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Duluth city councilors want higher charge for rental conversion of single-family residences

Some Duluth city councilors say they want to charge landlords a much higher rate to convert single-family homes into multiple-tenant rental units.

The councilors are responding to a plan from Mayor Don Ness to charge a $1,000 one-time conversion fee for new multi-tenant rentals.

The fee would be used to help pay increased city costs that come from multi-tenant rentals, such as student housing, and to discourage casual conversions.

But Councilor Jim Stauber said he wants a conversion fee of $10,000 to $15,000. In addition to helping cover increased police calls and building inspection fees, the money would be used to stock a special fund that could bolster neighborhoods hard-hit by single-family homes turned into student rentals.

The discussion will come to a head at tonight's City Council meeting, where the mayor's plan will be offered as an alternative to the city's current ban on new rental units within 300 feet of an existing unit. The rule only covers neighborhoods near the University of Minnesota Duluth.

"I think we have the votes to raise the $1,000 conversion fee significantly. I'd like to see $10,000 or $15,000 but I'll settle for $7,500," Stauber said. "This is a one-time fee for the right to start a small business in a residential neighborhood, and that doesn't seem out of line considering the problems that come along with it."

Councilor Patrick Boyle said he has already sent a proposed amendment to the city attorney's office that would set the conversion fee at $2,500.

"It has to be enough to pay the city's increased costs that come with multi-tenant housing and, yes, to act as a deterrent to maybe slow the number of conversions," Boyle said, noting the fee would remain at $1,000 for conversions to single-family rentals.

Mayor Don Ness called a $10,000 conversion fee "simply outrageous."

"The administration is putting forward a $1,000 conversion fee, which is comparable to the fee that Minneapolis has for the same conversion," Ness said. "It ensures (enough money to conduct) an immediate and comprehensive inspection to avoid having to issue temporary licenses before an inspection can be done."

Ness has said the intent of the reforms is to prevent overcrowding on residential streets and the problems it can bring. He said that happens when a three-bedroom single-family home is turned into "a five-bedroom boarding house" where each tenant has his or her own vehicle. Ness said that can lead to serious conflicts with neighbors. Ness' plan also calls for at least one off-street parking spot for each rental bedroom.

Stauber said he'd prefer to limit the higher conversion fee to just the area now covered by the 300-foot rule.

Gary Kalligher, a landlord and member of the Duluth Association of Responsible Rentals and co-owner of Re/Max Realty, said anything near $10,000 is "ridiculous."

"Obviously they are anti-rental. No one could afford to do that. I don't see how it could possibly pay," Kalligher said. "They are really prolonging the agony of people who can't sell their homes in that protective area because of the 300-foot rule. The council is just adding to what's already been a devastating loss of property value for those people."

Ness said fees should not be intended to solve the issues of multi-tenant rental housing.

"Our rental reform addresses parking and density issues. Our increased enforcement in recent years has proven effective at reducing problematic behaviors," Ness said. "We are hopeful that both rental reform and the repeal of the 300-foot rule will both be passed on Monday (tonight)."