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Friday, January 9, 2009
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Recession puts pressure on rental housing here
Staff Writer A single father of two children thought he was doing pretty well raising his family in Brainerd.
He had a job he enjoyed and about 18 months ago he moved his 9-year-old daughter and a 6-year-old son into a Habitat for Humanity home in northeast Brainerd that he helped build. The no-interest mortgage he received on the home was low enough for him to make ends meet.
Then, because of the poor economy, the financial situation began to unravel for the father, who wished to remain anonymous. His work slowed down and he ended up leaving his job for a more promising job in Deerwood. The father said he was told the job would be stable for more than a year. But he was laid off after six weeks.
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Brainerd housing inspector Bill Kronstedt inspected the crawl space in a rental property Thursday in southeast Brainerd. Brainerd requires rental property to be registered with the city. Brainerd Dispatch/Steve Kohls
» Purchase reprints of this photo.
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The father had no money to make his mortgage payments and he eventually lost his home through foreclosure. The family has until Feb. 11 to move out of the house.
The father did not waste any time and sought help through the Brainerd Housing and Redevelopment Authority, which helped the family find a rental property. The father just got the keys to his new rental property this week - a duplex in southwest Brainerd.
This Brainerd father is not alone. There have been a number of layoffs at several companies in the Brainerd lakes area and the number of foreclosures continue to mount. This trend is forcing people to seek rental housing.
"It's bad, it really is," said Teresa Hettver, Brainerd HRA housing compliance specialist. "We're receiving so many applications from people who have low income or no income because of the loss of jobs or they're on unemployment or MFIP (Minnesota Family Investment Program.)
If you go
What: Crime Free Multi-Housing meeting.
When: 7 p.m. at Brainerd Police Department.
Who: Anyone welcome, especially rental property owners or managers.
Why: Panel discussion to include Bill Kronstedt, Brainerd housing inspector; Keith Bachman, Brainerd fire inspector; Mark Ostgarden, Brainerd city planner; Rick Fargo of Progressive Property Management Inc.; Teresa Hettver, Brainerd Housing and Redevelopment Authority; and Julie Batters of Brainerd Public Utilities.
For more information: Call Elizabeth Harris, crime prevention specialist with the Brainerd Police Department, at 829-2805.
Section 8 extremely low income guidelines:
Household of one, income must be $11,900 or less.
Household of two, $13,600.
Household of three, $15,300.
Household of four, $17,000.
Household of five, $18,350.
Section 8 rental property rent guidelines:
$488 for a one bedroom.
$644 for a two bedroom.
$826 for a three bedroom.
$966 for a four bedroom.
$1,110 for a five bedroom.
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"We're also seeing people who do have jobs, but they're making $7 an hour and they can't afford their place. We're seeing a lot of people going into foreclosure and several people, who can't sell their homes, are trying to rent them out to make ends meet.
"With all these factors, we've seen an increase in rental properties and it all deals with the economy and low-paying jobs."
Hettver said for the first time in 20 years the HRA is considering closing its waiting list for its Section 8 program that assists people with paying their rent. When an applicant has been approved by the HRA to receive Section 8 financing, the person then can find a rental property that meets the HRA guidelines and the Section 8 funding pays 70 percent of the applicant's monthly rent.
Brainerd HRA director Doug Grout said there currently are 600 people on the Section 8 waiting list and "it has come to a point where it's not manageable."
Grout said the Brainerd HRA Board will vote on whether to close the waiting list sometime in the near future.
The cities of Brainerd and Baxter have seen an increase in the number of rental properties. Rental property owners are required to register their property in each city and pay a registration fee. Baxter does a rental property inspection every two years and Brainerd does an inspection every three years.
Baxter Building Official Bob Baumann said the city has 90 rental properties that are registered. Two large rental properties in the city are Clearwater Estates, which has 120 rental units, and Cypress Apartments, which has 102 rental units.
With the soft housing market, Baumann said Baxter alone had 30 spec homes (homes built before sold on speculation they will sell) that became rentals in March.
Baumann said the increase in rental properties is from an increase of people renting out their homes that they're trying to sell or renting a home going into foreclosure. Baumann said people are still calling the city about registering a rental property, but the vast majority of calls has slowed down.
Bill Kronstedt, Brainerd housing inspector, said Brainerd began seeing an increase in its rental properties early last year. The city has 2,288 rental units this year and last year there were about 2,200.
Kronstedt said the number of rental units most likely is higher, but not everyone registers their property as a rental.
"We keep finding houses out there that aren't registered," said Kronstedt. "Some are owner-occupied who are renting space and they're hiding in the bushes."
However, Kronstedt said overall the number of rentals may pick up in the coming months, but the increase will not be dramatic.
Rental property managing businesses in the area have been receiving more inquiries from people asking them to help manage their rental property.
Rick Fargo, president of Progressive Property Management Inc. in Brainerd, said he had 20-30 inquiries last year from people who wanted to rent their property, but he was only able to help five or six.
"I'll only help people if they want to rent their property the right way, if they don't then I won't," said Fargo, who manages about 140 residential properties in the Brainerd area. "The others (that I didn't help) either didn't want to do it the right way or they sold their property, I don't know."
Fargo said managing rental property is like running a business and rental property owners need to be knowledgeable of all the logistics that are involved, such as the fair housing laws, state and federal rental laws, city codes, tax laws and how to deal with tenants.
Fargo said the rise in rental property should be great for his business, but unfortunately he said most of the people who want to rent lost their home, quit paying their bills and now have poor credit scores, so he can't rent to them.
"We've dropped our screening criteria to try to get people into housing," said Fargo. "We know there are hardships, but unless someone with good credit can back them up and co-sign on the lease we can't rent to them."
Susie Hoheisel, manager of Diversified Property Rentals in Brainerd, said the company manages about 250 rental properties in Brainerd, Baxter and Pillager. Hoheisel said the rental company has had about 15 inquiries in the past six months of people asking them to manage their rental property. However, Hoheisel said the company basically manages its own properties.
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