Cleveland City Council on Tuesday welcomed many of the housing code changes Mayor Justin Bibb is proposing to force out-of-town investors to maintain their rental properties.
The sweeping legislation – dubbed “Residents First” by the administration – would require landlords to identify a local agent in Cuyahoga County who is legally responsible for their properties. The legal changes would also streamline the process of citing property owners for code violations.
But council gave a colder reception to Bibb’s proposal to require point-of-sale inspections when property owners sell vacant homes.
Housing advocates and Cleveland officials have been raising an alarm for years that rental investors – including many based outside Ohio or even overseas – have been scooping up houses as homeownership declines. Building and Housing Director Sally Martin O’Toole said the slate of code changes would give her department the tools to hold owners accountable for poor housing conditions.
“When investors are allowed to let properties languish, it robs communities and residents of generational wealth,” she said.
O’Toole said the city’s estimated 10,000 vacant properties have often slipped through the “net” of housing code enforcement – falling into disrepair as they passed from owner to owner.
After a point-of-sale inspection, the new owner would have six months to bring the house up to code. O’Toole said that the inspections would prevent investors from flipping vacant houses while allowing them to decline.
“Without this, you’re just rolling out the red carpet to every bottom-feeding flipper and speculator,” she said.
Council members questioned whether the department had enough staff for point-of-sale vacant property inspections. Council President Blaine Griffin said he didn’t want the inspections to become a burden for smaller owners.
“I know that this is mainly aimed at investors,” he said, “but I just hope that we don’t really inadvertently impact some of the mom-and-pops.”
Council’s Development, Planning and Sustainability Committee held an hours-long hearing on the legislation Tuesday. Another hearing is planned for next week.
Cleveland Documenter Tucker Handley has more from the Jan. 23 Development, Planning and Sustainability Committee of Cleveland City Council, including:
Responding to the rise in out-of-town property investors in Cleveland
Landlords, rather than homeowners, now make up a big share of the homebuyers on the East Side, according to figures that researcher Frank Ford shared with council. In 2021, 54% of the sales of 1-3 family homes on the East Side went to buyers who aren’t owner-occupants.
City officials argued for putting a local agent – such as a property manager – on the hook for dilapidated rentals owned by far-off investors. If out-of-town landlords ignore code violations and housing court summonses, the city could stick their local agent with the financial responsibility instead.
“We’re going to attempt to focus on the owner first,” O’Toole said. “However, when the owner is living in New Zealand, it’s very hard to get him into court.”
A local agent could then turn around and sue the property owner for the fines they paid out to the city, according to Austin Davis, a senior advisor to the mayor.
“So that owner, at the end of the day, is still going to be getting hammered,” he said, “either if it’s by us or by the local agent that they signed a contract with.”
Ward 13 Council Member Kris Harsh called the local-agent requirement the most important piece of the legislation.
“This is a sea change. This is really, really important,” he said. “For years, we’ve said only that guy in Idaho or New Zealand is actually financially responsible for the upkeep of the property, and that needs to change.”
Staffing up the Building and Housing Department
Harsh said he was concerned that a point-of-sale inspection for vacant properties would overload a department that was already trying to keep up with a large workload. Council members frequently complain to the department about distressed properties that owners aren’t fixing up.
The department’s code enforcement division was budgeted for 105 positions last year. O’Toole said she was down 18 inspectors, but that she was in the process of hiring people and hoped to add 15 more positions in this year’s budget.
O’Toole acknowledged that her department was “spread thin” trying to inspect both aging residential properties and new construction going up in the city. But the current way of doing business isn’t working, she said.
“They do the work,” she said. “The work doesn’t work, and that’s part of the problem. That’s why we’re here.”