Given new city mandates, a St. Paul landlord wonders how long he’ll hold on – Twin Cities

Given new city mandates, a St. Paul landlord wonders how long he’ll hold on

St. Paul Landlord Taylor Swartwood talks about the effects of the Tenant Protection Ordinance that was passed in March while in front of his rental property in St. Paul on Thursday, August 6, 2020. Accompanying Swartwood are his daughter Charlotte, 7 years-old and Asher, 5 months-old. (John Autey / Pioneer Press)

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By FREDERICK MELO | fmelo@pioneerpress.com | Pioneer Press

August 15, 2020 at 9:34 p.m.

Taylor Swartwood says he is feeling underappreciated and under the gun. The St. Paul landlord bought a small apartment building off Rice Street a few years ago for $157,000.

The purchase price was a deal by any definition, but he says he’s shouldered his share of headaches since.

“The upstairs tenant set it on fire 10 days after closing and disappeared,” Swartwood recalled.

Swartwood prides himself on being a provider of affordable units to immigrants and the working poor — “I like to rent to people who are on the way up.” But he says he’s not sure how much longer that will be the case.

He rents a studio in the three-unit building on Albemarle Street to a friend in addiction recovery for $625 a month. A one-bedroom rents for $775. A two-bedroom with double car garage goes for $1,075.

All of that could be about to change. He’ll pay $4,500 in property taxes and special assessments in 2020, up from about $3,000 when he purchased the property in mid-2017. And next year could be worse.

The building’s estimated market value was recently reassessed by Ramsey County, rising from $169,000 to $202,000 for the purpose of calculating taxes payable in 2021.

“It only breaks even right now, so I don’t even have a maintenance budget,” said Swartwood, who owns eight properties throughout St. Paul. “I’m going to have to harm friends to feed the city come 2021.”

ST. PAUL PROTECTS OR THREATENS NOAHS?

Swartwood isn’t the only St. Paul landlord frustrated by rising property taxes, new mandates such as organized trash collection and a raft of tenant protections approved by the St. Paul City Council in July.

As a provider of modestly priced units throughout St. Paul’s low- to mixed-income neighborhoods, he sees his situation as precarious — a bellwether of sorts for how small landlords offering affordable but nonsubsidized housing may react to rising taxes and a growing slate of local regulations.

To keep pace, he could sell his units, or spruce them up and charge higher rents.

“The city gets to look like the good guys — ‘Oh, we care about the poor’ — but they’re passing along all these fees that landlords have to pass on to tenants. We get to be the bad guy,” Swartwood said. “If their intention is to help people with bad backgrounds or preserve affordable housing, they did the opposite of it. The new affordable housing will be under a bridge, and the working poor will join them.”

Housing advocates disagree with his assessment, but most everyone acknowledges that the fate of naturally occurring affordable housing, or NOAHs, is a growing concern in cities where rent pressure has been intense. Some studies have shown the Twin Cities metro area losing more affordable housing than it has been creating.

Once low-cost units are improved upon or sold to national real estate firms and converted into market-rate properties, it may be decades before they’re affordable again.

Some observers of tax trends could make some counterpoints to Swartwood’s arguments. By virtue of their age, condition and location, his properties have for years benefited from a relatively low tax burden compared with other parts of the city, and they’re only now playing catch up.

Housing values plummeted during the Great Recession, and St. Paul was especially hard hit by a foreclosure crisis. Low- to mixed-income neighborhoods such as the North End, Payne-Phalen and Frogtown have only just begun to see values climb after long periods without much growth.

In other words, the city’s poorer areas are the last to snap back to pre-recession levels and then gain value on top of it.

In response to market pressure, the city has offered incentives for landlords to keep NOAH rents low. The St. Paul City Council last year approved a citywide expansion of the state-authorized 4D tax incentive program, which offers landlords steep property tax discounts if they agree to keep units affordable for 10 years.

Council member Mitra Jalali, a lead author of the city council’s recent SAFE Housing initiative, said the pandemic is poised to worsen a housing crisis that was already underway. Tenant protections such as giving renters of affordable housing advance notice before their building is sold and converted to market-rate rents are more important than ever when vacancies are limited.

“There are market pieces in the policy that are going to matter and need to come online immediately,” Jalali said. “We have a responsibility to protect vulnerable renters in our community right now.”

TOUGH INSPECTIONS, LIMITED SECURITY DEPOSIT

Still, Swartwood has a list of concerns going forward.

He calls the city’s Department of Safety and Inspections overzealous. What one inspector might be satisfied with, the next demands further evaluation, according to Swartwood. Each inspection costs money.

“They keep re-inspecting and changing the goal posts,” he said. “It seems like it’s just to get the fees for each visit.”

Under the city’s new SAFE Housing Tenant Protections, landlords are banned from charging move-in fees that go beyond first month’s rent and a security deposit of an equal amount.

In Swartwood’s eyes, that’s a disincentive to rent to anyone with a checkered history.

“I (leased to) somebody that smashed their toilet,” he said. “How the heck do you smash your toilet?”

NO EVICTIONS, LIMITS ON LEASE NON-RENEWALS

Another new mandate under the ordinance requires landlords to provide “just cause” — or justify in writing — why they have chosen not to renew a tenant’s lease. Housing advocates call it protection from retaliation. Swartwood said it’s yet another reason to avoid tenants with limited rental history.

Choosing not to renew a lease when a tenant is the source of frequent neighborhood complaints is a better path than seeking an eviction, he said, which is costly for everyone and stays on the tenant’s record.

In late March, Gov. Tim Walz declared a temporary moratorium banning evictions for non-payment of rent during the pandemic. (A national moratorium ended July 25.) If that keeps up, Swartwood foresees landlords ultimately losing their properties.

“If you have mortgage payments, and nobody’s paying you, it’s sort of like being told to turn lead into gold,” Swartwood said. “They’re going to cause a lot of foreclosures.”

NEW VALUE ASSESSMENTS

Several of Swartwood’s eight rental properties have been hit by revaluations, increasing their estimated market value by tens of thousands of dollars seemingly overnight.

A Cook Avenue duplex in the Payne-Phalen neighborhood, which held a taxable market value of $92,000 when he bought it in 2017, was just reassessed by the county. The new taxable market value is $183,000.

That would be welcome news if he were planning to sell, but the accompanying tax burden is not easy for landlords who want to keep rents relatively low.

“If you’re a speculator, ‘Oh, hooray! It’s time to sell!’ If you’re flipping houses, this is good news,” Swartwood said. “But if you’re providing affordable housing, and providing it long term, this is terrible news.”

Over time, he’s had to hike rents at the duplex from less than $800 a month to at least $1,200, and even then he’s absorbing some tax increases through reduced profits, he said. “I try to split the bill with people,” he said.

TRASH COLLECTION

Among his lesser concerns, he said, the city’s effort to organize trash collection irked him, as he used to receive discounts by renting dumpster service for his eight properties from just two or three haulers.

Under the new city system, those discounts are gone. He’s now working with assigned haulers — “practically a different hauler for every building” — and the trash barrels that have replaced his dumpsters are both smaller and messier.

But, he said, at least the price more or less breaks even.

VOTER REGISTRATION MANDATE KNOCKED DOWN

Not all of St. Paul’s landlord mandates have survived legal scrutiny.

In March, a federal judge ruled that Minneapolis and St. Paul have no legal right to demand that landlords issue voter registration information to new tenants.

St. Paul’s “obligation to inform” ordinance was enacted in 2018, two years after that of Minneapolis. Both cities’ ordinances were successfully challenged by the Minnesota Voters Alliance.

Perhaps ironically, providing voting materials is one mandate Swartwood said he’s open to. “If they asked me to, it wouldn’t be a big thing,” he said.

NOT DRACULA

If there’s one message he’d like to impart to city officials, it’s that he’s not the bad guy. Just the opposite.

“Landlords, we’re not vampire bats. We’re not Dracula. We’re not a high-margin industry,” Swartwood said. “You have to have the patience of a saint.”

He added: “We have to wear every hat — I’m a social worker, I’m a financier, I’m a contractor. At the end of the day, if I do everything perfectly, nobody knows it, and if I screw up, everyone thinks I’m the devil.”