Government Knows Better

Winona, Minnesota is a college town which passed an ordinance that a homeowner cannot rent his house if there are more than 30% of the houses on the block being rented. The unintended result is that now homeowners are leaving the property vacant which only makes the situation worse.

We understand the concern that having multitudes of rental houses on a block will cause the nearby properties to lose value. We also know that the municipal government has the responsibility to help prevent a decline in value if they are able. These both are  noble objectives.

The problem arises when you have an economy in free-fall, people lose jobs and have to move and must do something with the house which has become an albatross around their necks.  Can a homeowner be required to pay for two houses? Can a city prevent an individual from renting his property? Do the rights of the whole supersede the rights of the individual, in this case the homeowner? Would we want several rental houses around our own?

These are all really good questions that will have to be decided by a court. Unfortunately, we have come to a   place in this country where the rights of the individual are being undermined by the whole.  Our guess is that the Court (remember this is Minnesota) will rule with the city and that homeowners who cannot sell their homes will have no option other than to go through foreclosure.

Assuming that we right, this is a terrible solution. Foreclosed houses are even a worse drain on the surrounding properties. They usually are sold for significantly less than comparable houses which brings the entire neighborhood values down even further than having rental houses.

On the other side, at least the City will not have to administer the stock of rental houses which entail issuing permits and inspecting them. Also, city fathers can brag that they have less than 30% of their houses are rentals, even if certain streets are vacant!

Feel good solutions always end up with unintended negative consequences.

Conservative Tom

A court will consider whether homeowners have the right to rent out their property

by Katelynn McBride

January 23, 2013

Katelynn McBride is an attorney with the Institute for Justice Minnesota, which is representing Winona homeowners. The institute describes itself as the nation's only libertarian public interest law firm.

In the small college town of Winona, Minn., a court today will hear arguments on a case that could have dramatic implications for the property rights of every homeowner in Minnesota.

In 2005, Winona imposed a controversial ban on the number of homeowners who can rent out their properties. Under this rental ban, the government grants only 30 percent of homeowners on any given block a rental license. Similar rental bans are spreading throughout Minnesota: Mankato, West St. Paul and Northfield are also forbidding large percentages of property owners from renting out their homes. In 2011, West St. Paul enacted the most restrictive rental ban of all — only 10 percent of homes can receive rental licenses.

Winona's rental ban has been devastating for homeowners who move away and are unable to sell their homes because of a terrible housing market. Instead of letting the homes sit unoccupied, many homeowners want to rent out the property to help pay the mortgage. But the rental ban has plunged several Winona homeowners, like Ethan Dean, into financial trouble.

Dean purchased a simple but nice home near downtown Winona, but had to leave when he was called to go serve his country as a U.S. adviser in Afghanistan. Now, Dean's home sits empty and is about to be foreclosed on because he cannot sell or rent it out.

The right to rent is especially relevant in this tough economy, when people are re-evaluating their financial positions, being pulled to new job opportunities in different towns or deciding to move close to family for financial and emotional support. People who cannot rent out their homes face tremendous financial difficulties if they move to take advantage of new opportunities.

Homeowners have trouble selling homes that lack rental licenses because potential buyers want the ability to rent. With no ability to rent, then, the only options are to decline a great opportunity or keep paying a mortgage on an empty house. It is not just in Winona that changing situations are motivating people to rent their properties, but all around the country. Courts need to protect the right to rent so that people have the flexibility to respond to changing circumstances in their lives.

Winona says it passed the rental ban to prevent ill-behaved college kids from bothering their neighbors, but Winona can do that by using long-accepted tools such as noise ordinances and housing codes and by cracking down on nuisance crimes. Winona should also embrace what makes it so great, the university and the students, by working with them to educate them about how to be good neighbors.

Instead, Winona chose to pass an unconstitutional law. The 30-percent rule is a blunt instrument that applies to all, even to those whose renters would be well-behaved and not cause the alleged problems.

In short, instead of providing a sensible solution to a small problem, the rental ban has actually created a big problem that is harming homeowners throughout the city. Thus, common sense dictates that it should be scrapped. Indeed, because the ban unduly and unnecessarily infringes upon the basic right of homeowners to rent their property, the Minnesota Constitution demands nothing less.

If the court in Dean's case agrees and vindicates his right to rent his property, it will send a strong signal to cities and towns across the state that rental bans like Winona's are unconstitutional and must be repealed. A case from the small town of Winona could produce a big win for Minnesota homeowners.