Periodic rental inspection programs are a must for every city

If you had to guess, what percentage of cities do you think have successfully implemented periodic residential rental housing inspection programs? You might be guessing somewhere in the range of 50 percent to 60 percent, but it is probably closer to 10 percent. And while it is typically much higher for large cities (populations more than 500,000), such a low percentage puts into perspective the strides that many communities still must go through to ensure safe, healthy housing for their residents.

My previous and current work experience has provided me with a clear picture of the current state of periodic rental inspections and showed me the opportunities and challenges of developing this kind of program.

Throughout it all, I have observed first-hand what it takes for a periodic residential rental housing inspection program to succeed. And in that work, I have specifically noted the substantial impact an ineffective program can have on the most vulnerable people in our communities. From substandard living conditions to lifelong health concerns, when rental properties are not maintained, it’s the tenants who suffer the most.

Ad hoc vs. Periodic: Challenging the current inspection process
Most cities in the United States are not conducting residential rental housing inspections as regularly as they should be. Ad hoc inspections, or inspections made on the premise of a complaint or referral, are not adequate to ensure all properties and buildings meet required minimum life safety codes.

Periodic residential rental housing inspection programs specifically address the issues that often lead to substandard conditions. This type of inspection program regularly examines all residential rental properties, buildings and the interior of units for code compliance based on pre-defined intervals.

By statute, property owners have always been legally responsible for maintaining their properties in compliance with applicable codes and laws. Periodic inspection programs help to ensure that all property owners are keeping up with those responsibilities.

The argument could be made that ad hoc or complaint-based inspections allow cities to focus on the issues tenants care about and have complained about. However, this perspective has proven to fall short, ignoring critical gaps which, when not addressed, have the potential to create serious health and safety concerns.

1. Not every tenant is willing to make a complaint. The simple fact is tenants may not be willing to risk the perceived landlord retaliation for making a complaint to the city. Putting the onus on individual tenants means serious health and safety issues may go unnoticed, unreported and unrepaired.
2. Although ad hoc inspections address the specific problem at hand, that narrow viewpoint means the larger, underlying issue is missed entirely in many cases. For example, one tenant complains about a mold issue in their unit. Which, when inspected, is determined to be caused by an old and dilapidated plumbing system. The problem is addressed, and repairs are made for that specific unit. But what about the remaining tenants living in that building? Could the argument not be made that a more generalized inspection is warranted, possibly resulting in the need to address the entire plumbing system causing mold in multiple units?
3. When a residence is not properly maintained, it is almost too easy for minor issues to develop into much larger ones. Without periodic inspections, disrepair is an inevitability.

Looking to the City of Los Angeles, other communities can see the clear advantages of such initiatives. Launched in 1998, Los Angeles’s Systematic Code Enforcement Program (SCEP) became an award-winning inspection program in 2005 for its impact on the city. In less than seven years, the program resulted in the correction of more than 1.5 million habitability violations and an estimated $1.3 billion re-investment in the housing stock by property owners. Having implemented and worked through the initial hurdles of their program, Los Angeles acts as just one example of what to expect when starting a program—and how to ensure this type of program is beneficial for every party involved.

Starting a new periodic inspection program
With such obvious benefits as improved health and safety of tenants, enablement of property owners to keep their properties compliant with code through routine maintenance, and preservation of property values, you might be wondering why more cities haven’t jumped on the bandwagon.

The short answer: Timing and a lack of modern technology. The long answer: From my experience, it’s a little more complicated.

The inspection process involves multiple stakeholders, including the tenants, property owners/housing providers, and government agencies/inspectors. There is an apparent lack of understanding among all affected when it comes to how and where to start, what is involved in the program, and how these types of programs benefit the community.

Debunking common misconceptions
For a wider adoption of periodic inspections, there must be a focus on adopting proven methods; and an understanding of the mechanics and processes that create and run periodic inspection programs. Identifying where there are holes in the knowledge base and filling in those areas with informed responses will help to alleviate tension and improve support.

Who is paying for this?
Cost is a huge factor when it comes to these types of programs. As we will dig into later in the article, a cost recovery mechanism is essential to running a successful program. Typically, housing programs recover their costs by charging an annual fee to the property owners. Such fees may result in pushback from either the property owners or the tenants. Making it essential to weigh the costs vs. the value of periodic inspection programs.

Housing providers are generally allowed to pass the inspection costs through to the tenants. However, property owners are typically restricted from directly passing capital, repair and maintenance costs to tenants. Typically, tenants will see a 12-to-1 return in their favor. A Los Angeles Housing Department study concluded that for every dollar of increased rent, the tenant was receiving $12 invested by the housing provider into the property. And for the property owner? Consistent maintenance is cheaper than major repairs. By keeping up with annual property maintenance, property owners avoid more costly repairs down the road.

How long does it take to get started?
It all begins with the adoption of a periodic rental housing inspection program ordinance. Communities may adopt an ordinance at any time. In fact, the sooner the better. Housing agencies can start by using proven technology and building out their city’s property inventory with a mandatory rental registry.

Since property owners pay one-fourth of the program fee each year (in a four-year cycle), the housing agency can begin billing the properties before hiring inspection staff. This helps to ensure the program is self-funded from the start.

The first inspection cycle will most likely result in higher-than-normal violations that need to be addressed. Because of this, a transparent first inspection cycle policy focused specifically on life safety violations is highly recommended, leaving the less significant violations for cycle two. Having modern field inspection technology will allow the trained Inspector to move efficiently and productively through cycle one.

TIP: Property owners will need to rely on the property’s financial equity to secure resources for these repairs. Low-interest rates and a growing economy will help property owners afford repairs and make the process smoother.

Will there be pushback?
Naturally, some pushback is to be expected. Housing providers are in business and provide a service. Tenants pay rent and benefit from that service. Local governments provide oversight to protect the rights and regulate the responsibilities of housing providers and tenants. Rental housing inspections are a form of consumer protection in many ways, and most housing providers understand this.

Defining the benefits that both the tenant and the landlord can expect from these inspections will help to alleviate concerns and ensure active engagement once the program is running.

As a bonus, cities starting their programs now benefit from the effort of their predecessors. Many of the hurdles that cities like Los Angeles faced as they started their inspection program have been solved and no longer present a challenge.

The components of a successful program
A successful program comes down to three key components. Without one or more of these components, cities and communities may struggle to fully realize the potential of periodic rental inspection programs.

1. Rental registry: Mandating housing providers/property owners to register their properties with the city has proven critical to achieving a successful modern program. By creating a reliable data pool of all multi-family/single-family rental residences, the city can effectively manage its housing inventory. Without a rental registry, cities will struggle to maintain an accurate and detailed picture of the rental housing inventory, including the property ownership information.
2. Periodic inspection ordinance: This will govern the mechanics of the program, dictating things like when an inspector can come to a residence, how often, under what level of notification, the inspection process, and what happens if someone fails to comply. Discover the various rent-related ordinances of other jurisdictions here.
3. Cost recovery mechanism: To support a program such as this, you need funds. Without a cost recovery mechanism, the program will have to compete for funds with other priorities, making it harder to get it off the ground. Implementing a cost recovery mechanism will fund your program with the necessary resources needed for startup and maintenance.

Efficiency made possible: The technology factor
If cities hope to run an efficient and effective inspection program, manual operations and processes are not an option. Between the obvious needs like scheduling and inspecting, and the back-end processes such as maintaining and automatically refreshing the vast amounts of data, there just isn’t enough time in the day to manage everything by hand. Luckily, the technology exists to support these efforts. You just have to find the right technology to fit your initiative.

While capabilities will fluctuate based on your technology solution choice, some examples of how technology can support your periodic inspection program are:

• A centralized rental registry that consists of an accurate database of rental properties with parcel and unit details that are viewable on interactive maps. Note, the property inventory and the ownership data must be refreshed continually or at least annually.
• A robust, adaptable mobile inspection app streamlining the entire process with checklist-based inspections, accurate real-time data, and the capability to reschedule or issue citations and notices.
• Automated digital “Code Book” functions.
• Workflow automation to ensure processes are optimized.
• Real-time analytics and reporting, tracking progress on all inspections and code enforcement efforts.
• Built-in automated cost recovery functions.

It is no longer enough for cities to simply be reactive with their inspection programs. Prioritizing the health and safety of residential rental properties is a proactive endeavor that demands the widespread adoption of periodic residential rental housing inspection programs.

Scott McGill is a business development, subject matter expert at 3Di Systems, a government software company. McGill is an experienced housing and inspection subject matter expert, leveraging a career of more than 30 years with a large U.S. city to offer critical insight into solutions that best serve communities and their citizens. Prior to his work at 3Di, McGill spent 15 years developing and managing a complex, award-winning periodic rental housing inspection program, bringing necessary efficiency to their processes to improve the experience for all parties.