RHLS Senior Staff Attorney, Bob Damewood, worked with the Allegheny County Financialization of Housing Incubator to research best practices and to draft public comments to the Pittsburgh Department of Permits, Licenses and Inspections (PLI) regarding investor ownership of rental housing. Since the 2008 financial crisis, investment corporations and private equity firms have become increasingly active in America’s rental housing market.
Pittsburgh is no exception – it is estimated that 25% of all 1-4 unit home sales in Pittsburgh are being purchased by investors, and investment companies have also been active in the city’s multifamily market. Institutional investors tend to operate under a business model that maximizes short-term returns by increasing rents and keeping repairs to a minimum. This business model harms tenants and can leave communities with a deteriorating housing stock. With Attorney Damewood’s assistance, the Financialization of Housing Incubator urged PLI to collect data through its rental registration program that will help policymakers understand the extent and impact of investor ownership of the city’s rental housing.
Below are the comments from RHLS. We hope that you will read and share them.
The (LHOT) Financialization of Housing Incubator shares Permits, Licenses, and Inspections’ (PLI) goal of ensuring that all rental units are maintained in a safe and healthy condition. We write in support of the Draft Rules and Regulations and to recommend clarifying modifications that we believe are reasonable and necessary to achieve that goal.
- If the Owner is not a natural person, the registration should include the Pennsylvania registered office or certified registered office provider
Rule 4.B.2.iii.1 requires that, when the Owner is not a natural person, the registration must include the name, residence address and contact information for the president, general manager or other chief executive of the organization. In addition to that information, the Rule should require the Owner’s Pennsylvania registered office or certified registered office provider. Every organization that operates a rental property within the Commonwealth is required to have a registered office or certified registered office provider on file with the Pennsylvania Department of State. Requiring applicants to provide that information will ensure that PLI has the proper address for service of civil or criminal complaints if judicial enforcement becomes necessary.
- “Ownership interest” should be clarified
Rule 4.B.2.iii.2 requires that, when more than one person has an ownership interest, the name, address and contact information must be provided for each owner. The obvious purpose for requiring that information is to identify the people who actually own rental property, which information might otherwise be obscured through one or more layers of corporate structure. The term “ownership interest” is not defined, however, and the use of the word “owner” could cause confusion with the defined capitalized term “Owner,” which refers to the holder of legal title.
PLI should clarify the rule so that applicants know what information must be provided. We offer the following suggested language, modeled after Philadelphia’s rental licensing requirements[1]:
Rule 2 (new paragraph)
OWNERSHIP INTEREST means a legal or equitable interest in a property or business, however designated, including, but not limited to, capital stock, partnership interests, or membership interests.
Rule 4.B.2.iii.2
When the Owner is not a natural person or a publicly traded company, the required information shall be provided for each natural person who has an ownership interest in such owner or owners of the property that exceeds one or more of the following, regardless of whether the natural person has a direct ownership interest or such natural person’s ownership interest is held through one or more tiers of a corporate structure, such as parent-subsidiary structure: (a) twenty-five percent (25%) of the value of the property or (b) twenty-five percent (25%) of the value of the owner of the property. If no natural person has such an interest, the application, permit or notice shall identify the name and preferred mailing address of the five natural persons who have the largest equity interest in the property.
We are grateful for this opportunity to offer suggestions.
[1] See Philadelphia Code § 9-3901(2)(a)(.1)(.a) and § 9-3901(5)(c).