Danene Sorace

Lancaster Mayor Danene Sorace talks the the LNP Editorial Board in the LNP Studio Tuesday, Jan. 22, 2019.

Last year when I came into office, a priority was to look at how to move the needle on rental properties that were not being maintained. 

If you’ve been following headlines, you know these efforts have resulted in 30-plus properties being shut down through focused code enforcement efforts or a court decision that turned properties over to the city — a kind of receivership to address chronic maintenance issues. Half of these properties are now on track to become owned and occupied by low- to moderate-income families. For some of our city blocks, this will be a game changer. Not only have tenants dealt with substandard and unsafe conditions, but neighbors to these properties have had to deal with their poor condition.

We’ve also been working at creating a system for inspections that is more responsive to problem properties. Currently, the City of Lancaster inspects 14,820 rental units every four years. Four years is too long, especially for properties that have been neglected or minimally maintained for years, if not decades, already. The city is currently compiling criteria — e.g., history of code violations, past due bills, etc. — and considering a two-, four- and six-year cycle of inspections.

In the midst of this process, we’ve been looking at a variety of housing/rental data fueled by a new data warehousing system called BuildingBlocks that was deployed internally last fall and now available to the public on our website, www.cityoflancasterpa.com/government/open-data. Housing costs in Lancaster, and nationally, have risen faster than incomes. Combined with a shortage of housing, the United States is in a full-blown housing crisis, with many families paying more than 30% of their income for housing. In Lancaster city over half of occupied rental units (53%) are housing cost burdened, in comparison to 22% of homeowners (American Community Survey 5-year estimate, 2013-17).

I wanted to know if rents were comparable across the city. The short answer is they are. According to the aforementioned American Community Survey 5-year estimate, the median gross rent for a two-bedroom apartment across the city’s census tracts is between $769 and $996. Right off the bat, we see this variation of a little over $200 doesn’t line up with the city’s variation in median income, which ranges between $23,371 to $53,912, a difference of over $30,000.

Knowing that rent is about the same citywide led us to another question: What is the degree to which renters in the City of Lancaster are overcharged relative to the market value of housing?

Recently, Matthew Desmond and Nathan Wilmers considered this question in the context of Milwaukee, Wisconsin. They found that landlords in poorer areas of Milwaukee derived more profit from their rents.

The same is true in Lancaster.

Looking at the residential sale average compared to the per month median gross rent by census tract, we found that in the poorest areas of the city — the Southeast and Southwest — renters pay 9% or more of the total sale price of the property annually.

There are three factors that explain how landlords in the Southeast and Southwest are deriving profits at a significantly higher rate: sale price, property taxes and overall lack of investment.


The three factors

— Sale price.

The county’s assessment office provided us with data on city property sales from 2005 until today. We took a look at property sales across the city’s census tracts, and the residential sale average is lowest in the Southeast and Southwest. (For a visual comparison of median gross rent versus average residential sale by census tract and other graphic representations of the data presented here, go to www.cityoflancasterpa.com/rents.)

— Property taxes.

The assessed value of property is intended to correspond to the market value of a property. While 40% of the city saw its assessed values increase as part of the county’s reassessment in 2018, 60% did not. In fact, some 2,000 property owners saw a 25% reduction in their property taxes after reassessment — the majority of these in the Southwest.

— Lack of investment.

If you spend any time walking through the neighborhoods of our city, it is also abundantly clear that properties in the Southeast and Southwest — of which the majority are rentals — are not as well-maintained. To better understand this, we took a look at housing violations over the same period, as well as building permits, as a proxy for rental housing investment by property owners. The total count of code violations is highest in the Southwest, while most building permits are in the Northwest.


Conclusions

Putting it all together, some investors in the South of the city are achieving a faster rate of return on their investment, paying less in property taxes and investing less in property maintenance — all while charging the same rents as other areas of the city. Certainly, it is true there are landlords who are bucking this trend, but they are clearly the exception, not the rule.

As mayor, when I look at this data, I see the legacy of red-lining and the cycle of disinvestment that continues to perpetuate poor housing conditions and rent-burdened families. I am reminded of the 2009 Franklin & Marshall College study that found $19 million annually leaves the Southeast alone in the form of rents paid to owners in ZIP codes outside Lancaster city. I am also reminded how critical our property maintenance code, rental licensing and inspection processes have been over the last 10 years. Without these important tools and the dedicated city staff that oversee these functions, we’d be much farther behind in maintaining our city’s housing infrastructure.

Beyond the data, we are talking about people. Our neighbors. Neighbors who are living in homes that — should I hazard to guess — many of the landlords themselves would not live in. The city doesn’t have any legal tools to set rents and, at this moment, it is all about what the market will bear.

There are also legal limitations to what we can require in terms of property maintenance. Given the limited supply and high demand, it is understandable that landlords are taking advantage of the market to maximize profits. I just don’t think it is moral.

Danene Sorace has been the mayor of the City of Lancaster since January 2018. Susannah Bartlett, community development administrator, and Juliana Ryan, Franklin & Marshall intern, contributed research to this op-ed.

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