FFM Follow Up: The High Price of Fighting City's Controversial Rental Limits

Homeowners pursue property rights case despite potential foreclosure and thousands of dollars in lost rental income  --

  Ethan Dean never gave up hope during five tours of duty as a US advisor in Iraq and Afghanistan. He kept making his mortgage payments while living halfway around the world, partly due to rent checks from a tenant staying in his house in Winona, Minnesota. Even with his mortgage under water, he continued to hold out hope—until he got back home.

Soon after Dean’s return to the states this spring, however, the rent checks stopped coming in. Not because his tenant moved out or couldn’t pay, but because Winona authorities said it’s against the law for him to have renters in his three bedroom house nearWinona State University. The city refused to renew a temporary rental license that gave Dean an exemption to Winona’s controversial ordinance that capped at 30 percent the number of home rentals per block.

“I’ve lost the house. I’m not in the same state, I can’t live in it and I can’t rent it,” Dean said from his new job in Kansas City. “I’ve tried everything humanly possible to keep that house but the city council is obviously not too concerned about their citizens.”

While Dean may be losing the battle to retain ownership of his house, he’s more determined than ever to continue the legal campaign he’s waging against the southeastern Minnesota city’s so-called “30 percent rule”. The Institute for Justice, a national civil liberties group, has sued in state court to strike down the ordinance preventing Dean and the owners of two other houses from renting their property. The crux of the case:  Renting one’s home to someone else is a fundamental property right.

“The city is playing musical chairs with property rights. Some homeowners can get rental licenses and not even use them, and others cannot get them even when they desperately need them,” said Anthony Sanders, an attorney leading the legal challenge.“The city arbitrarily picks winners and losers. It’s got to stop.”

For Ethan Dean, the rental prohibition has not only prevented him from critical cash to help make his house payments but also serves as a barrier to selling it.

“There is no doubt if I could rent the house, I could have sold It years ago. People have wanted to buy it so they could rent it out,” Dean told FFM. “Half a dozen people have expressed interest with my realtor but they can’t rent it.”

In the process of investigating the case for trial, attorneys have also uncovered evidence of incompetence in administering the rental restriction. Attorneys discovered that city authorities had lost track of an expired rental license that should have been assigned three years earlier to Holly Richard, another plaintiff. While Richard now possesses the newly minted city permit, the costly mistake made her all the more resolved to see the case through.

“I’m still part of the lawsuit because I don’t agree with the city regulations on this,” Richard said. “They can’t keep track of the permits, so I can’t see who it benefits. It doesn’t benefit the average renter or homeowner.”

A city official acknowledged the error but said no changes have been implemented to current procedures. “After we checked all the properties on the block, we found that another property did not renew their rental license in 2008 and the property wasn’t taken off the map,” said Carlos Espinoza, assistant city planner. “We just issued her a rental license as soon as we discovered that. The block in now saturated according to the 30 percent rule.”

The other plaintiffs in the case, Ted and Lauren Dzierzbicki, have been forced to let their house stand empty since their daughter graduated from Winona State University. Despite investing thousands of dollars in maintenance and improvements, they have also been unable to find a buyer without a rental license in hand.

The lack of a permit, however, hasn’t stopped Ethan Dean from tweaking city authorities one more time. The same single mother with two kids who was renting his house while he was serving abroad is living there to this day—rent free.

“She’s been staying there for free for several months only because I want someone in the house. I didn’t want to kick her out,” Dean said. “The city can’t say nobody can stay for free. They can say people can’t rent it. She’s a single mom with 2 kids, what am I going to do?”

The case will go to trial in Minnesota District Court in Winona in January, 2013.

Print        Tips or comments? Contact Tom Steward at 612-354-2192.

Stay In the Loop

Stay Up To Date

Sign up today for our
e-update to find out what is
going on in your state and
local government.

FFM Tipline

We will do our best to uncover the wasteful spending you report.