Government Action Effects REALTOR® Economics

The REALTOR® Association of Southwestern Illinois recently hosted their second annual ‘Economic Forecast’ breakfast. This event is designed to give members an insider’s peek at what is in store for the next year and the impact on the real estate market. This year was particularly insightful as the guest speaker was Dr. Lawrence Yun, Chief Economist for the National Association of REALTORS®.

Dr. Yun provided members national and regional economic data such as job growth, past and recent home sales, as well as trends in consumer confidence that are vital to increasing home sales. Citing a lagging GDP, low consumer confidence and slow job growth, Dr. Yun stated the economic recovery will be slow and will need help to fully get there.

What dovernment does...As a Local Government Affairs Director, I am always advocating the actual value of the Illinois Association of REALTORS®’ role in effectively advocating for or against legislation that impacts our industry. Sometimes it is difficult to get the message across that what government does directly impacts the demand for and our ability to sell properties.

I was excited when an economist like Dr. Yun made the point to discuss the impacts changing the Qualified Residential Mortgage’s (QRM) 20% down would have inhibiting first-time homebuyers, how taking away the Mortgage Interest Deduction (MID) makes owning less financially advantageous, and how not guaranteeing access to a 30-year mortgage would affect an already struggling real estate market.

After the breakfast, several members commented to me on the connection Dr. Yun made between government affairs and the economics of real estate. It was a new level of interest from some members and it reaffirmed the belief other members already had in the role government affairs plays in the industry and why it is important the Illinois Association of REALTORS® is always there advocating on behalf of Illinois REALTORS®.

Share this post with your REALTOR® constituents and learn more about the issues important to Illinois REALTORS® at www.IARActionCenter.org >

Kyle Anderson, Local Government Affairs Director, represents the REALTOR® Association of Southwestern Illinois, the Greater Gateway Association of REALTORS®, and the Egyptian Board of REALTORS®.

Crime Free Housing Ordinances

The “Crime Free” Housing initiative originated in Tempe, Arizona, and traveled to other states including Illinois. Crime Free Housing ordinances continue to grow in popularity among local officials in Illinois. The idea behind these proposals is to regulate landlords and rental housing in regard to crime prevention on the property.  Requirements such as landlord licensure and building registration are being imposed by several home rule municipalities in Illinois, but non home-rule units cannot impose such requirements. IAR local Government Affairs Directors have objected to many features of these proposals, including the attempts to regulate those who already have a real estate license. The most common provisions of these proposals include:

  • Licensure of Landlord or Property Owner
  • Registration Fee for Rental Property
  • Crime Free Housing Seminar hosted by Local Police Department
  • Inspections and Occupancy Certificates
  • Eviction Requirements

Licensure Requirements

Many communities require property owners or managers to obtain a license from the municipality before they are allowed to rent property within the community. Oftentimes, the property owner or manager is required to live “locally,” or else they may be required to name a “local agent” to serve as the responsible party of the property in case of an emergency or a reported crime on the property.

Depending on how the ordinance is drafted, there may be a conflict with the Illinois Real Estate License Law.  A municipality cannot prevent a real estate licensee from performing “licensed activities” as spelled out in the state license law.  But some towns have attempted to do just that with their own license ordinance.  If you have any questions about this type of provision in a local ordinance, contact your local Government Affairs Director.

Property Registration Fees

Registration fees are most often set at around $50.00 per unit, per year in order to fund the local Crime Fee Housing program and other operations related to regulation of rental units. This can become quite costly for large companies who manage large numbers or units.

Crime Fee Housing Seminar

Property Managers or owners are also required to complete a Crime Fee Housing seminar, hosted by the local police department prior to renting property. These seminars provide property managers with tips on tenant screening and other ways in which crime can be decreased on their properties. The Crime Free Housing Seminar is typically a 6 to 8 hour class.

Inspections and Occupancy Permits

Exterior and interior inspections of property may also be required. Local building officials often suggest exterior changes that could help to decrease crime on property including trimming bushes or adding exterior lighting.  Interior inspections may be required to determine habitability of the unit. Once a unit has passed inspection, Occupancy permits may also be required.  Most of these property maintenance requirements have existed in several municipalities in Illinois long before the more recent emphasis on crime prevention.

Evictions

Several municipalities require the use of a “crime-free” addendum to leases.  If one of the tenants commits a crime on the property, the lease is voided and the tenant may be evicted.

Municipal Inspection Programs

Municipal inspection programs continue to be proposed in communities throughout Illinois. Cities are granted inspection powers under Illinois state statute, however, there are limitations to these powers. Local Government Affairs Directors (GADs) work to ensure that the provisions in these ordinances are attentive to property rights and to the time-sensitive nature of real estate transactions. The most commonly-seen provisions in these programs are:

  • Fees
  • Property Registration or Landlord Licensure Mechanisms
  • Inspection Checklists
  • Timely Delivery of Inspection Report
  • Temporary Occupancy Permits

Fees

Municipalities cannot use inspection ordinances as a way to generate income for the community. The fees charged for a municipal inspection should cover the administrative costs with running the program, but should not create a profit for the city.

Property Registration or Landlord Licensure Mechanisms

Property registration or landlord licensure mechanisms are typically used when rental property is required to be inspected. Registrations may require the name of the tenant or landlord in addition to a contact number for each. Cities should be encouraged not to seek too much personal information from a tenant or landlord such as birthdates, license plate or social security numbers.

Inspection Checklists

Inspections can only include those items in a home that would prove to be hazardous to the health and safety of the occupant. Checklists assist the property owner in understanding what is expected of them and clearly states improvements the property may need.

Timely Delivery of Inspection Reports

Inspection reports should be submitted to the property owner within three to five working days of the inspection. A delay in receiving the inspection report could result in the loss of a tenant, or could possibly hold up the sale of a property.

Temporary Occupancy Permits

Temporary occupancy permits can be granted to an owner in the event the property does not pass inspection, but isn’t necessarily an immediate threat to the health or safety of the occupant. Temporary occupancy permits allow an occupant to inhabit the property while providing an extension of time to remedy problems.

“Zero Dollar Transfer Tax” as an Enforcement Mechanism

Some municipalities will use their home rule power to enact what has become known as a “zero dollar transfer tax.” This type of tax is not meant to generate revenue but is used as a way to ensure that the point-of-sale inspection requirements are completed–by prohibiting the transfer of the property. (If the transfer tax stamp is not issued, then the property’s transfer cannot be recorded.) IAR strongly believes that this enforcement mechanism (whether with a zero dollar transfer tax or any kind of transfer tax) is an unconstitutional violation of the property owners’ rights.

These are just a few examples of negotiations that can be made during the creation of an inspection program. There are other issues that may arise, but these items are simple to attain and help foster a streamlined inspection program that is simple for REALTORS®, homeowners and municipal governments.