Mayor Justin Bibb’s ‘Residents First’ law banked on signing up ‘local agents’ to keep out-of-town landlords in line. How’s it working?
More than 10,000 rental properties are represented by local agents under Cleveland’s new housing laws. But tens of thousands more may be flying under the city’s radar.
This house in Glenville is owned by a limited liability company with a mailing address in the Los Angeles area. The landlord has a local agent on file with Cleveland City Hall. Credit: Nick Castele / Signal Cleveland
Cleveland now requires landlords to have boots on the ground in the metropolitan area. That rule, part of a law the city passed last year, is meant to hold out-of-town property owners accountable for their rentals.
The boots belong to people known as “local agents” — often, property managers or real estate brokers — who have agreed to take legal responsibility for their clients’ rental properties. If maintenance problems go unfixed, and the landlord ignores code violations, city prosecutors can haul the local agent into court instead.
Landlords must list a local agent when they apply for Cleveland’s rental registry. As of mid-June, landlords who own 10,314 properties had signed up 2,433 local agents to be responsible for their rentals, according to the Department of Building & Housing.
The numbers provided by the city include properties on the rental registry and those still in the application process.
But an estimated tens of thousands of Cleveland rental properties aren’t on the city’s list. A 2020 Case Western Reserve University study put the number of rental properties in Cleveland at more than 54,000.
“We all know and believe that there is a shadow inventory of rentals that have never hit our rental registry,” said Sally Martin O’Toole, the city’s director of building and housing.
Those numbers offer a snapshot of Cleveland’s progress enforcing a key provision in its new housing laws, dubbed “Residents First” by Mayor Justin Bibb’s administration. Bibb has used strong language in pitching his solution to neighbors’ struggles with unresponsive and faraway landlords.
As City Hall tries to fulfill that pledge, it has faced resistance and reluctance from the real estate industry. Property managers and brokers told Signal Cleveland that they are leery about taking legal responsibility for rentals that they don’t own.
I didn’t expect it to be easy at all.”
Building & Housing Director Sally Martin O’Toole on enforcing Cleveland’s new housing laws
A group of landlords sued the City of Cleveland in federal court this March, arguing that Residents First violates property owners’ contracts and constitutional rights. The city has asked the court to dismiss the case, which is ongoing.
Meanwhile, Cleveland is trying to register more of that “shadow inventory” of rental properties flying under City Hall’s registry and radar.
Despite — or perhaps because of — these headwinds, O’Toole said the rollout of the new law has gone as she expected.
“I didn’t expect it to be easy at all,” she said. “I’m going to say that people are taking notice. They’re trying to do what they can. A lot of them are confused. We’re taking a lot of time to help them. We knew that it was going to be labor-intensive and time-consuming.”
The passage of Residents First caught some real estate brokers by surprise, according to Drew Gaebelein, the president of the Akron Cleveland Association of Realtors. The association opposed the legislation when it came up for council hearings, saying it would harm a real estate market still in economic recovery.
“They called us, trying to say how could this possibly be true?” Gaebelein said, describing members’ reactions to the law. “We don’t have any official reporting on this or official word on this, but we do suspect that there are companies out there that are skirting their way around this, not complying with it. Obviously, they’re not calling us and telling us that.”
Enforcing housing laws under ‘Residents First’
Cleveland’s law requires all landlords to have a local agent based in Cuyahoga County. If the owner is a person who lives in Cuyahoga or the surrounding counties, they may simply list themselves as the local agent. Cleveland landlords based outside of that area must find someone local to represent them as an agent.
When people sign up as local agents, they’re taking a risk. If their landlord clients ignore code violations, the local agent could pay for it.
As of June 11, Cleveland had not prosecuted a local agent for violations at a property the agent represents, O’Toole said. But that could change if landlords ignore the citations they receive from City Hall. Prosecuting a local agent is a “last resort,” after the landlord fails to show up in court, she said.
“Where we have, let’s say, an absentee owner, somebody that is completely unreachable who has ignored notices, now we start going after the local agent because we’re not getting anywhere with the owner,” she said. “We’ll always try first to get to the owner.”
By City Hall’s own estimates, the proportion of landlords who don’t respond to prosecutions could be high. Over the last 18 months, only an estimated 19% of defendants facing charges for code violations attended their first court hearings known as arraignments, according to chief housing code prosecutor David Roberts.
That figure illustrates the challenge that Cleveland faces in enforcing its housing laws through the courts. Another legal option, bringing civil lawsuits against landlords for maintenance problems, can be time consuming. The city’s lawsuit against a Shaker Square-area apartment building owner is set to go to trial in August, nearly two and a half years after the case was filed.
Thanks to Residents First, Cleveland can also hit property owners with civil tickets that carry $200 fines. If the tickets go unpaid, the city and county add the fine to the property’s tax bill.
This year, the city sent tickets to 277 property owners for failing to obtain certificates that their properties are safe from lead paint. As of June, only 33 had paid their fines.
If Cleveland fines or charges local agents, the agents have a way to recoup their losses. Residents First gives agents an avenue for suing landlords over fines they accrue.
We do suspect that there are companies out there that are skirting their way around this, not complying with it.
Drew Gaebelein, the president of the Akron Cleveland Association of Realtors, on Cleveland’s new local agent requirement for landlords
In City Hall’s view, tension between local agents and property owners is a good thing. Landlords need local agents, but local agents won’t want to represent absentee landlords. Bad landlords will have to shape up in order to get a local agent to sign on with them, O’Toole said.
“We want to make sure that they are not overly on the hook for somebody who is a terrible owner,” she said of local agents. “But terrible owners need to be put on notice that they need to up their game so that they can, in fact, get a local agent on board to handle their properties in good conscience.”
Some property managers have decided not to become local agents because of the legal liabilities involved. Gaebelein, the president of the realtors’ association, said there’s also fear among property managers that their insurance costs will go up.
Gaebelein pointed to the provision of Residents First spelling out when the city could take a local agent to court. The law says the city will “make a good faith effort” to go after the property owner alone, but has “sole discretion” to hold a local agent responsible for code violations.
“It continues on to say it is at the city’s discretion where they could essentially prosecute an agent in charge for issues with a home that they don’t own,” he said.
Mayor Justin Bibb announces a new survey of Cleveland housing in 2022. Credit: Nick Castele / Signal Cleveland
Shining a light on the ‘shadow inventory’ of Cleveland rentals
Smaller rentals make up the bulk of the properties not on Cleveland’s rental registry, according to Case Western Reserve University professor Rob Fischer. He coauthored the study estimating that there were more than 54,000 rentals in the city.
“Owners of larger properties are more successful” at complying with the city’s paperwork rules, he wrote in an email to Signal Cleveland. By contrast, the “fugitive properties” not on City Hall’s registry are largely smaller rentals of just one or two units, he wrote.
How will City Hall track down landlords who don’t sign up for the rental registry?
O’Toole said her department is sharing information with the Cuyahoga Metropolitan Housing Authority, which helps to cover tenants’ rent through the federal Housing Choice Voucher program. Many people refer to the program as Section 8.
There are more than 7,000 rental units in Cleveland covered by Housing Choice vouchers, according to CMHA officials. O’Toole doesn’t know the exact number but said “thousands” of those property owners could be missing from the registry.
CMHA already reminds its voucher landlords in Cleveland that they must follow the city’s housing laws, according to Dorivette Nolan, the housing authority’s chief of policy, planning and voucher administration. But soon, CMHA will require landlords to sign up for Cleveland’s rental registry before being approved for vouchers, she said.
Another avenue for finding unregistered rentals is to search for them in Cuyahoga County property records. That can be “tricky,” O’Toole acknowledged. But City Hall can look for clues. For instance, properties of four or more units owned by limited liability companies are likely rentals, she said.
What about landlords who skirt Residents First rules?
If a property owner ignores the city’s rental registry, code violations and court cases, there’s another option left for local governments: foreclosure.
O’Toole pointed to civil tickets as a key part in that process. In an email, she called the tickets “the best hope we have to drive better enforcement in a climate with a growing number of out of state investors.”
Unpaid tickets from the city go onto a property’s tax bill. When enough unpaid tax debts pile up, Cuyahoga County could move to foreclose and sell the property to a new buyer. That can be a months-long process, however, and sheriff’s sales don’t guarantee that a property will end up in better hands.
“None of this is perfect, but it’s better than only having criminal enforcement tools,” O’Toole wrote.
She offered an anecdote to show how tickets could push a landlord to compliance.
“One landlord showed up last week with a stack of civil tickets for multiple properties that hadn’t been registered for years — making sure he got them all registered,” she wrote. “A good outcome.”
Government Reporter
I follow how decisions made at Cleveland City Hall and Cuyahoga County headquarters ripple into the neighborhoods. I keep an eye on the power brokers and political organizers who shape our government. I am a graduate of the Medill School of Journalism at Northwestern University and have covered politics and government in Northeast Ohio since 2012.
