The Proposed Rental Registry Is A “Tax On Tenants,” Certificate of Occupancy and Minimum Standard of Habitability. This Fee Based Proposal’s Potential Cost: $10 to $19 Million.
After a careful review and analysis of the proposed ordinances to amend and reordain article II of chapter 6 and articles I, II, III, IV, and V [sic] [VIII] of chapter 26 of the New Orleans Code of Ordinances, we concluded that the proposed ordinances seek to address individual issues not systemic to the rental industry and are effectively addressed in existing municipal and state ordinances. Costly, blanketing legislate must be avoided. Rental Registry proponents have ignored and dismissed all existing solutions without consideration. The Rental Registry is a flawed bureaucratic concept that fails to address the real problem. Moreover, the proposed ordinances failed to pass a basic cost–benefit analysis as demonstrated below.
COST-BENEFIT REVIEW: Before embarking on any major plan or policy change, prudent managers will exercise due diligence to ascertain and fully comprehend the challenges or problems confronting them. The process is fourfold:
- Define the real problem.
- Investigate and define the cause(s) of the problem.
- Examine existing solutions and alternatives to effectively addressing the problem.
- Choose the best possible cost effective solution to resolving the problem.
The Rental Registry is being touted as the panacea to blighted housing, safe living and property owner accountability for New Orleans renters. But New Orleans code enforcement already addresses these issuesi and there is overwhelming state and city ordinances to effectively address all such problems. One such example is $30,000 in fines levied against a landlordii who refused to begin or make needed repairs.
We hope you will take a few minutes to read this important information and realize there is a better approach than imposing a $10 million “tax on tenants,” and an overlapping bureaucratic nightmare.
- EXISTING ALTERNATIVES: Sufficient codes and ordinances for health, safety and welfare currently exist for residential habitability. The proposed ordinances serve to create a duplicate layer of costly oversight, will increase consumer’s (tenant’s) rental cost and further exacerbate the rental market rates. The proposed ordinances produce no measurable benefit to tenants or property owners that cannot otherwise be provided through well established existing ordinances.
- EXISTING COMPLIANCE STANDARDS: Preexisting state and municipal ordinances currently provide for sufficient compliance of minimum habitability standards. The implications of the proposed ordinances suggest perceived deficiencies that are otherwise currently addressed in existing ordinances. Duplicate, similar and overlapping ordinances create unnecessary hardships and are counterproductive when embraced and implemented.
- New Orleans Codes and Ordinancesiii has sufficient preexisting and exhaustive standards of habitability safety, and welfare codes addressing the intent proposed herein. Chapter 26 Article IV, Minimum Property Maintenance Codes, Divisions 1-11 provides a detailed body of ordinances that require compliance and provide for a minimum habitability standard.
- Louisiana Civil Codesiv comprises over 45 civil codes regarding minimum standards for rental properties, leasing agreements, property owners responsibility and provides detailed tenant’s rightsv and laws governing habitability, safety and welfare of tenant’s and much more. All information is free to download.
- EXCESSIVE AND BURDENSOME FUNDING: In 2013 the United States Census Bureau estimated there were 189,896vi housing units in our city of which 47% are owner occupied, leaving 53% or 100,700 as potential rental units. Using the current $190 registration fee charged to a home owner to register a small home business for a simple “certificate of occupancy,”vii consumers (tenants) would be taxed $19 million.viii This number excludes all other fees, re-inspection fees, penalties, hearing fees, property liens and other revenue generating activities that are part and parcel of this unnecessary ordinance. Because the proposed ordinances intentionally lack transparency by omitting projected cost to fund such legislation, the actual numbers could be higher or lower as indicated here:
- Assuming a $60 registration fee per unit, the tax on tenants would be $6.0 million.
- Assuming a $75 registration fee per unit, the tax on tenants would be $7.5 million.
- Assuming a $100 registration fee per unit, the tax on tenants would be $10.1 million.
- Assuming a $150 registration fee per unit, the tax on tenants would be $15.1 million.
- RENTAL RATES INCREASE: Currently, tenant’s rental rates face significant increases with the council’s passage of the sewerage and water rate hike that is scheduled to double S&WB bills over next 4 -5 years. Doubling water bills poses a substantial hardship for tenants with fixed and limited income and only those who live otherwise may disagree. By comparison, the cost–benefit outcome of these proposed ordinances only adds to the soaring cost of unaffordable housing in the city of New Orleans and lays on the backs of our consumers (tenants) yet another rental increase. To add a $10 to $19 million tax on these consumers (tenants) seems unconscionable.
- PROPERTY OWNERS: According to First City Court’s 2014 eviction records, landlords were forced to evict 4,516 tenants for not paying their rent and lost over $3.6 million annually or about $300,000 per month in rental income. Add $850,000 annually in court filing fees and the cost of repairs to the trashed units at the average cost of $1,000 per unit or $4.5 million annually which is $376,000 per month and landlords lost a total of $8.9 million in rental income. In addition, recent rate hikes in property taxes, flood insurance doubling, property & casualty insurance increases, S&WB bills doubling, Entergy’s carbon tax and ongoing maintenance, repairs and improvement cost all add to skyrocketing expenses and drive rents higher. Unfortunately, these costs must and shall all be passed on to the consumers (tenants) if a business hopes to remain solvent. To add additional layers of overlapping bureaucracy and a millions in unnecessary fees, rental rates will certainly escalate.
- BENEFICIAL OUTCOME: There are 3 principal entities involved in these proposed ordinances that will be significantly effected:
- The municipality: The City of New Orleans would initiate yet another revenue stream potentially valued at approximately $19 million in exchange for creating a similar and overlapping regulatory process that is already well addressed by preexisting ordinances as demonstrated in 2.1 and 2.2 EXISTING COMPLIANCE STANDARDS of this document. Furthermore, the option to outsource the proposed program to a 3rd party, as suggested in the proposed ordinance, would further increase the cost to the consumer (tenant). The ordinance produces costly and excessive bureaucratic scrutiny that offers no greater outcome than existing codes and ordinances. Layers of bureaucracy are always excessive and costly. The revenue streams created by these ordinances would potentially enrich the city’s coffers while providing little in return to the consumers (tenants) or property owners.
- The consumer (tenant): This multimillion dollar program will adversely effect the consumer (tenant) and ultimately drive rents higher. It is naive to assume that this “tax on tenants” will benefit the consumer (tenant) in any way that is not otherwise provided for in existing ordinances. Hard working consumers (tenants) are extremely competent and capable of inspecting rentals, negotiating leases, and procuring a residence without the need of paying a 3rd party to tell them it’s habitable. Consider the following facts:
- Tenants carefully inspect their rental unit for habitability prior to entering a leasing agreement. The proposed ordinance is a veiled inference that the tenant lacks basic common sense and good judgment.
- Tenants have a wealth of codes, ordinances and resources currently enacted that require property owners to comply and facilitate any required repairs necessary to maintain a minimum standard of habitability.
- Current codes and ordinances allow tenants to effect repairs themselves and deduct it from the rental cost should a property owner fail to make reasonable repairs in a timely manner.
- There is no legitimate evidence suggesting the need for blanketed ordinances, effecting all rental units and consumers (tenants).
- The property owner: The property owner will once again be charged with the unpleasant task of justifying yet another rental increase due to a new city ordinance. This will not sit well with the tenant who has suffered previous rental increases that were imposed for property tax increase, flood insurance increase, property and casualty insurance increase and other costs of doing business. No amount of empathy will console their frustration and anger as they consider how to absorb yet another rental increase.
- MISGUIDED LEGISLATION: Costly, blanketing legislate action is never the answer to addressing limited individual issues, especially when preexisting remedies are available to achieve the same result. The proposed ordinances speak to a perceived deficiency that in reality is not systemic, but limited in nature to about 5% or 10% of landlords rental properties. Sometimes, seemingly good ideas are the enemy of what is best. The vast majority of consumers (tenants) and property owners are well served by existing ordinances and should not be additionally burdened with costly and unnecessary legislative action.
- UNINTENTIONAL IMPACT: Misguided agenda’s often attempt repairing that which is not broke for the purpose of self validation. These proposed ordinances attempt to do just that and will negatively impact the current rental market and all entities as follows:
- Higher rental rates for tenants.
- Costly legislation.
- Similar and overlapping regulatory process.
- Escalating Open-ended fee based structure.
- Hardship for tenants on fixed and low incomes.
- Overlapping and unwarranted intervention.
- Misdirected focus and lost productivity.
The cost-benefit review of the proposed new ordinances, aka Rental Registry, make it abundantly clear that the proposal fails to address the implied problem—forcing negligent property owners to repair their properties that fail to meet a standard of habitability. While we commend Ms. Cantrell’s intentions to address these important issues that effect about 5% to 10% of the rental properties and owners, the proposed legislation is a broad and costly measure that far exceeds the scope of its implied intention and concentrates more on the 90% to 95% of rental properties that do not have complaints of neglect or lack of habitability. The Rental Registry approach is tantamount to owning a fleet of 100 vehicles and 7 of them have flat tires. Would your solution to get those 7 vehicles back on the road be to buy new tires for all 100 vehicles or simply fix the flat tires?
The citywide Rental Registry is being called a vehicle to help our neighbors suffering from substandard housing, but its real destination is the 90% to 95% of rental units, tenants and landlords that are not the problem and shake down a multimillion dollar fee that is without justification. The properties that have already been identified by tenants as having habitability problems must be the focus of our attention. Any proposed solution must be predicated upon the actual problem in order to effectuate the proper result and provide expeditious relief to the tenants with habitability issues. While New Orleans code enforce lacks the resources to register and inspect the 90% to 95% of the rental properties that are not part of the problem, they are certainly capable of addressing the real problem which is the 5% to 10% of the properties with reported code violations.
The proposed ordinances produce no measurable benefit to tenants or property owners that cannot otherwise be provided through well established existing ordinances. From a business perspective, the right focus and actionable plan will result in accomplishing everyone’s goals in a cost-effective approach and bring relief to frustrated tenants.
From a humanitarian perspective, there are about 5% to 10% of our neighbors that need assistance in getting their rental units repaired. We have effective tools and remedies in place now on both a state and municipal level to accomplish the task. Let’s focus on the problem and not a costly overlapping bureaucracy that is certain drive rents higher.
One One of the largest challenges facing our city is not the passage of costly ordinances that will increase a tenant’s rental cost, but to legislate an actionable plan to repair the deplorable conditions of our streets. Tenants and property owners alike are forced to navigate a virtual minefield of potholes as they attempt to reach their homes each day. We would urge this council to avoid consideration of these proposed ordinances and move to focus on more urgent and vital issues affecting our residents.
iiiNew Orleans Code of Ordinances: https://www.municode.com/library/la/new_orleans/codes/code_of_ordinances?nodeId=PTIICO_CH26BUBUREHOST
ivLouisiana Legislature: http://www.legis.la.gov/legis/Laws_Toc.aspx?folder=67&level=Parent
vA Guide To Louisiana Landlord & Tenant Laws: https://www.ag.state.la.us/Shared/ViewDoc.aspx?Type=3&Doc=220
viUnited States Census Bureau: http://quickfacts.census.gov/qfd/states/22/2255000.html
viiiValuation $19.3 million: These values are calculated from existing fees for like and kind permit fees currently being charged. It is reasonable to assume that proponents initial valuations will be low-balled to overcome objections to passage.