King Urukagina would know what to do

There was once a king of Lagash in ancient Mesopotamia who restored prosperity to his realm by instituting the rule of law. Previously when merchants came to this land, they were attacked by thieves or were paid in bad coin. And so the merchants stopped coming to Lagash and foreign trade dwindled.

This king, Urukagina (ruled 2378-71 B.C.), decided to extend the same legal protections to foreign merchants as to others. The merchants again felt secure. They came back to Lagash with their merchandise, and traded; and the land again prospered.

What has this experience to do with housing in Minneapolis? While traveling merchants have discretion whether or not to trade in a country, housing stock is set upon a firm foundation. No matter how fiercely thieves or city officials pillage, these buildings aren’t going anywhere. They would appear to be sitting ducks for whatever abuse is dished out to the buildings and their owners.

But this analysis is wrong. For, even if the buildings cannot be easily moved, the investiment dollars related to them are discretionary. People simply will not invest in rental property if they feel that their investments are unsafe. Therefore, the level of crime in a city or the fact of political abuse or instability have a bearing on the city’s housing supply. Landlords who feel abused by the city may neglect to repair their properties but will, instead, walk away from their investments to avoid throwing “good money after bad”. People who could fix up dilapidated property will decline to do so. Private investors will decline to build new rental units. There will be a decline in the housing stock.

During the past ten years, city records show that the number of rental units in Minneapolis has declined by 15,000 - from approximately 90,000 units in 1990 to 75,000 in 2000. This is the fundamental fact behind the housing crisis. There is not enough supply to accommodate demand. As a result, people are sleeping in shelters or under bridges. There is a rising level of human misery.

Housing policy wonks will tell you that the reason for declining investment in rental housing is because of changes in the tax code made in 1986, or conversions of Section 8 housing to market rate housing, or the rising cost of land, etc., etc. Those who do actually provide affordable rental housing tell a different story. Like the merchants of Sumer who were attacked by thieves, private landlords in Minneapolis feel they are under attack by violent criminals, destructive tenants, neighborhood groups, lawyers, and city officials. These are the some of the same people who are going to the state for money to fix a problem which they themselves created.

With rents going through the roof, there ought to be a booming housing market. Developers ought to be constructing new units of rental housing without subsidies. Owners ought to be fixing up their units to take advantage of new opportunities for profit. But this is not happening - at least not on the scale which is needed to meet the housing crisis. Why not? Fear of punishment by city officials is a large part of the answer. Indeed, many private owners of rental property fear that their properties will be confiscated. The city will take over their buildings without paying for them.

Is the above assessment too alarmist? Consider this: The city of Minneapolis has a half dozen ways to take property away from private owners. It can revoke rental licenses, making it illegal for an apartment owner to rent to anyone. It can call in city Inspections to pepper the building with work orders until the cost of complying with the work orders becomes prohibitive.

Since there are no uniform minimum standards in the housing code, the fact of compliance is at the individual inspector’s discretion - sometimes influenced by the City Council member. The city can condemn a building for health reasons. The city and MCDA can take a property by eminent domain and pay the property owner “fair market value” - which, in one case, has been interpreted to mean $1.00 for what used to be a mansion in north Minneapolis. The city can put the building on the “249 list” and then order the building demolished - and charge the owner a 15% administrative fee.

On the state level, the building can be put out of service for a year through application of the state “nuisance law”. “Neighborhood groups”, including enterprising individual attorneys, can leaflet buildings until they find 51% of the tenants interested in being represented by them. Then they can petition courts to take over the management of the building and gain access to the owner’s checkbook. Property owners can further be hit with discrimination lawsuits in a half dozen categories and with lawsuits concerning sexual harassment of tenants.

In summary, it's dangerous to invest in rental property in Minneapolis. There is a hostile political climate toward private-sector landlords. No wonder many people are getting out of the business.

Elected city officials have the most power over this situation; and therefore, arguably, they have the most responsibility for what has happened to the housing market in Minneapolis. Blaming buildings for crime, these politicians have ruined the rental-housing market in Minneapolis. Homeless tenants, not they personally, pay the price.

The officials who have the greatest accountability for this problem are the Mayor, Sharon Sayles Belton, and the leaders of the Minneapolis City Council, Jackie Cherryhomes and Joe Biernat. These people have highly developed public-relations skills but are heartless when it comes to tearing down rental properties and consigning innocent people to sleep in the cold outdoors. As a result, it will be quite a trick, in this one-party town, to remove any of them from office in this year’s city election.

Unfortunately, King Urukagina is not running for office this year. If he were, he would know how to fix the city’s housing crisis without going to the taxpayer for funds to heal its self-inflicted wounds.

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