Rental Housing Quality in Bloomington, IL

1. Rental Housing Quality in Bloomington, IL Lindsey Haines

2. Research Question • 33% of housing in Bloomington is renter occupied • About 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?

3. Theory • Landlord 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

4. Economic Incentives • Maintenance costs increase with age of property • Return 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

5. Non-economic Factors • Local 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

6. West Bloomington IWU Plan Area

7. History 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

8. West Bloomington • Classified as a “Slum and Blighted Area” • Building code violations • Inadequate public infrastructure (sidewalks, sewers, etc) • Zoning violations • Vacancies and high business turnover • 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:

9. Median Household Income Minority Population

10. Hypotheses • 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.

11. Empirical 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

12. Variables Class A • Dependent Variable: Housing Quality • City of Bloomington Rental Inspection Program Index Class D

13. Variables Independent Variables

14. Data • Random sample of 300 rental properties • All 225 West side rental properties * Not including condemned properties. 11 of 26 located on West side.

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

16. Analysis • Hypothesis 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

17. Analysis • Age 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.

18. Policy 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 discrimination • Outreach to minority tenants • Prairie State Legal Services • Enforcement of proper building code

19. Works Cited American 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.