Clearfield Re-Zoning Big Win for Landlords Not in Clearfield

Clearfield city is again in the news. The city has decided to rezone a large portion of its geography to only allow for single family residences. On top of that, grandfather clauses only allow for units provable prior to 1979.

According to the city's data, almost half of the city is rental property.

This rezone change is huge. Its going to wipe out property value for non-conforming multi-units. It may pose a logistical problem for owners who got financing for multi-unit housing but now have a single family use in the property. Market conditions are such that refinancing to better rates is difficult for landlords already. Add to that the decline in value of the property and now you have a major problem for landlords. Lenders may also have some issues since their collateral is now worth significantly less.

I have several thoughts on this decision by the city:

It is a success for Clearfield city. I have to give them credit for having the guts to institute a zoning policy that will address significant quality of life issues that are coming down the road due to the high percentage of rentals. In general terms, quality of life in a community tends to go down when the percentage of rentals is too high. The logic is that nobody has ownership in the community so nobody cares for it or about it.

On the flip side, this is a defeat and possible disaster for some landlords. Having the use of your property arbitrarily restricted by government is never fun. Some landlords may be put into financial hardship because of this rezoning. It will be interesting to see how many units were created and being used after 1979. I anticipate foreclosures as former landlords walk away from properties that no longer make sense to own. Negative cash flow and negative equity are tough positions to justify. Banks will take ownership, eat the loss in value, and resale the property at a price that makes sense for single-family home use.

This ruling is a big win for owners of legitimate rental property in Weber and Davis county. As tenants vacate the now un-rentable units in Clearfield, they will be seeking housing elsewhere. Clearfield just cut the supply of available rentals. Demand is the same. Look for higher rents because of it.