Opinion: Some Suggestions For Town Council Candidates About The Town’s Real Estate Woes
Photo: Public Domain Picures. Public Domain
Real estate markets everywhere are haywire, and in Amherst, the added pressure of student rentals and single family-to-student rental conversions are exacerbating an already chaotic situation. It is easy to find things to complain about in Amherst with regard to the real estate market. However, as Teddy Roosevelt wisely said, “Complaining about a problem without posing a solution is called whining.” In the spirit of reducing Amherst’s already ample supply of whining, below are several partial solutions to our town’s real estate woes. The following question and ideas, and whether candidates for Town Council are willing to answer and/or adopt them, may help voters decide who to elect in November.
While some of the candidates for Town Council favor massive development by largely eliminating zoning restrictions on duplex and triplex conversions, it might behoove voters to ask where these candidates live, and whether their neighborhoods are at risk of these conversions.
Amherst would benefit from tracking student housing as a separate real estate category, and establish a minimum distance, lot line to lot line, for student rentals. Existing properties would be grandfathered in, but upon change of ownership would become subject to student housing density regulations. This has been done in other college towns and has helped limit the incursion of student rentals into residential neighborhoods.
Establish a town data base of all rentals for safety, zoning, and behavior violations that is available to the public and tracks activity for at least five years. New infractions would be reported to the local press for publication, and include landlords’ and/or property management services’ names.
Require landlords to disclose rental rates and publish them as part of the requirements for rental permits. This would help eliminate price gouging, and help renters, students, and non-students alike, make informed choices.
Partners in LLCs must be fully disclosed and are part of the public record, according to the office of the Massacusetts Attorney General. Amherst should require all real estate LLCs to include a full list of partners’ names on all of the LLC’s rental permits. These names should be easily accessible on the town website listing real estate in order to facilitate the tracking of “nuisance properties” and problem landlords.
Establish penalties for landlords whose properties routinely fail to meet behavior or building code regulations. Pull rental permits for properties for set lengths of time, based on the severity and/or frequency of complaints. Publishing the names of owners would alert the town’s residents to chronic offenders, potentially shaming some into compliance, and allow renters to make wiser choices when selecting rental units.
While a proposed enhanced inspection process for rental units is a promising start, there is much more we can do. The upcoming election, and the review of the Town Charter in 2024, hold the promise of restoring some order to the dysfunctional mess that is the current real estate market in Amherst, but only if Town Council is responsive and willing to put the interests of regular citizens on a par with those of developers and landlords.
John Varner is a resident of Amherst’s District 3.
Some of your suggestions could lead to a legal nightmare for the town, landlords and in the end reduce choice for tenants. Nuisance is the responsibility of the perpetrator be it the tenant or the owner. Knowing state rental laws should be a requirement to anyone attempting to regulate rentals. Town council included. Maybe converting existing buildings in a private-public partnership and offering affordable rentals and homeownership could help – as long as the affordable unit owner is able to afford Amherst fees and taxes. Otherwise it is pointless too.
Ms. Shepard, can you be more specific regarding your claims of legal jeopardy??
The remedies suggested involve re-establishing a town data base that was allowed to fall apart several years ago, and enhancing the data base to collect information that is already – or should be – part of the public record. Other suggestions are simply following the lead of college towns across the country that have been ahead of Amherst in addressing the problems related to student housing and people trying to get rich off of them. Amherst’s housing situation is in its current state in part because the town has long deferred to realtors and developers while downplaying the concerns of residents. Town government taking appropriate action is long overdue. Candidates should be clear on where they stand, so that voters can compare policy positions and vote accordingly.
Landlords’ complaints about paying a few hundred dollars for periodic inspections every 5 years are risible when they are making $1000+/month/bedroom off their rental units. A 4 bedroom unit will gross almost a quarter of a million dollars in rent over 5 years. Raising rents even further using the inspection fee as an excuse would be naked greed, not justifiable recompense.
Well said, John! Asking every Town Council candidate their stance on this burning issue is an excellent idea, as are several of your proposals. Regarding student rentals, other ideas (to the extent legal and practicable ) might be: to have higher property tax rates and higher rental permit and rental inspection rates for absentee landlords; and, as a disincentive to price-gouging, to have a graduated tax schedule, with proportionally higher taxes, rental fees for landlords whose rents exceed prevailing norms.
I agree with you that we need a town plan to address the problem of housing, something practical, positive , and visionary. We are by no means against students as such, but residential neighborhoods must be protected, and renters must be protected from predatory landlords. For their part, our planning and zoning boards must uphold, not undermine our zoning bylaw.
This is a tremendous topic that is currently being navigated by town council and administration. If you are interested in following, review the Community Resource Committee meetings and future agendas.
Renata is right, that some of your recommendations could lead to legal nightmares. I would be careful about a lot of these recommendations.
Landlords concerned about increased costs for many of these meritless charges are concerned because there is substantial costs to operating a property and keeping the property in habitable condition with the wear and tear that comes from people living there. It is a challenge as it is to operate and to increase the costs means that the landlords will have to increase the revenue, (revenue does not definitively lead to profit, it is revenue that is needed to cover the cost of operating the “shelter from the elements” that is provided in exchange for rent). The cost of everything has climbed substantially in recent years, from vendors who can provide necessary services for housing, to the supplies, materials and tools needed for the home and within the last 12-18 months, the cost of debt to acquire said property. This is not including the cost of taxes, insurance, waste management and utilities for the property.
Mr. Varner, the individual who rents a 4 bedroom unit and grosses $250, 000 probably has expenses North of $200,000 for the property in that 5 year period so if no major capital expenditures are needed, they might net $10,000 per year. Heating systems fail, roofs wear out, windows need to be replaced etc. So a portion of that $10,000 needs to be reserved for large expenses.
I appreciate the opinion, this is a common challenge that we face working in property management/real estate investing, that people are not familiar with ALL of the costs associated with providing housing in exchange for rent. It is still worth talking about.
So, Mr. Crossman, landlords would net $50,000 in five years, and you believe a $500 inspection fee every 5 years fee is excessive? Parting with 1% of your earnings to make sure the property is safe and up to code doesn’t seem excessive.
And, yes, properties do run down hill if not maintained. There are numerous examples all over town of ramshackle student rentals that are not properly maintained and are a drag on neighbors’ property values. A new roof for a single family home might run $20-30 K, and will last for 20-30 years A new furnace is $7-10K, and will last at least 20 years. Replacing windows costs up front, but pay for themselves with reduced energy costs. Painting a single family property every 20 years is another $6-8K. So that’s spending about $50K every 20-30 years. If you own the property that long, at current rental rates, you will gross a couple million dollars, minus $50K. I’m not clear what you are spending money on, but your math seems fuzzy.
The rent permit is a charge every year, the inspections are additional charges, and if you review the proposal there are numerous charges related to inspections that have been proposed. I would encourage you to review the documents from the CRC to understand how many additional charges they want to charge the landlords. They are looking to raise over $475,000 per year in fees to the landlords. That is right, they are looking to raise $475,000 per year on top of the $288,000 that they are getting through permit fees and inspections already. –
Remember, if the landlord is lucky, they will clear $10,000 in a good year. That is trusting that the Orangeburg sewer line doesn’t fail. That is trusting the roof, the windows, the heating systems, plumbing systems, the appliances, the electricity systems, all hold up for that year. This is hoping that the pipes don’t freeze in the Winter time and no trees fall down on the property. –
Again, I think your intent is fair and adequate, but I think the information you have is incomplete. This is a tremendous task that Town Council/Community Resource Committee is trying to work on. The margins that landlords make are not as great as people think. I think you may not realize that the town is trying to increase their revenue from the landlords by half a million dollars PER YEAR, and that is what the landlords think will become more burdensome for our tenants because their rent payments are what cover the cost of operating the shelter they rent. –
I admit I also lack some information. Which neighborhood do you think has been impacted by blighted properties to the effect that the values have gone down in Amherst? I would be interested to hear which neighborhood is hurting so I can try to buy a property there to move back to Amherst? I looked at available properties in Amherst and the “most affordable/cheapest” one is listed for $399,000. If you review the housing report from 2015, anything above $400,000 was considered luxury housing.
Legally, property owners are responsible for what happens on their properties, including the misbehavior of “nuisance tenants.”
The real estate market is ultra tight in Amherst because LLCs and investors are so anxious to purchase student rental investments that they are willing to pay way over the asking prices, sight unseen, no inspections. (try googling “How to make money by investing in student rentals”. You will find many hits, as I am sure you are aware). For an investment strategy that you describe as being SO sketchy, there certainly is no shortage of people with lots of cash waiting to get into the market.
E.G.: The house three doors down my street went on the market 4 months ago for $365K. It sold literally in a matter of hours to a person paying $30K over the asking price in cash, with no inspection. After refinishing a couple hardwood floors, the place went back on the market, and sold to another investor for $430K.
E.G.: The property across the street is a student rental. It was purchased in cash by an individual who also purchased 4 other properties within the same season. (By the end of the first summer, three of the five properties were the subjects of noise complaints.) It was rented the first year before obtaining a rental permit. I met the owner and pointed out the numerous problems that needed to be addressed. The owner did re-roof the place, when I told them that the previous owner had leaks that damaged interior sheetrock. They replaced the garage doors, which had fallen apart and would not close, in violation of the state building code. They have yet to repair or replace the 60 year old windows, or the rotting trim all around the house, or seal the house against vermin or treat for insects, despite the obvious need and obligation under the state building code to do so. The first year it was rented, there were 5 and sometimes 6 tenants, in clear violation of town law. The over-worked town official in charge of rental inspections did meet with the tenants to address parking regulation violations, which continued off and on. Things have improved in the last two years in terms of the students’ number and behavior, but each June, there is suspense as the old crew moves out and a new one moves in.
True, if I wanted to sell my place to the highest bidder (instead of a family), I would make out because I’m in Amherst and the real estate market is nuts. But I would greatly prefer a stable neighborhood of families.
Steve: Being legally responsible and doing something about it are two different things, and rarely does Amherst hold landlords accountable, hence the need for tracking.
John, for the record, am all for a data base and minimal distances, which, Newark , Delaware and State College, PA., working together, instituted in their towns. Just making the point that property owners are already liable for what occurs on their properties, so what is being proposed is neither radical nor an intrusion.
If done well, the collective data may also be a teaching tool for student landlords, exploring the data to discover why they go to all that expense and effort to make $10,000 a year on a house that has absurdly high revenues (4 tenants each paying $1400/bed = $67,200/year). How much could a landlord net in a town that can only charge real-world rates?
I can’t imagine the frequent phone calls I get from call centers offering to buy my house are for the goal of netting $10,000 per year.
> I can’t imagine the frequent phone calls I get from call centers offering to buy my house are for the goal of netting $10,000 per year.
Took the words right out of my mouth Mr Bryck. Thanks to Mr Varner for coming up with ideas to help the situation. One of the councilors (sorry I don’t remember which one) suggested concentrating on the nuisance properties. After all, each rental usually turns over each school year so those tenants don’t care about the neighborhood long term.
The simplest thing to do would be to make examples out of the tenants that cause problems with the properties and disrupt the neighborhoods with noise. Big fines. Umass and the landlords should be involved. This would help the landlord protect the property and help the regular residents sleep at night.
Once the word gets out that the town means business with its off campus rentals, things might be better for all. CRESS could be involved.
A Modest Proposal: why not address these problems through real estate tax assessments?
Here are some things we might try (feel free to tweak the numbers):
1) For the first student-rented bedroom, increase the assessed value of the property by, say, 100 times the monthly rent.
2) For each subsequent student-rented bedroom, increase the assessed value of the property by the same fraction as the first student-rented bedroom did, compounding the increase.
3) If the entire house is a student rental, compound the increase one more time.
4) If there is no on-site owner/manager, compound the increase two more times.
5) For each neighboring property which is not rented to students, decrease its assessed value reciprocally, according to distance from the student rental and how many non-student houses are within that distance, such that the average assessment for the neighborhood doesn’t change.
6) Mathematically, this makes the assessment adjustment factor a harmonic function; when more than one property in a neighborhood is a student rental, apply the superposition principle: simply add the harmonic-adjustment-factors that each student rental contributes to compute the overall harmonic-adjustment-factor.
7) Hire a professional mathematician to oversee these harmonic-adjustment-factor calculations and certify the results (that $475K annual post-retirement salary looks very attractive 😉 )!
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Just to clarify, although I was alluding to the Jonathan Swift satire, some of my proposal may be worth serious consideration, inasmuch as much social policy in the United States is accomplished through the tax code.
Were it allowed by law, one way to balance the attractiveness of investing in single-family homes and converting them into student-rental properties is to tax that investment income by recognizing how much it increases the value of each student-rental property and assessing it accordingly for real-estate taxation purposes.
If one computes the assessment-adjustment factor for student-rental properties along the lines suggested above, that would result in a significant source of additional tax revenue for the Town. Some of that revenue could be returned to the remaining homeowners according to what I called a harmonic-adjustment-factor: a pun on “harmony” as well as the actual mathematical notion of “harmonic function” that I was — at least vaguely — trying to explain in my previous post.
And for a home-owner near multiple student rental properties, one effect of this revenue-return feature might be a large enough tax reductions that this home-owner would get a negative real estate tax bill from the Town! Perhaps that could be seen as compensation for a home-owner who is subject to the near-neigboring student-rentals or serve as an incentive to not sell out to a student-rental investor.
I don’t know whether such tax mechanisms are a better way to solve this social problem, but we should be aware that the proposed inspection system may be seen by many — including some tenants — as an unwarranted and unwelcome “nanny state” or even “police state” tactic, that should give all of us pause.