Mark Oprea
Sally Martin O'Toole, the director of Building & Housing, at a lead prosecution press conference in September. She spoke briefly about Residents First, a 50-page overhaul of housing code. "It will make the bad actors want to leave—and that's fine," she said. "We're fine with them going away."
The overall message, and the bulk of the department's motivation, seems to revolve around a clear message to "bad actor" homeowners and out-of-state investors: Get your property into shape, or get the hell out of town.
Such proposed legislation, all 50 pages of it, had been tinkered with and edited by 19 people—members of Council, city attorneys, B&H folk and five members of the Vacant & Abandoned Property Council. Its heat is best contained in its title: Residents First.
If passed in October, the code update would spell magnificent changes, Martin forewarned, to how homes are bought, transferred and managed in Cleveland, from registering all vacant properties to adding mandatory five-year inspections of parking garages and HVAC units, to adding $200 fines and forcing out-of-state owners to hire a Cleveland-based manager, a "local agent-in-charge," to deal with City Hall, if the need to do so arises.
"It's a lot, but we feel we've hit a sweet spot with what we're proposing here," Martin said during the two-hour Zoom conference. As for the local agent-in-charge rule, Martin was probably the most adamant: "It's nothing new," she added. "It's done in the suburbs. It's a game changer: We have a human being we can take to court."
"One of the hardest things is trying to track down these people," Councilman Anthony Hairston added, later in the Zoom.
Martin's excitement, a kind of careerist joy that stems from her time fighting shoddy property managers in South Euclid, may make the 50 pages of code overhaul seem like a kind of housing Magna Carta. After all, nearly half of all East Side homes, according to a 2021 survey, were sold to absentee landlords.
But, save for the city's progress battling the shady investor types, real estate agencies and housing experts see a different side to Building & Housing's proposal. A side that may, they say, hurt more smaller landlords—and the rental market in general—than the city intends.
"My first thought? It's a disaster," Ralph McGreevy, the head of the Northern Ohio Apartment Association, which represents some 200,000 units, told Scene.
McGreevy, along with the five other real estate experts interviewed for this article, believes that the strict provisions meant to punish and impede bad actors may have a stymieing affect on mom-and-pop landlords, namely those struggling to keep decent margins.
Residents First, housing experts say, may actually do more harm to "good actors"—mom and pop landlords—than intended.
The theory is that with added hoops to leap through, with more necessary inspections (which cost $325 to $375 on average in Ohio), mandatory registration, unforeseen $200 fines, court fees, et cetera, well-meaning landlords will be further deterred. Or, they say, tenants will be harmed, especially with the legislation's required Point-of-Sale inspection, which requires money for repairs go into a city-owned escrow account at a 150 percent markup.
"All that just adds to the cost of a landlord," David Sharkey, an agent at Progressive Urban Real Estate, said. "What are they going to do? They're going to up the rent! I mean, when a landlord starts paying out for some stuff, all they see is expenses."
The point-of-sale provision has obvious, at least in Martin's eyes, benefits for tenants. (It's called Residents First, after all.) Before any single home in Cleveland is sold to an owner, whether in Cleveland or Kansas City, every inch of that home has to be brought up to code—from its heating and cooling to its roofing and appliances. And it must be made lead-free.
Rents in Cleveland have ballooned six percent, according to RentCafe, in the past year. Those like Sharkey and McGreevy suggest that the predicted burden placed on both good and bad landlords will eventually trickle up to the rental behemoths, like K&D and Millennia Group.
"In other words, it will expand to include all properties—no building will sell," Christopher Smythe, president of Smythe Property Advisors on East 9th St., told Scene, regarding the "massive" point-of-sale clause. "It's a very cumbersome process that slows markets down, and hurts the transaction business. That's my fear."
An owner of 388 units of multifamily apartments, from Elyria to Tremont, Smythe, when asked about Wednesday's housing forum, wondered why he wasn't invited. As did other experts interviewed for this article.
"Where are the real estate people?" he said, allowing a laugh. "Landlords need to be involved in these decisions. This is government folk and nonprofits making decisions without the proper input."
As for Residents First, the legislation will be scrutinized by members of Council's Development, Planning & Sustainability Committee sometime in October. If passed, it would likely go into effect in 2024.
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