BUILDING EFFECTIVE RENTAL HOUSING REGULATION IN COOK COUNTY

Alan Mallach, Senior FellowCenter for Community Progress

October 13, 2015

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90% Suburban Cook County Chicago

The market is changing

• 55,000 more rental units, and 30,000 more single family rental units in suburban Cook County today than in 2005.

• This is an opportunity and a challenge.

Opportunities and challenges

• Opportunities for families seeking rental housing in suburban communities

• New and inexperienced absentee landlords with limited skills and capacity

• Difficulty maintaining scattered site properties• Predatory, speculative investors in low-price communities, particularly in South Cook County.

Low prices are a major problem

• Investor buys a 3 bedroom house for $20,000 and rents it for $900/month (tenant pays utilities)

• Gross income (with 10% vacancy) over three years = $29,160 – annual return on cash flow alone 15.3%

• Gross income with voucher

(with 5% vacancy) over three

three years = $43,947 –

gross annual return 39.9%• Expenses = ?

The response

• Effective municipal regulation, coupled with pro-active strategies and incentives, can improve rental housing quality and reduce problems.

• The most effective strategies are based on licensing and regular property inspection

• Effective regulation cannot be punitive – must be geared toward building a strong landlord community – ‘raising the bar’.

Raising the bar

• A rental licensing ordinance based on sound standards and regular inspection

• A performance-based system oriented toward fostering compliance

• A landlord support system• Incentives for good landlords• System must be sensitive to different legal powers of

home rule and non-home rule municipalities.

Elements of an effective ordinance –Home rule municipality

• Findings• Definitions• License required; application procedure• Inspection and re-inspection• Issuance of licenses• Annual performance evaluation and property

classification• Performance based standards• Fees• Violation; penalties

Elements of an effective ordinance –Non-home rule municipality

• Findings• Definitions• Landlord obligation to register (informational)• Nuisance physical conditions• Other nuisances• Outcome of chronic nuisance determination; registry• Inspection; re-inspection• Annual performance evaluation and property classification• Effect of annual review• Fees• Violation; penalties

A proactive approach

• Find landlords – don’t wait for them to come to you• Work with landlord community – it’s in their

interest, too. • Help build landlord and property management

capacity • Build local government capacity through inter-

governmental and partnerships with private and non-profit entities.

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