases and fieldwork, said Matt Greller, executive director of the Indiana Association of Cities and Towns. State statute already bars government from generating a profit on user fees, he added.  

Speedy, a Republican who previously served on the Indianapolis City-County Council, said that if cities want to regulate rental housing, they should cover the cost with property-tax revenue.

That’s not the direction local government is headed, however, especially with the state’s constitutionally mandated property-tax caps, Greller said. Legislators have urged local governments to look to other sources of revenue, including user fees. “That’s what’s happening,” he said.

Indianapolis already has about 15,000 abandoned houses and lots. A rental-inspection program could keep that number from growing, said Lisa Abbott, director of housing and neighborhood development in Bloomington.

Bloomington, where 67 percent of housing is rented, has the largest rental-inspection program in the state. It is funded by fees paid by property owners. Abbott believes it has helped prevent the problem that Indianapolis officials raised at the Statehouse, in which rental property becomes so dilapidated no one will live there and the owner abandons it.

“You will not drive down any street in Bloomington and see multiple boarded-up properties,” Abbott said.

The Indiana Apartment Association, which represents owners of large multifamily complexes, contends that local regulations are redundant to the inspections that are already conducted by lenders and, in the case of subsidized housing, federal regulators.

Cities are also free to enforce whatever health and safety codes are already on the books, apartment association President Lynn Sullivan said.

If single-family rentals, often owned by out-of-town investors with no on-site management, are creating problems, cities should find a way to deal with them separately, Sullivan said.

The apartment association has suggested allowing landlords to opt out of local regulations if they can show proof that their property has been inspected by a bank or other government agency, Sullivan said. “That makes a lot of sense because the cities, if they are having trouble with properties, they could concentrate their efforts and resources on those.”

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