HomeMy WebLinkAboutA006 - Staff Report on Rental Concentration Exception Options dated May 22, 2018 ITEM # 35a
Staff Report
Rental Concentration Exception Options
May 22, 2018
BACKGROUND:
The City of Ames is in the process of adopting an ordinance that restricts the
concentration of single-family home rental properties within specified areas. The draft
ordinance sets a cap for 25% of properties registered as rental properties. If a
neighborhood exceeds this threshold, then no new rental registrations could be
approved. City Council has authorized temporary exceptions to the 25% cap to allow
for Transitional Letters of Compliance for rental of property for up to two years.
Additionally, owner occupied homes with up to one roomer are also exempt from the
cap. The proposed third reading of the Concentration Cap ordinance is a separate item
on this same agenda.
City Council received a staff report regarding examples of rental concentration
limitations at the February 20th and March 20th workshops. Additional examples of other
City's rental concentration ordinances were provided to the City Council at the April 10th
meeting. At this meeting and at the recent May 8th City Council meeting, there was
discussion of whether a permanent exception from the cap should be allowed. Council
decided to engage in a discussion of this topic immediately rather than wait until
September 2018 as originally planned.
If an option for a permanent exception is pursued, the City Council must first identify
what is considered a hardship. The hardship could include individuals with immediate
circumstances related to the sale of their property or it could include people that may
have issues selling their property in the future. When considering a hardship related to
the sale of property it will likely come down to considering how to evaluate return on
investment and resale expectations in a specific neighborhood. Due to the permanent
exception of a hardship finding, the threshold of approval should be a high bar to
maintain the integrity of the concentration cap. In some ways this would be similar
to evaluating the financial feasibility in conjunction with a demolition request in the
University Impact Overlay or a use variance that has a hardship standard.
Based upon experience with variances and the fraternity/sorority demolition permit
requests, staff drafted a process for a permanent exception as part of the April 10th staff
report. The approach outlined by staff was designed to address the variability in the real
estate market, long term property ownership, the seasonality of sales and time on the
market for a home, the unique condition/repairs needed for a home, and a prerequisite
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of abutting other rental properties. This original option is described as Option 1 below.
Staff also has outlined two additional approaches as well for less restrictive time periods
to apply for a hardship or to delay implementation of the cap restriction for current
property owners.
OPTION 1: TWO YEAR SALE PROCESS WITH PERQUISITE OF ABUTTING
REGISTERED RENTAL PROPERTY
This option was first described as part of the April 101" staff report. Staff believes the
delay in applying for a hardship exception is essential for ensuring the intent of the cap
is met on maintaining ownership housing opportunities. Without a time on market
standard, there would be no way to know the viability of the sale of the home for
ownership purposes.
The standards in this approach also are designed to overlap with the option of a
Transitional Letter of Compliance that allows for the renting of the property for up to two
years if someone is unable to sell their home. This option also includes a prerequisite
for abutting other rental properties. The proximity standard reflects earlier concerns
expressed in April for hardships about selling property when properties are surrounded
by other rental properties.
Qualification Prerequisites:
1. Evidence of offering/advertising the property for sale for a minimum a period of
24 months with disclosure of offers received for purchase of the property that
have been rejected.
2. Evidence of the original purchase price, date of purchase, and current mortgage
balance.
3. Current appraised value of the dwelling with comparable sales.
4. A home inspection report describing the condition of the property.
5. Rental Housing Code pre-inspection and cost estimate for compliance with the
Rental Housing code.
6. Property must have been in ownership by the current property owner for a
minimum of five years.
7. Prerequisite that the property has abutting registered dwelling units on a
minimum of three sides (Need direction on whether across the street counts as
abutting, originally proposed without including across the street)
Decision Making Criteria (By City Council)
A. Determination that the preponderance of properties along the same block face
are existing registered rental properties, not just the abutting properties.
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B. Sale of the property for an owner occupied home is not financially feasible when
considering the condition of the home and market value. Deferred maintenance
and actions of the property owner that diminished the value of the property are
not presentable evidence in support of financial infeasibility.
C. Sale of the property for an owner occupied home would deprive the owner of the
property of reasonable use of, or economic return on, the property within the
intent of the Rental Concentration Cap to preserve homeownership opportunities
in a neighborhood.
OPTION 2: NINE-MONTH SALE PROCESS AND NO ABUTTING RENTAL
PROPERTY PERQUISITE
This option is the same as Option 1 with the exception of the amount of time the
property needs to be for sale and whether the property abuts other rentals. The real
estate market is highly seasonal and a short time of an on the market standard would
not account for normal ebb and flow in market demand. Nine months would be longer
than typical expectations for the sale of single-family home, but not to the degree as
proposed with the 2-year process described above that assumes someone would rent
home in the intervening period of time.
To provide some context to the nine months, the median days on the market for Ames
was recently reported by the Central Iowa Board of Realtor statistics as 69 days in 2018
compared to 55 days in 2017 for the same time period. Days on the market is real
estate industry term calculated commonly through the Multiple Listing Service (MLS).
Staff also notes these numbers vary throughout the year and are subject to proprietary
information through MLS and real estate listing agents. Due to permanency of the
exception, a threshold greater than the market median and addressed that seasonality
would be appropriate.
Qualification Prerequisites:
1. Evidence of offering/advertising the property for sale for a minimum a period of
nine months with disclosure of offers received for purchase of the property that
have been rejected.
2. Evidence of the original purchase price, date of purchase, and current mortgage
balance.
3. Current appraised value of the dwelling with comparable sales.
4. A home inspection report describing the condition of the property.
5. Rental Housing Code pre-inspection and cost estimate for compliance with the
Rental Housing code.
6. Property must have been in ownership by the current property owner for a
minimum of five years.
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7. No prerequisite of abutting existing rental properties.
Decision Making Criteria (By City Council)
A. Sale of the property for an owner occupied home is not financially feasible when
considering the condition of the home and market value. Deferred maintenance
and actions of the property owner that diminished the value of the property are
not presentable evidence in support of financial infeasibility.
B. Sale of the property for an owner occupied home would deprive the owner of the
property of reasonable use of, or economic return on, the property within the
intent of the Rental Concentration Cap to preserve homeownership opportunities
in a neighborhood.
OPTION 3: DEFER CAP REQUIREMENT FOR 6 MONTHS FOR CURRENT
PROPERTY OWNERS.
This option does not consider proving a hardship, but would allow a current
property owner to register the property and receive a Letter of Compliance within
the next six months. This option would essentially defer the 25% cap restriction for a
limited time to allow for existing property owners that think it is financially advantageous
to invest in registering a property and receiving a Letter of Compliance to do so.
This approach would provide be a one-time exception process for current owners and
would not allow a new property owner that is buying into a neighborhood the option to
register the property as a rental property. If the property owner does not complete
the Letter of Compliance within the 6-month timeframe, they would not be eligible
for the exception. City Council could also apply the minimum ownership standard of
five years that is included in the previous two options.
Qualification Prerequisites: (By City Staff)
1. Administrative review for registering a rental property.
2. Property owners of record on May 22, 2018 may register a property within a
Rental Concentration Cap neighborhood as a rental property prior to September
1, 2018.
3. The property registration within a Rental Cap neighborhood allows for six months
to obtain a Letter of Compliance from the time of the initial inspection for the
Letter of Compliance. (This requires all necessary improvements to be completed
by March 1, 2019)
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4. If a property owner has not obtained a Letter of Compliance within six months,
the property registration shall expire and may not be renewed or reapplied for
under this exception.
STAFF COMMENTS:
With any exception to a rental cap there is a question of maintaining the integrity of the
neighborhood and the rationale for having a cap in the first place with an exception
allowance. Many individuals presented concerns over the past nine months about the
impacts on the quality of life caused by high levels of single-family rental properties due
to the transitory nature of residents, higher levels of activity from an increased number
of occupants, character and alterations of rental property compared to owner occupied
homes, and impacts on availability of affordable ownership opportunities for homes near
campus. At the same time, other property owners expressed concern about the
potential effect on their property values if they choose to sell in the future or to rent the
home as an investment property.
The issue of rental concentration limitations is not unlike other issues of
neighborhood integrity addressed by prior City Councils with Hospital/Medical
area expansion, Single-family Conservation Overlay District north of Downtown,
and the University Impact Area standards. Exceptions or variances in these areas
have a high bar of approval due to the permanency of the decision. The approach
for the rental cap exception should be similar.
City Council has been presented with three options to address concerns about
hardships while attempting to support the intent of a rental cap. If there is a
desire to pursue this strategy, the City Council will need to provide direction on
one of the three options described above or give direction on the following
specific issues so that staff can draft an alternative option.
1. One-time exception process for 2018 or hardship process for future
2. Proximity to current rental property as a prerequisite
3. Approval authority (City Council or other)
4. Criteria for approval, quantitative or qualitative
If the City Council can agree on an approach to an exception policy option, a draft
ordinance reflecting the preferred hardship process will be brought for review to
the June 12t" meeting.
Staff believes that with direction to draft hardship standards the City Council
could proceed with adopting the Concentration Cap ordinance on third reading,
approving specific neighborhoods for the cap, and allow the moratorium to
expire. The benefit of this approach is that the extension of the moratorium,
which is a broader area than proposed for the concentration limits, will no longer
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be needed as the Concentration Cap ordinance would address the concerns
included with the moratorium. Any new hardship standards reviewed on June
12t" would then be an amendment to the Concentration Cap ordinance after it is
adopted.
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AI.Warren
3121 Maplewood Road
Ames IA 50014
May 17, 2018
Dear Mayor and Council,
I would like a hardship appeal to finish two bedroom and have them counted for
occupancy at the house I own at 2334 Storm St.This house was built in 2016. 1 tore down an old
falling apart, abandoned house and built a 4,200 square foot house in its place. The basement
area is 2,130 square foot and has 9-foot ceilings.This house was designed to have two
bedrooms in the basement with large egress windows in place. A large finished bathroom is
already in use.To complete these bedrooms, we just need to add one wall to each and frame in
a closet, (not required by Ames City Code).
However, we didn't finish these two bedrooms in 2016 because the City Code did not
allow 5 unrelated people to occupy a house. I knew if these bedrooms were finished they
would be occupied. I gave Council Member Gloria Betcher a tour of the house and told her that
if the law changed we would finish these two bedrooms. Council Member Betcher commented
it was a very nice house and fit in the neighborhood well.
Then in 2017,the Iowa Legislature changed the rules on how the code could be applied
to occupancy.There were various meetings dealing with the number of people in a house. It
ranged from the current number of 3 with different restrictions to no firm top number of
people.
Last Fall when the City Council took up the issue, I was looking for direction on how
many people could occupy a house. Instead,with each meeting it got more confusing. Many
different proposals were presented; one per bedroom plus one roomer, one per bedroom up to
four plus one roomer,SCAN proposed only 3 unrelated people plus parking. Then it was five
unrelated people plus parking. I was wanting and needing direction from the City; do I add one
bedroom or two because I have off street parking for 5 cars? During this time a moratorium was
put in place not allowing any additional bedrooms. So, I am caught in the middle wanting to go
by City Code, (which still isn't final) and being able to add and count my bedrooms.The City
Council needed to give direction before freezing everything. 1 was trying to follow code and be
respectful of the neighborhood which I have owned property in for 40 years.
A house two doors East of mine was built at the same time with 6 bedrooms and rented
as such. They had the extra and filled them against code. They are currently legal for 5 and 2334
Storm is legal for 3.
1 am requesting that I be allowed to add the two bedrooms and have them be counted
given that the City gave no clear direction on the code and how it would be applied.
Respectfully,
Al Warren
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