Landlords Investing in Tenants to Increase Property Values and Improve Communities

By Jenny Casler, Lansing and Ann Arbor Property Owner

As landlords we have an incentive to improve the condition of our communities in order to increase the return on our investment.  When people want to live, work and play in a community, property values in that community rise.

How can we impact the condition of our communities?  How can we do this as only one person, especially if we don’t live in the community?

This blog post offers some steps, tools and food for thought, and welcomes a discussion on additional thoughts to further improve the actions we can take to improve our communities.

Steps for Increasing Property Values
As a homeowner in both Ann Arbor and Lansing it is obvious to me that houses in the Ann Arbor area can sell for six times the amount of a similar house in the Lansing area.

So, what might be the issues that we can impact in order to increase the property values in the Lansing area?

I see two main factors:

  • Condition of housing stock
  • Community that people want to live, work, and play in

How can we continually maintain or improve the condition of the housing stock, and potentially increase peoples’ desire to live, work and play in our community?

Maintaining or improving the condition of housing stock

1. Screen tenants

  • Ensure that they have a reliable source of income, in order to maintain the household and their involvement in the community
  • Ask yourself, how will these tenants impact the neighborhood?  Will they contribute to the community?  Or, will they disrupt the community?

2. Incentivize the tenant to maintain a clean household and premises

  1. People have different priorities.  Not everybody prioritizes the cleanliness of their homes or premises.  However, the cleanliness of the home is a significant priority to landlords, who ultimately have to mitigate any damages caused by dirt and decay, and may also have a decline in property value related to negative externalities (e.g., trash left outdoors causing the home and neighboring homes to become undesirable places to live).
  2. The “tools” provided in the appendix can be used as needed to incentivize appropriate behaviors, such as when it will lead to a win-win scenario between the landlord and the tenant.  The “tools,” as examples, are sections from a rental lease that can enable the landlord and tenant to negotiate the desired behaviors, assign a value to those behaviors, and hold one another accountable.  The language can be adapted to fit particular situations as necessary.

3.  Maintain open communications with tenants in order to identify and address issues and opportunities, including:

  • Maintaining the status quo
  • Improving the premises, such as upgrades for energy efficiency and exterior appeal

Increasing peoples’ desire to live, work and play in the community
Surely, many factors impact peoples’ desire to live, work, and play in a community. Further, many of these factors are outside of a landlord’s hands (e.g., education, employment, and leisure opportunities).  However, we can take some actions to encourage the residents of the communities to contribute to the success of those factors.

Residents’ active involvement in education and other community activities is necessary for those factors to thrive.  The success of these factors in turn impacts the property values within the community.  In order to incentivize tenants’ involvement in these activities, for example, tenants can be given a discount on their rent for:

  • Volunteering at a:
    • School event
    • Greenhouse
    • Farmers’ Market
    • Neighborhood Center
  • Participating in government meetings (e.g., City Council meetings or master planning sessions)
  • Working or volunteering for a public-sector entity (government, school or nonprofit), which typically provides a lower take-home pay for the employee/tenant.

The example lease language in the appendix shows this incentive as a payment “in arrears.”  In other words, in this example the tenant must provide evidence that an activity was performed, such as a signed note from the event coordinator.  However, the actual implementation is up to the landlord, and can be based on a level of trust created with the tenant as well. The types of activities can be adjusted based on the circumstances in the community, given that they comply with nondiscrimination laws, etc.

In practice, I have found that having these discussions upfront with the tenants has helped create transparent expectations, including for open and positive dialogue.  The tenants see the serious interest in their livelihoods and their community.

In practice, only one tenant takes advantage of the “active involvement discount.” Nonetheless, the conversations had with tenants, other residents and other stakeholders within the community show that even a dialogue on this topic helps one another realize the impact that we can have as individuals in improving our communities. This dialogue, and the changes that we each make to our own behavior, can ultimately have a positive impact on our communities, and – for landlords – a positive return on investment.

Jenny Casler grew up in the Lansing area and now returns regularly to visit family, work on her rental properties, and look for additional rental properties.