Rental Housing Quality in Rental Housing Quality in Bloomington, ILBloomington, IL

Lindsey Haines

Research QuestionResearch Question33% of housing in Bloomington is renter occupiedAbout 40% on West Side

Key issues in West Bloomington Neighborhood Plan◦ Absentee Landlords

◦ Housing Quality

◦ Enforce the building code

What factors determine the quality of the rental housing stock in Bloomington, IL?

TheoryTheoryLandlord decisions drive property quality

What drives landlord decision-making?◦Owner-occupant, Resident, Absentee Landlord◦Number of properties owned◦ Property quality◦Neighborhood quality◦Non-economic factors

Economic IncentivesEconomic IncentivesMaintenance costs increase with age of propertyReturn to investment (Dubin 1998)

◦ Not as high in poorer quality neighborhoods

◦ Neighborhood quality creates a rent ceiling

◦ Discourages investment

◦ Self-fulfilling prophecy of neighborhood deterioration

Non-economic FactorsNon-economic FactorsLocal landlords may be more likely to correct housing

deficiencies due to a greater awareness of problems (O’Hare 1981)

Single property landlords may have more time and energy to focus on the property

‘Community pride’ as a possible explanation of local

landlord superiority (Porell 1985) ◦ Local landlords internalize some negative externalities associated

with poor quality housing because they live in the community

◦ Social responsibility

West BloomingtonWest Bloomington

IWU

Plan Area

History of West BloomingtonHistory of West Bloomington Middle-class and working class neighborhood until 1930s

Great Depression: decline in status and upkeep◦ Upwardly mobile and well established people left the neighborhood.

◦ Large houses converted into apartment buildings

◦ Although many structures were broken up into many units,

an owner typically lived in or nearby the multi-family housing units.

◦ Well into the 1960s these neighborhoods remained stable and successful.

1970s: Neighborhood Decline◦ Introduction of cheap repair materials

◦ Decline in building trades standards

◦ Structures start to deteriorate

◦ Transition from owner-occupant to absentee landlords

West BloomingtonWest Bloomington Classified as a “Slum and Blighted Area” Building code violations

Inadequate public infrastructure (sidewalks, sewers, etc)

Zoning violations

Vacancies and high business turnover

Characteristic Plan Area Whole City

Median HH Income $23,845/year $46,496/year

HS Diploma 57% 92%

Density of Single Parent Families

26% 24%

Density of Minority Population

29.5% 15%

Avg. Age of Housing Stock 110 years old 35 years old

Increased foreclosures, property disinvestment

Lack of commercial facilities (grocery stores, pharmacies, etc)

Overcrowding

High crime rate

Socioeconomic data, mapped by the 2000 Census, indicates the following:

Median Household Income Minority Population

HypothesesHypotheses

Hypothesis 1: Local landlords maintain their stock better than non-local landlords.

Hypothesis 2: Landlords owning multiple properties do not maintain their properties as well as single-property landlords.

Empirical ModelEmpirical Model Ordered probit model (based on Porell 1985)

Quality = Property + Neighborhood + Landlord

Bloomington Model

Qn= ß0 + ß1AGE+ ß2SQFTperUNIT+ ß3TYPE+ ß4HHINC +

ß5RACE+ ß6RENT + ß7LLRES + ß8LLUNITS+E

Westside Model

Qn= ß0 + ß1AGE+ ß2SQFTperUNIT+ ß3TYPE+ ß4HHINC

+ß7LLRES + ß8LLUNITS+E

VariablesVariablesDependent Variable: Housing Quality City of Bloomington Rental Inspection Program Index

Definition of Rental Property Classifications

ClassValue in Model

Definition

A 4The building is in excellent condition and has minor or no violations of applicable city codes.

B 3

The building is in good condition and has minor violations of applicable city codes and the violations do not pose an immediate threat of danger to life, health, and safety of the occupants.

C 2

The building is in sound condition and has major or minor violations of applicable city codes that do not pose an immediate threat of danger to the life, health, and safety of the occupants.

D 1The building has critical violations and is either unsafe, contains unsafe equipment, is unfit for human occupancy or is unlawful.

*Source: City of Bloomington Rental Inspection Program

Class D

Class A

VariablesVariables

Variable DefinitionExpected

SignSource

AGE Age of the structure (as of 2009) -Bloomington Assessor

SQFT Square footage per unit (as of last inspection) ?Bloomington Assessor

RACEProportion of white residents in unit’s respective block group (2000)

+ US Census

HHINCMedian household income of unit’s respective block group (2000)

+ US Census

TYPEType of unit

1 if attached, 0 if detached-

Bloomington Assessor

LLRESResidence of unit’s landlord (as of last inspection)

1 if in Bloomington-Normal, 0 if not-

Bloomington Assessor

LLUNITSNumber of properties owned in sample

1 if multiple, 0 if single-

Bloomington Assessor

Independent Variables

DataData Random sample of 300 rental properties All 225 West side rental properties

Descriptive Statistics

Variable Bloomington Westside

Quality A 69.4% 44.2%

Quality B 19.8% 36.6%

Quality C 6.0% 18.3%

Quality D 4.8% 1%*

LL Res in BN 69.8% 80.4%

LL Res out BN 30.2% 19.6%

LL Owning Single Unit 57.5% 36.2%

LL Owning Multi Units 42.5% 63.8%

Attached Unit 53.6% 44.2%

Detached Unit 46.4% 55.8%

* Not including condemned properties. 11 of 26 located on West side.

ResultsResults

Variable BBloomington BWestside

AGE -.016* -.015**

SQFT .000 .000

TYPE -.031 .484*

RACE .044* -

HHINC -6.233E-6 -

LLRES .220 .176

LLUNITS -.044 .081

Pseudo R2 .163 .065

*Significant at the .05 level ** Significant at the .001 level

AnalysisAnalysisHypothesis 1: Local landlords better

maintain their stock than non-local landlords

Hypothesis 2: Landlords owning multiple properties do not maintain their properties as well as single-property landlords

AnalysisAnalysisAge of properties negatively affects quality…follows theory

of disinvestment with property age.

“Whiteness” of block groups positively affects quality, even when controlling for household income. Indicates presence of housing discrimination.

Detached housing is significantly higher in quality for Westside…makes sense historically. Indicates that it does not violate the building code.

Policy ImplicationsPolicy Implications

Work to maintain aging housing◦ Establish the West Bloomington Revitalization Partnership as a

CHDO (Community Housing Development Organization) Non-profit can use HUD funds to purchase/rehab housing

Crackdown on housing discriminationOutreach to minority tenants

◦ Prairie State Legal Services

Enforcement of proper building code

Works CitedWorks CitedAmerican Factfinder. “Housing Indicators” United States Census. 10 Oct 2009.

<http://factfinder.census.gov/home/saff/main.html?_lang=en>.

“City of Bloomington Property Assessment” Property Database Assessor’s Office. City of Bloomington Township 10 Oct 2009. <http://www.wevaluebloomington.org>.

Clapham, D. (1992) “The Effectiveness of Housing Management” Social Policy and Administration 26(3), 209-225.

Dubin, R.A. (1998) “Maintenance Decisions of Absentee Landlords under Uncertainty” Journal of Housing Economics 7, 144-164.

Goodman, J.L. (1977) “Causes and Indicators of Housing Quality” Social Indicators Research 5, 195-210.

Porell, F.W. (1985) “One Man’s Ceiling is Another Man’s Floor: Landlord/Manager Residency and Housing Condition” Land Economics 61(2), 106-117

Registered Rental Property Class and Date of Issue City of Bloomington Rental Inspection Program. 18 Aug 2009. 10 Oct 2009. <http://www.cityblm.org/library/bs/pdfs/rpt ActiveRRCurrentClass.pdf> .

“Renters’ Handbook” (2005) Prairie State Legal Services.

Rosenthal, S.S. (2008) “Old Homes, Externalities, and Poor Neighborhoods. A Model of Urban Decline and Renewal.” Journal of Urban Economics 63, 816-840.

“West Bloomington Neighborhood Plan” (2008) West Bloomington Task Force.

“West Bloomington Plan Area and Building Conditions Report” (2008) City of Bloomington.