In an effort to contain the perceived negative effects of rental properties on area home values, several Minnesota cities are planning to limit the number of rental properties permitted on each city block[1]. Not surprisingly, would-be landlords and homeowners hoping to generate some rental income out of their homes are furious, but city officials fear that when the GSEs “start dumping” properties in 2012 in the form of “bundles” sold to investors that too many rentals will be allowed to sit vacant and run down, thereby dragging property values down with them. For example, West St. Paul mayor John Zanmiller warns that too many rentals could drag down everyone’s property values, and says that they only way to “ensure that there are not huge clusters of rentals popping up in one particular block or…area” is to put a limit on rental volumes before it becomes an issue. Zanmiller supports an ordinance that will allow no more than 10 percent of properties on any block to be rentals and that would be lifted once the city gets “over the hump of the housing crisis.”

Not surprisingly, many homeowners in the area are furious and point out that they may lose their homes entirely if they cannot rent them out. Many are suing or threatening to sue West St. Paul and other Minnesota cities enacting these laws. Several college towns in the state like Mankato and Winona already have ordinances limiting rentals in place, but these cities’ laws are also under fire as desperate homeowners seek to rent out their properties instead of losing them to foreclosure[2]. Do you think that limiting rental properties makes sense? If the law is already in effect when you purchase a property, should you be required to abide by the ordinance?

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[1] http://www.startribune.com/local/136240298.html

[2] http://www.therepublic.com/view/story/26ec8739386c45dc98f2f55dc40b40a4/MN–Rental-Limit-Ordinances/