The increase would generate nearly $1 million for the city to funnel into code enforcement and neighborhood revitalization efforts, but it has some landlords crying foul.
“I support higher fees, but not that high,” said Billy Daniels, who owns 11 rental houses and two duplexes.
He now pays $130 in annual fees to the city – $10 per structure, a rate established when the current rental licensing program took effect more than four years ago. Under the new plan, he would pay $240 per structure, or $3,120 a year.
He also would need a $10,000 surety bond on each property. Bond rates vary widely, but Daniels said the cheapest he found cost $200 per bond. That adds $2,600 to his annual expenses.
“We’ll have to raise our rents $40 or $50 a month to cover those extra costs,” he said. “My tenants can’t afford that. It seems to me their goal is to eliminate rental property in Tupelo.”
The goal isn’t to eliminate rental property completely but to decrease it by about 10 percent, said David Rumbarger, president and CEO of the Community Development Foundation.
CDF organized four committees of volunteer business leaders to study and develop the strategies contained in the Tupelo Neighborhood Reinvestment Plan, including the new rental licensing fee structure.
The plan is a broad $15.7 million initiative that aims to revitalize the city and grow its middle class, which has increasingly moved out to the rural and suburban areas.
Unless Tupelo reverses the trend, it stands to lose property tax revenues as families abandon neighborhoods that then convert to rental homes.
According to the CDF committee that recommended the new rental fees, cities with more than 30 percent rental dwellings have higher crime rates than the national average.
Thirty-seven percent of all occupied dwellings in Tupelo are rentals. The rate drops to 33 percent when looking at all housing, including vacant dwellings, according to the U.S. Census Bureau.
That’s still higher than the Northeast Mississippi average of 25 percent.
“There is a reason we have (so much) rental housing in Tupelo,” Rumbarger said. “And that’s because it’s a good deal here. It’s too good. We need to start charging landlords for the services the city provides, like code inspection.”
The city inspects all 5,152 rental units in the municipal limits every two years. Dwellings that pass inspection get a certificate of occupancy and can be rented to tenants. Those that don’t meet standards require repeat visits from the city until all necessary repairs are made.
When the program launched in January 2007, the city had three full-time code enforcement officers who not only inspected all units, but also performed other duties, like overseeing new building construction and cracking down on code violations.
Since then, the division has shrunk to two code-enforcement officers. And the existing rental license fees generate just a few thousand dollars a year – not nearly enough to sustain the program much less hire additional employees.
Currently, landlords pay $10 annually per rental house or duplex, $30 annually for complexes with three to 10 units, and $100 annually for larger complexes.
Now, it’s a larger plan
Development Services Director BJ Teal, whose department houses the program, had proposed a new fee structure last summer that would have charged $50 for single-dwellings, $100 for duplexes and small apartment buildings and $15 per unit in large complexes with a $3,000 cap.
She also had suggested applying higher fees to landlords who repeatedly failed code inspections while going easy on the good owners. But this week Teal said she supports the same flat fee for everyone, regardless of their property’s condition.
“This isn’t just to fund the program within our department anymore,” Teal told the Daily Journal. “This is part of the larger plan to reinvest in our city, and it’s important that we fund it.”
She did, however, recommend waiving the surety bond requirement for landlords who pass inspections and avoid code violations. Negligent rental property owners, though, must still obtain the bonds.
That means the 257-unit Presidents Gate apartment complex, which in the past has racked up numerous violations, might face anywhere from $1,000 to $20,000 in bond fees, plus $30,840 in license fees.
Even without the bonds, good landlords with multiple properties will see a sharp increase. The 228-unit Azalea Gardens pays $100 now but would shell out $27,360 under the new program.
That’s actually a good deal, said Azalea Gardens property manager Judith Lynch.
“It’s not a lot of money to ask to get approval from the city to make sure the unit is safe,” Lynch said. “That brings down our liability insurance. And $27,000 a year as opposed to a $1 million lawsuit because someone got hurt in one of our units is a lot better for us.”
Most landlords say the higher fees will mean rent increases for tenants. Without the bonds, that’s an additional $10 per month for a unit inside an apartment complex and $20 per month for a house or duplex.
Rumbarger said those hardest hit by the fees – those with fixed incomes – already are subsidized by the federal Section 8 housing program. The program pays part of their rent and will absorb the higher cost.
Those above the federal poverty line should be able to swing the higher fees, especially if they’re enjoying a safer and cleaner property thanks to city inspections, he said.
But Ward 6 Councilman Mike Bryan said the plan could backfire by driving middle-income renters into the suburbs and leaving only subsidized tenants in Tupelo.
Other council members also jumped into the debate during a work session Tuesday at City Hall. Several council members found the proposed fees too high; others justified them by citing the benefits provided.
Either way, the group wants to hold more meetings before deciding the program’s fate. Landlord Becky Ewing said she hopes she and her peers will be included in the discussions.
“The city is barreling off and they’re doing this, which is fine. Everyone needs to be held accountable and it needs to be a pretty town. I grew up here, and I care,” said Ewing, who has four rental houses and two duplexes.
“But let’s have some dialogue. Let’s have the confidence to know that, if they pass this, they’ll make sure the guy next to me whose property needs to be torn down will be inspected as equally as mine.”
Contact Emily Le Coz at (662) 678-1588 or firstname.lastname@example.org.