Risky business

By Lauren Fritsky
Times Staff Writer

An explosive effort in recent years to get tough on unlicensed rental-property owners in the Northeast seems to have lost some fuel. Throughout last year, some City Council members pushed for legislation to target owners who fail to get necessary permits and licenses to rent homes in the city. The focus included investors who say they will live in the homes, but then rent them out instead.
Council members now say the city may lack the manpower to control — or even identify — these property owners.
"It’s not all of them" who are in violation, stressed Councilwoman Joan Krajewski (D-6th dist.).
Ammo was gathered last year when the Mayfair Community Development Corporation conducted a study of properties in the community and raised an eyebrow at the numbers — about a third of the homes were not occupied by the owners. A community task force was formed to further explore the boom in rental properties.
In June 2005, City Council’s Committee on Licenses and Inspections held a hearing on the increase of rental properties in the entire Northeast. With the task force input, Krajewski introduced a resolution to create a rental-housing unit within the city Department of Licenses and Inspections.
The unit’s mission would be to ensure that property owners had the required licenses and permits. In the event of code violations, the provisions would require that rental-property owners submit mailing addresses, since some have been difficult to track down when issues arose in the past.
"They don’t know what’s going on in their properties," Krajewski said of unreachable landlords.
In practice, however, the strategy hasn’t had a chance to work. Krajewski said she has since realized that L&I — which had 32,931 rental-housing licenses on record citywide, according to figures compiled in January — does not have the resources to investigate every property for compliance.
Her office is exploring the possibility that agencies like the federal Internal Revenue Service or the state Department of Banking could provide information to aid investigations, such as whether property owners may have lied on banking mortgage applications about living in their properties or failed to mention rental income on their tax returns, she explained.
Krajewski’s office said an investigator at the state banking department is examining possible mortgage fraud cases in the city. About 70 addresses in the lower Northeast’s 19135, 19136 and 19149 ZIP codes have been submitted by the city for inspection, she said, though an update on the investigation was unavailable.
The only records available on the number of rental properties in the Northeast are from the 2000 census. However, statistics from the University of Pennsylvania’s Neighborhood Information System show increases in L&I code-violation properties in some areas. Between 2000 and 2003, the percentage of properties in violation in most Northeast ZIP codes stayed below 10 percent. However, the percentage of properties with code violations in the 19124 area, which includes such neighborhoods as Frankford, Summerdale and Northwood, increased by almost 3 percent during the period, from 12 percent in 2000 to 15 percent in 2003.
The 19124 area is already plagued by quality-of-life issues, and according to Realtor Chris Artur, a key observer of housing trends in the lower Northeast, they might be affecting property values.
Artur contends that property values in the lower Northeast have dropped as much as 10 percent since last year. He has witnessed a trend of more transactions involving investors who convert their properties to rental locations.
"There are not as many class-A tenants to match the rentals. You’re getting people just to fill up the houses. People are taking risks on tenants," Artur said.
Castor Gardens resident Scott Ascah, 34, tends to agree. Last month, he watched as a burglary on the 7000 block of Kindred St. required assistance from a police SWAT team. In previous weeks, three homicides had occurred in the community.
Recent crime trends, and his feeling that landlords are letting "anybody" move into nearby homes available for rent, inspired Ascah to sell his house, he said. He is moving later this month.
"There are for-sale signs everywhere because of these people," he said, referring to some neighborhood residents who seem indifferent to property upkeep.
Artur understands Ascah’s reaction, but he also cautions against impulsive sale decisions.
"You have so much violence in the last year that’s scaring the hell out of people," Artur said, referring to crime in the city. "If people panic on the sale end, they’re going to sell it to more renters."
Artur also noted, though, that real-estate investors can’t be entirely banished, especially if they prove to be law-abiding and seek tenants who aren’t likely to be a source of constant headaches. The alternative, he fears, can be properties that move slowly on the market.
"If we stop investors," Artur said, "we’re going to be left with more vacant properties."
Residents might find some relief from a bill introduced in January by former City Councilman Rick Mariano. The measure, which becomes effective next month, will require approval of what is called a certificate of rental suitability before a property can be leased. Only property owners with up-to-date licenses, no outstanding code violations and full confidence that their properties are free from defects would gain approval of a certificate.
Originally, the bill required L&I to inspect each property, but the city agency said it lacked the inspectors for such an undertaking. As the Times went to press this week, L&I spokeswoman Gail Johns had little additional information on the new provision, other than that officials were "in the process of doing revisions" to it.
The rental-suitability legislation pleased members of the Tenant Union Representative Network, a city organization focused on defending the rights and interests of tenants and homeless people. Executive director Phil Lord believes that more property owners have been violating the city’s housing codes.
"It’s not perfect," he said of the new legislation, "but it’s a step in the right direction."
Artur’s one reservation about it is whether some property owners could be hindered by a slowdown of an already-stunted process for license applications and approvals.
"I don’t know who benefits if everything is slowed down," he said, suggesting that a possible backlog in processing applications might prompt even fewer landlords to apply for licenses.
With her task force hearings put on hold, Krajewski said residents can battle quality-of-life concerns caused by unlicensed properties by keeping their own homes in shape.
She urges residents throughout the Northeast to contact their City Council representatives to report rental properties they believe to be unlicensed or suspicious. She also advocates the city’s Community Life Improvement Program (CLIP), which can respond to property issues like high grass, trash or other eyesores. That office can be reached at 215-783-6346.
"When you start getting tenants in who let the neighborhood go, it’s up to the neighbors to handle that," Krajewski said. "You need to take part in it as well. Write it down, call it in." ••
Reporter Lauren Fritsky can be reached at 215-354-3038 or lfritsky@phillynews.com