Strict landlord oversight in Minnesota offers Baltimore a model

MINNEAPOLIS — The rental housing empire of Mahmood Khan is — like many of his century-old buildings — crumbling.

And that’s fine with city officials here. In fact, they’re the ones causing the landlord’s demise.

After three decades of renting some of this city’s oldest properties to some of its poorest residents, Khan is being forced out of business by a Minneapolis City Council decision to revoke all of his rental licenses.

Now nearly 300 tenants face eviction from nearly 60 aging buildings. A city report shows the properties have generated nearly 1,400 complaints and 3,550 violations over the decade that Khan and city officials have battled.

To prevail, the council invoked an unusual rule: If just two of a landlord’s licenses are revoked, the city may yank all the rest.

With Khan’s last appeal recently exhausted, his tenants are set to be evicted when the winter — and his business — comes to an end.

“It is extreme without a doubt,” Khan said. “The city has no mercy.”

Rental housing regulations in Minneapolis and nearby Brooklyn Center are considered by advocates to be among the most effective in the nation at improving living conditions for tenants. They include aggressive inspections, a system for grading properties, rewards for landlords who follow the rules and punishments for those who don’t.

Baltimore officials are considering enacting similar policies next year to improve enforcement efforts that critics say have been ineffective at combating blight in a city where a third of its nearly 130,000 rental units have been labeled substandard.

To understand the differences between Minneapolis and Baltimore, consider how each uses license revocations — an extreme measure that officials in both cities say they “rarely” deploy.

From 2014 to 2016, Minneapolis has revoked an average of 27 licenses per year; Over the past dozen years, Baltimore has revoked a total of just two.

Baltimore housing officials have supported a system that emphasizes compliance over punishment — in part, they say, to avoid what Khan says is the cost of more aggressive regulations: fewer affordable rental homes. Critics of the punitive approach say revocations punish tenants as much as landlords.

But a consultant hired by Baltimore’s Department of Housing and Community Development advised the agency this year to adopt the Minneapolis approach to improve oversight of the city’s landlords.

The Baltimore Sun reported this year that judges in the city’s landlord-tenant court routinely ruled in favor of property owners even when renters proved they were paying for unsafe living conditions that entitled them to lowered or waived rent. In an investigative series entitled “Dismissed,” The Sun reported that the city rarely collects or enforces financial and legal penalties levied against landlords for various violations.

Advocates for tenants in Baltimore have long blamed substandard living conditions on limited city inspections in a market where 53 percent of homes are rentals.

In Baltimore, properties of three or more units must be inspected every year to get and maintain licenses. Those with fewer than three units do not require licenses. They’re inspected only when tenants complain of violations.

The smaller properties make up half of the city’s rentals, but generate the most complaints. In many neighborhoods, properties of one or two units make up to 90 percent of homes, his research shows.

A Maryland Judiciary task force of landlords, tenant groups and lawmakers has recommended expanding licensing “to cover the most problematic properties and landlords.”

The city’s consultant, the Center for Community Progress, put it more bluntly:

“By excluding these units from the licensing system, [Baltimore] is effectively permitting abusive landlords to operate in many of the city’s most distressed areas,” the nonprofit said in a 161-page report.

The group was hired to examine the city’s “Vacants to Value” blight-elimination program, which focuses on unoccupied properties. It went out of its way to advise more aggressive action on occupied buildings.

“In many neighborhoods the problem of substandard rental properties and exploitative landlords is as or more serious than the vacant property problem,” the group said.

Alan Mallach, the report’s author, said Baltimore’s inspection and code enforcement efforts are “reactive.” Most of the city’s 219,000 annual inspections are spurred by complaints rather than proactive licensing.

“Minneapolis is an excellent model for Baltimore,” Mallach said.

Baltimore Mayor Catherine E. Pugh has said she wants to expand licensing and inspections, but has not provided specifics. City Councilman Bill Henry said he intends to introduce a Pugh-supported bill in January that will accomplish that goal.

“We do want to hold landlords accountable,” Henry said.

Mallach’s report highlighted several policies from Minneapolis, and its suburb of Brooklyn Center, that he said could help Baltimore devise “effective rental regulation strategies.”

In addition to expanded licensing, he noted two other key steps.

First, he said, the city should develop a performance-based rental licensing scheme that assigns grades to all rental properties. The best buildings get the best grade, a rank that means lower licensing fees and fewer inspections. That rewards good landlords and allows inspectors to focus their limited resources on the worst properties. Low grades mean higher costs and more oversight.

Second, the city should establish and maintain a public database of citations, police visits, code violations, judgments, tenant complaints, tax compliance and other existing data on licensed properties.

In Minneapolis and Brooklyn Center, landlords are required to maintain licenses for all rental dwellings. There are nearly 24,000 licenses in Minneapolis, and nearly 800 in Brooklyn Center.

The grades are determined by a property’s violations, warning letters, citations, disorderly conduct complaints and other data.

In Minneapolis, nearly 22,000 properties hold the highest grade, called Tier 1. That requires an inspection every eight years. The nearly 1,500 buildings with the second-best grade, or Tier 2, are inspected every five years but pay annual fees. The 470 buildings ranked last, or Tier 3, are inspected annually and face higher costs.

For example, the landlord of a three-unit property with the highest rank pays a $70 license fee while the same-sized building with the lowest grade pays $373.

“We target our resources at the properties that need the most work,” said Noah Schuchman, director of regulatory services for Minneapolis. “Our goal is to have the financial burden carried by the people whose properties take up the most time.”

Minneapolis housing inspector Darrell Spears cruises the city with a clipboard brimming with inspection records. He said he believes the grading process has prompted landlords to make improvements more rapidly to attain higher rankings.

“The tier will only change if the house changes,” Spears said. “You’re a business. You came here to make money. You have to figure out how to make money” by following the rules.

Brooklyn Center’s process is slightly different: It uses four “types.” Properties with the highest grade pay a license fee every three years; the second-best pay every two years; and the third type pays annually. The lowest-ranked properties pay every six months.

Both cities publish extensive data about licensed landlords. Brooklyn Center publishes an online list of property owners, their companies, addresses, contact information and rankings. Minneapolis provides an online map that allows anyone to view which addresses and owners have had licenses revoked.

Mallach said Baltimore should develop a similar system.

“An effective licensing system needs to be grounded in a solid data base,” he wrote. “These data sources, which already exist, but in different city departments, need to be integrated into a single database managed by the office responsible for rental regulation.”

The Minnesota programs have critics.

Tenant advocates say the Minneapolis program has given the highest grades to properties that clearly do not qualify.

“In theory, it’s a good idea” to rank the buildings, said Eric Hauge, director of organizing and public policy at the advocacy nonprofit HOME Line. “It incentivizes you to have quality units. But there are bugs in the system.”

Some say the eight-year span between inspections for top-tier properties is too long.

“The city isn’t getting in there often enough,” Hauge said.

He and others also worry that revoking licenses put tenants in “vulnerable positions.” His group prefers the city to use a rule that empowers tenant associations, with judicial oversight, to impose reforms on problem properties.

Landlords in both cities say Minneapolis and Brooklyn Center are exceeding their authority.

Khan filed a complaint in federal court last year to appeal his revocations. He argued the city is violating U.S. fair housing laws developed to prevent racial discrimination because nearly all of his tenants are minorities.

“With this mass revocation, the City ruins [Khan] financially and pushes some 350 protected class members into the street and an expensive, tight rental market,” he wrote in the lawsuit.

It was dismissed. A subsequent appeal to the U.S. Supreme Court died last month.

Dorothy Bright, an African-American mother of three teenagers, has rented from Khan for several years. She said she fears she will be unable to find an affordable house when she is evicted.

“The shelters are all full,” said Bright, 60. “There is no affordable housing in the city anymore. Where are we going to go if we get evicted?”

ddonovan@baltsun.com

twitter.com/dougdonovan

Copyright © 2018, The Baltimore Sun, a Baltimore Sun Media Group publication | Place an Ad
75°