Rental Crisis in Seeley Lake? Through Landlords' Eyes

Editor’s Note: One of the first complaints we hear from people moving to Seeley Lake is they cannot find a place to rent. Potential renters are faced with limited options, budget constraints and lack of availability. Several renters, property managers and landlords were asked the question: Does this constitute a rental crisis in Seeley Lake?

While not all agreed, they identified problems, challenges and potential solutions from their perspective. While most of the landlords we spoke with were willing to share their name, two asked to remain anonymous. They are identified as ‘Landlord’ and ‘Homeowner.’

This three-part series will bring some of the issues raised to light and perhaps begin a community discussion.

SEELEY LAKE – There are some landlords in Seeley Lake who own and manage rentals as their primary business. Others rent out one or two properties to recover some of their mortgage payments. Most landlords interviewed have invested in rental properties elsewhere or not been able to offer more rentals in Seeley Lake because of the high cost of real estate and rising costs due to stringent building codes and increased septic regulations in Missoula County.

Don Larson and his partner Doug Hadnot have been in the rental business for around 25 years. They have 12 units in Seeley Lake including the School Lane Apartments and three trailer lots. Their lots rent for $250-$300 per month and they are on the upper end of the rentals in Seeley Lake starting at $600 for a two-bedroom, one-bath apartment.

“I think we are very good landlords. We are fair to our tenants, we keep clean units and our rents are $100 under Missoula,” said Larson. “We work really hard to keep our rents under Missoula’s.”

Larson said they have no problem renting and usually have one unit available. This last winter 30 percent of their units were vacant which was a first in 15 years. They started allowing pets this past year with a pet deposit and they haven’t had any problems.

“All units come with a working dishwasher, garbage disposal, light bulbs are in, the roof doesn’t leak, smoke detectors and carbon monoxide detectors are working. Those are requirements of the state law,” said Larson.

When Larson and Hadnot bought their lots 25 years ago, they paid $3,000 per lot. Larson estimates the lots are now worth $25,000 and the septic regulations require two lots to meet regulations.

“Once you get the building standing you are forced into the $800 to $1,000 a month rentals. Missoula County has no concept of affordable housing, in my opinion,” said Larson.

Larson and Hadnot both have additional rental properties outside of the area. They agreed 15 years ago that they were no longer going to build in Missoula County.

“It is untenable to work with Missoula County. The building codes, electrical codes, the plumbing codes the health codes are a pain in the butt and the costs are too high,” said Larson. “It’s unfortunate that we could have been investing in Seeley Lake,” said Larson.

Another landlord, who wished to remain anonymous, moved to Seeley Lake in 1998. She owns 30 properties out of state and is a licensed property manager in the state of Montana with more than 35 years of property management experience. She employs a property manager that runs a background check, a credit check, job verification check and at least two previous landlord checks including the most recent landlord for all applicants.

“The credit report gives you a crystal ball into who these people are. Your history is a predictor of who you are and how you perform,” said Landlord who said everything must match their application. “You also know where you stand if you need to sue.”

Landlord said that there is no housing available in Seeley Lake. She has seen some of the properties other landlords are renting to people and said they were uninhabitable.

“I don’t think the inadequate housing is good for the community. It is the compliance department at the county level that should be making sure people have adequate housing,” said Landlord.

She questions why people choose to move their family here without proper housing. She does not feel there are many jobs that command good wages so they are forced into sub-standard housing.

Shane Kesterke has 15 rentals in Seeley Lake including one single family home, the Wolf Ridge Apartments, trailers, duplex, tri-plex and lot rental. His smallest units are $325 per month up to $750 per month.

While Kesterke’s rentals have all been occupied the last couple of years, that has not always been the case. He does not keep a waiting list. While he does not claim to be an expert on the subject, he does not see the need for more rentals in Seeley Lake.

One homeowner, who wished to remain anonymous, started renting his home after taking a job in another town. Once people heard he was moving he had several people call and ask to rent the property that had enough acreage for horses.

“At the time we had some hope that we could cover a portion of our mortgage in Seeley and keep the home that we really enjoyed and potentially return to Seeley after retirement,” said Homeowner.

Homeowner said they used word of mouth and did not advertise their home was for rent. He rented it himself for two years to the same family who he thought would be good renters but did not take care of it and caused significant damage.

Landlord Dick Lewis has several rentals in Seeley Lake. He primarily rents quarter to half-acre trailer lots and owns the trailer court on Grizzly Drive.

“I’m 100 percent, 100 percent of the time, for the past 15 years,” said Lewis. “I have a continuous list of calls but don’t keep a list because I never know when people are going to move out.”

Based on the number of inquiries for rentals, Lewis feels he could easily rent five to 10 more lots if he had them.

Lewis’s trailer sites come with a septic and rent for $200-$250 per month. Water, garbage and snow plowing are not paid except in the trailer court. Lewis feels his prices are 20-30 percent below where he should be because many of his tenants are on limited or fixed incomes and a few have been with him for 35 years.

“I think a $200 rent is very reasonable but they have a $50-75 per month water bill, they have snow plowing, they have to deal with their garbage some way or another, they are still in it for $400-$500 per month,” said Lewis. “I hate to [raise] their price. While it is my living, I understand the impact on them. Even $10-$20 per month is a lot of money.”

When asked if he thought there was a rental crisis in Seeley Lake, Lewis replied, “I agree there is a rental crisis,” said Lewis. “Lack of selection to start with and the base that is looking for rental can’t afford the ones that are actually out there. $800 - $1,500 per month is not out of line for what they are trying to rent. But for the people living and renting in Seeley Lake that is a lot of money.”

Landlord Challenges

All of the landlords agreed the number one problems for affordable housing is the cost of real estate. Since the value of land is so high, it makes it hard to rent at an affordable rate.

“The problem with housing here is the cost of dirt in Montana is very, very pricey,” said Landlord. “The going rule of thumb is you should be getting 10 percent rent for the value of the home. That equation doesn’t work in western Montana because there is a disparity in income.”

Homeowner agrees and said that it does not make business sense to buy homes and manage them as rentals.

“Someone who is able to pay $1,000 in rent is also able to pay a mortgage,” said Homeowner. “We are losing the ability for young, working families to live there just because of the cost of housing. That isn’t getting solved. If our intent as a community is to turn it into Aspen, Bigfork or Whitefish and have service people commute in from Potomac or Greenough to serve that resort community, then we are well on our way to that. I personally don’t want to see that.”

Larson said that an active real estate market coupled with a regressive property tax system has escalated land costs. Every time real estate agents add a four to six percent commission on top of selling price, state and county tax assessors have a new, higher comparable value to value land.

Larson also credits rising building and utility costs to increased regulations. Newer, stricter codes drive up the cost of electrical, plumbing and building construction costs and the requirement that only licensed electricians or plumbers perform commercial installations drives up the cost of rental housing.

Larson said he wanted to cover the stairways on the School Apartments to keep snow off them in the winter and make them safer for tenants. He estimated it would cost around $3,000. After the building inspector gave him all the requirements, it would have cost $12,000 because it had to be engineered and built to code.

“It was inordinate. I just didn’t do it. There are health and safety [standards] and there is excess,” said Larson. “I think it is excessive in Missoula County.”

Since Seeley Lake does not have a community sewer system, it limits the size of the dwellings on lots and the number of residences per lot. The current Missoula County requirements for septics has made it nearly impossible to put in a new septic on a small lot or unaffordable to develop small lots for either trailers or multi-family units.

Lewis said he would be interested in putting in a 20-unit trailer park. However the amount of acreage required for the septic system combined with access to city water does not exist.

While the sewer could be a solution, all of the landlords see it as a challenge for rental housing.

“The sewer is a two-sided sword. If we get the sewer it would open those [smaller, downtown] properties to be developed,” said Lewis. “The cost of the sewer from the number they are talking will drive the tenants off the lots I already have.”

The final challenge the landlords agreed on was finding good renters that take pride in their rental. Kesterke defines a good renter as someone that pays their rent, does not bother the neighbors and doesn’t trash the place.

“It is incumbent on the landlord to screen and qualify their tenants carefully,” said Larson. “If he does that, there are no problems.”

Larson continued there are very specific criteria under the Montana Landlord Tenant Act of 1977 (http://leg.mt.gov/bills/mca_toc/70_24.htm) that landlords and tenants must comply with. There are also federal, state and county laws that prohibit discrimination and require certain documentation such as the lead-based paint disclaimer for all homes built before 1978.

“I think the state law is fair. It gives the landlords rights and tenants rights. Often tenants don’t understand what they can and cannot do. [That’s why] we write a very tight lease,” said Larson. “If we are not complying with state law then tenants absolutely have the right to take us in to court.”

“One of the reasons people are hesitant [to rent out their home] is because often renters don’t take care of the property like you would and there is a real liability, depreciation occurring to the property that wouldn’t otherwise occur,” said Homeowner. “It just broke our hearts to see the kind of damage that had occurred in such a short amount of time.”

Homeowner decided to sell because it was a financial burden to maintain two homes and the renters were not taking care of the property. Homeowner said that he sold it for $15,000-$18,000 less than then had been offered just two years before.

“We took that level of a hit because of the damage that occurred when we were gone,” said Homeowner. “In retrospect, we would have been better off leaving it empty for two years and then putting it on the market than collecting the rent and selling it after the depreciation occurred.”

“If they have done damage to the unit, they will pay and I evict,” said Landlord. “You have to be in business or not. I’m not a welfare company. My properties are very well taken care of. This is my 401K. If I wouldn’t live in it, my tenants wouldn’t live in it.”

Landlord Solutions

Landlords agree that the only solution to more affordable rentals is affordable property to develop and Missoula County working with property owners instead of against them when it comes to helping them develop affordable housing.

Larson suggested revisiting the tax structure and moving away from the property tax and go to sales taxes or energy taxes.

“There are so few property owners, the burden falls very heavily on the property owners and the local governments depend on the income,” said Larson.

Larson would also like to put in an RV park on his trailer lots.

“Seeley Lake could be the Arizona of the north if Missoula County would get real about their septic regulations and build really nice RV parks up here,” said Larson. “We have all the basics that RVers could want. But the septic regulations are so unreasonable and the sewer the way it is proposed will not fix it.”

Lewis suggested the state could sell off the property that they are allowed to sell.

“There are state sections around us that could be developed. If they would release the property [down by the river in Dogtown] to private ownership, people would then put a $100,000 to $200,000 home on it,” said Lewis. “Who is going to spend that kind of money on a piece of ground that you don’t know what the rent is going to be next week?”

Kesterke feels revising the Seeley Lake Land Use could reduce the limitations. “I would like to see steady, sustained growth for Seeley Lake,” said Kesterke.

Homeowner recommends if individuals are going to rent their home and they aren’t going to be in the area, to use a trusted property manager.

“It insulates the owner from the difficult conversations you may need to have, it allows oversight if the property isn’t being taken care of. At least there is someone that would recognize that,” said Homeowner.

Landlord advises tenants and landlords to know the law and hold each other to it.

“[Renters] if you are going to give someone your money, make sure your place is perfect. There should not be ‘as is.’ If there are problems, renters should call the health department and report it,” said Landlord. “Landlords should run a business. If you are in the rental property business it is a business. Know who is in your property and be able to divest yourselves personally from the business.”