Talking points against the City of Saint Cloud’s proposed rental housing conversion moratorium Drafted by the Saint Cloud Area Association of REALTORS® with support by the Minnesota Association of REALTORS® on behalf of that state’s 17,000 REALTORS® The Saint Cloud Area Association of REALTORS® opposes the proposed rental conversion moratorium for the following reasons: 1. Property rights: The rental moratorium impairs a fundamental aspect of property ownership. Property has been compared to a bundle of sticks, with the bundle as a whole constituting ownership of every attribute of the property, sometimes known as ‘fee simple absolute’ title. Among the core rights that a property owner typically has, and does not expect to be deprived of by regulation, is the right to lease or rent his property to another party. The other party, in exchange for rent payments, acquires a ‘stick’ that represents the right to use and occupy the property for the agreed upon period. In Saint Cloud, however, a property owner who would be subject to the moratorium would be deprived of the right to sever the rental ‘stick’ from the bundle. This is a direct affront to the tradition of property rights, where ownership includes the right to convey to others the right to use and occupy a property. 2. The proposed moratorium will have a negative impact on renters city wide and increase the price of rent. Similar to above, the moratorium infringes upon the rights of those seeking ‘leasehold interests,’ a recognized property right, by preventing them from being able to rent dwellings that are subject to the moratorium, but might otherwise have been available for rent. The effect and intent of a rental moratorium is to limit the supply of rental housing. This will make such housing more difficult, city wide, to find and more expensive for those who seek to live in it, including families and others who are unable to afford or choose not to own their homes. This will impact housing affordability in the city. Students can borrow money at a low rate to pay for living costs; non-students usually do not have that option. 3. Moratorium has many serious and negative consequences. To the extent that the moratorium is extended, or leads to a longer term or ban on rental registrations in zoning districts, the impact on rent prices will be exacerbated and could raise Federal Fair Housing concerns. The proposed moratorium does not call for discrimination on the basis of a protected class; however, to the extent that the resulting ordinance impacts neighborhoods with a concentration of residents from a protected minority group, it is conceivable that the implementation and enforcement provisions of a moratorium could disproportionality impact those residents and provide a basis for bringing a claim under the FHA. 4. Winona: Just because the Minnesota Supreme Court dismissed the appeal as they deemed the matter to be moot, it does not give cities a green light for rental restrictions in Minnesota. The Minnesota Supreme Court did not address the property rights controversy as they considered it moot and deemed it not in their power to decide. As identified in the decision, all of the appellants’ circumstances had changed during the course of the case, such that they no longer had any claims for relief. However, An overwhelming majority of appellate courts in other states that have addressed similar restrictions on the right to rent, have found them unconstitutional, and have struck them down. Concepts like ‘no due process’ for property owners losing their rights and lack of ‘equal protection’ are serious issues. The Winona decision even states, “The right to rent one’s property is an important property interest.” Furthermore, virtually every state appellate court to address the question has ruled that its zoning enabling act only allows cities to zone to regulate the use of property, not its ownership or occupancy. In other words, many courts have held that zoning enabling acts authorize local regulation of land use, but not regulation of the identity or status of owners or persons who occupy the land. The proposed rental moratorium in Saint Cloud may distinguish between the user of the property rather than its use. It is best to not engage in a new ordinance that could be in violation of the Constitution and State zoning law. 5. The moratorium runs counter to the stabilization of Saint Cloud’s real estate market. Homeowners decide or even need to rent their property for a variety of reasons: to recoup cost of owning the property during their temporary absence due to Military Duty, a move to a senior living facility, a job change or transfer, etc. Sometimes the owners can’t sell it due to a down market, or they can’t sell their homes at an acceptable price compared to the mortgage. Under the moratorium, owners would be unable to convert and rent their property, causing them to sell at a distressed price (impacting values and property taxes), or cause them to negotiate a short sale or even go into foreclosure. The moratorium may lead to an increased number of short sales, foreclosures, housing value declines (a home that contains all its ‘sticks’ is generally more desirable than a comparable one that with restricted rights) by limiting the ability to sell homes due to restricted property rights. 6. The Moratorium is ineffective at addressing the issues it was intended to solve - Use current enforcement ordinances and new IT system. Moratoriums are proposed in response to ‘anecdotal’ evidence from homeowners that rental dwellings and their tenants decrease their values, cause the character of the neighborhood to decline, and decrease their quality of life. While the City may have an interest in wanting to address these concerns, a rental moratorium, is at best, a blunt instrument in doing so. The rental conversion moratorium in no way enhances the City’s ability to enforce code and zoning violations. The City already has in place a mechanism to address the issues it now seeks to address. The case can be made that a rental moratorium is unlikely to achieve the complaining homeowners’ objectives and such a rental ban may be difficult to justify. The City should focus on its current ordinances and its efforts to enforce noise, litter, nuisance and other health or safety violations, instead of prohibiting the further conversion of dwellings that impacts property rights. And the City should continue its work on “designing and implementing an enterprise-wide information technology system to improve code enforcement and tracking functionality” to address problem landlords and tenants. 7. Work with SCSU – We encourage the City to work together with SCSU on neighborhood issues. A rental conversion moratorium flies in the face of SCSU’s goal to “invest in student recruitment and retention strategies to build strategic enrollment growth over time.” Where will the new students live if the entire city is under a rental conversion moratorium?