Wednesday, September 22, 2010

RUCO Facts and Figures

Greensboro's RUCO (Rental Unit Certificate of Occupancy) ordinance was adopted by the city council in 2002. Its purpose was to reduce the number of substandard apartments in the city by requiring all rental units to be inspected in order to receive a certificate of occupancy. The ordinance also requires that a 2% sampling of apartments in the city be inspected annually. Thus RUCO is a proactive rather than a complaint-based system, although tenant or neighbor complaints can still trigger inspections.

The Triad Real Estate and Building Industry Coalition (TREBIC) and the Triad Apartment Association and the Greensboro Landlords Association opposed the ordinance, claim that it doesn't work, and are now lobbying the city council to return to a complaint-based system.

But RUCO does work, and it works very well.

In the first year of RUCO inspections, the number of substandard housing units reported in Greensboro increased dramatically, but this was not because housing was getting worse. It was because RUCO was uncovering hundreds of substandard apartments that lay hidden in the complaint-based system. The figures support the contention of the Greensboro Housing Coalition that many tenants are afraid to report problems because they fear reprisal by their landlords. But as RUCO inspections progressed throughout the city, landlords stepped up maintenance, and the number of substandard units was more than cut in half from its peak:

Even more dramatically, RUCO inspections have reduced the number of housing-related complaints by 80%:

Not surprisingly, when landlords know that the RUCO inspector might show up, they get their properties up to code without waiting for someone to complain.

Landlords also respond to complaints far more quickly under RUCO than they did under the previous ordinance. More than half of violations were not fixed even after a month under the old system. But now almost 60 percent get fixed on the same day they're reported, and nine out of ten are fixed within 30 days. That is because of the ordinance's one-two punch of fines for non-compliance and the threat of lost rental income if one's CO is revoked.

If proactive inspections are repealed in Greensboro, experience in Asheville, NC shows that the number of housing complaints will probably rise again to previous levels. Asheville enacted an ordinance similar to Greensboro's RUCO program, and under it the number of housing complaints declined steeply. But under pressure from Asheville's landlords, the ordinance was repealed, and housing complaints quickly jumped back up:

Proactive inspections also improve safety. In Asheville, after the repeal of the proactive inspection program, residential fires doubled.

One feature of the RUCO ordinance that the apartment industry especially hates is its sample inspections. They argue that it is a waste of money, and inspections should be focused on the "real problem properties" that can be identified from a visual inspection or from tenant complaints. As Marlene Sanford, president of TREBIC put it in a News & Record article, "We've spent $3 million inspecting luxury apartments."

But Marlene was not telling the truth when she said that. The total cost of RUCO over its first eight years is $2,865,682, and in that time it has uncovered thousands of substandard housing units. I doubt that those were luxury apartments, and even if they were, they obviously needed to be inspected.

So far this year, 13 percent of apartments visited during random sampling failed inspection, according to Dan Reynolds of Greensboro's inspections department. Violations occurred in all kinds of apartments in all parts of town. Eighty-one percent of the violations were related to electrical problems or smoke alarms. These problems are not visible from the outside, and even the tenants may not know about them. They would never be discovered if the apartment industry gets its way. The fact that about one in ten apartments in Greensboro have problems that jeopardize the life and safety of the tenants is apparently not a concern to TREBIC.

Landlords also complain that up to a third of violations are "caused by the tenant." But this figure includes dead smoke alarm batteries, which the apartment industry considers to be the tenant's responsibility (though for the life of me I can't figure out why). However, I doubt that saying "it was the tenant's fault" will console anyone for the loss of life or property in the case of a fire.

The hostility toward tenants that I've heard expressed at many RUCO meetings seems odd to me. You would think that tenant damage is something that professionals would have built into their business model, and at any rate it has no bearing on the landlords' responsibility to maintain their rental property. You never hear anyone in the auto rental industry claim that they shouldn't have to submit their cars to safety inspections because those darn renters just keep wrecking them.

Regulatory Capture

Though I haven't gone into detail about the history of the ordinance, it's important to note that the apartment industry has steadily chipped away at it over the years. One way they have done this is to capture its regulatory body, the RUCO board. Here is the language from the ordinance:
The board shall be composed of fifteen (15) members serving three-year terms and representative of the following: One (1) member from each of the five council districts; one (1) council member, one (1) inspections staff member from the city's engineering and inspections department; one (1) staff member from the city's housing and community development department; one (1) member from each of the following organizations or representative successor organizations having similar interests: Triad Apartment Association; Triad Real Estate & Building Industry Coalition; Greensboro Landlords Association; Greensboro Housing Coalition; Greensboro Neighborhood Congress; and two (2) citizens at large. In making appointments to the board, the city council shall make due effort to assure a fair balance between the number of members representative of landlord/owner interests and those representative of tenant/occupant interests. All members shall have one (1) vote except for city staff appointments who shall serve in an advisory capacity and be appointed by the city manager to serve at his discretion.
What that boils down to is that of the RUCO board's 13 voting members, none of them must be actual tenants, and only one of them (from the Greensboro Housing Coalition) necessarily represents tenant interests, since the Greensboro Neighborhood Congress is mostly made up of homeowners. In fact, the Congress's current representative is himself a landlord who was fined under the RUCO ordinance. But three of the members must represent the rental housing industry. According to Jordan Green of YES! Weekly, six of 11 current voting members either own rental properties or work for companies that do so. There are no tenants on the board at all.

The foxes, having taken up comfortable residence in the regulatory hen house, have finished their hors d'oeuvres, and are now hungry for the main course.


TL said...

Doggone pesky facts!

I would have expected such from a pointy-headed liberal, but good grief!

Anonymous said...

When the tenant takes the battery out of the smoke detector to repower his Ipod-the Owner has a failed inspection, the most common "electrical failure"...This is Big Brother in the worst way and the statistical evidence would give a real epidemiologist a good laugh...where are the controls, adjustments for population change etc. and validity tests? Pretty graphs do not create truth..

jimcaserta said...

It seems like you've got two identical, or near identical posts. Hopefully the system remains proactive and even leans towards becoming more so, and less captured.

J. Tasker said...

I don't get it. I have rental units, thus am a landlord. The system works great for me. I even put a copy of the certificate in every apartment screwed to the inside of a utility room door. Whenever I have an apartment needing a RUCO inspection, it's not a problem, it's free, it's extremely worthwhile. As a direct result, my tenants don't feel they need to hesitate to call when there is a problem and quick calls help me protect my investment. I figure it costs me about $100.00 to accompany an inspector. The inspection is good for five years. That works out to about 39/100ths of one per cent over the period. If I rent a unit just one month faster than average as a result, I've made back four and a half times my cost as a minimum. This RUCO program works extremely well for me as it is and it's just incomprehensible that anyone would want to change it now . . .

J. Tasker

Unknown said...

great post david , did you see the news 2 video on RUCO? Amazing

David Wharton said...

Anonymous, the violation report lists electrical problems separately from smoke alarm problems. I'll send you a copy if you're willing to reveal your identity.

Also, you can't charge an iPod with a battery.

Finally, epidemiologists study the spread of disease. Perhaps you're thinking of a demographer? At any rate, if you know one, I'm happy to share my data.