A Chicago City Council committee has just passed an ordinance designed
to protect tenants who live in foreclosed rental properties. Under the
ordinance, lenders that repurchase a foreclosed property at the sheriff's
sale would be required to give existing renters $12,000 in relocation
expenses per rental unit or to give those renters leases with annual rent
increases no greater than 2%.
The relocation expenses provision was added to the most recent version
of the ordinance. As expected, it has received some pushback from lenders
Mortgage lenders claim that the ordinance would make mortgages in Chicago more expensive and
would make lending in the city less attractive overall.
But then again, mortgage lenders say that about every attempt to hold them
accountable. $12,000 in relocation expenses seems rather high, but perhaps
that's the point. If keeping a paying tenant in a building is less
expensive than making that person vacate, then market forces should prevail
and we should see a decrease in post-foreclosure evictions.
It's also worth noting that most people don't fully understand
their rights as a tenant in foreclosure. If renters can rest assured that
they won't be put out on the street overnight, then they may remain
in a property instead of vacating the moment they catch wind of a foreclosure filing.
According to the
Chicago Tribune, some local realtor organizations are not too thrilled with the $12,000
provision. One of the main objections is that it will make renting more
expensive. It is hard to see how that could be the case -- the only way
this would increase the cost of renting is if new landlords choose to
evict a tenant and pay the $12,000 required under the ordinance. It's
worth noting that the ordinance would not prohibit a landlord from evicting
a tenant who is not paying.
Quite simply, the cost of relocating tenants will only be incurred at the
landlord's election -- it is not as if this is an additional tax or
fee being assessed on every rental unit in the city.
Foreclosures have presented a big problem for the State of Illinois and
the City of Chicago. Empty properties create blight and attract crime.
During 2012, vacant properties in Chicago received
seven reports of criminal activity per day. It's clear that the glut of abandoned buildings in Chicago is a major
problem -- until the financial sector can help provide a workable solution,
it should stop shooting down attempts to do just that.