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'For Rent' bad sign for small Western Pa. cities

| Sunday, Jan. 26, 2014, 6:21 p.m.
Eric Felack | Valley News Dispatch
Angelo Enciso stands in front of his Victoria Avenue home in New Kensington on Tuesday, Jan. 21, 2014. Today, only seven of the 35 homes on his block are owner-occupied; the rest are rental units.
Eric Felack | Valley News Dispatch
Angelo Enciso, 71, stands on the front porch of his Victoria Avenue home in New Kensington on Tuesday, Jan. 21, 2014. Only seven of the 35 homes on his block are owner-occupied; the rest are rental units.
Eric Felack | Valley News Dispatch
Angelo Enciso walks along the 1200 block of Victoria Avenue in New Kensington near his home on Tuesday, Jan. 21, 2014. Fellow homeowners have moved out in the past three decades, leaving only seven of the 35 homes on his block owner-occupied. The rest are rental units.

Angelo Enciso has watched his New Kensington neighborhood go through many changes during the 31 years he has lived there, perhaps none so dramatic as its shift to rental units.

“We went from most of the places being occupied by their owners … then as the older people moved away, their kids sold the property off for rental units,” the 71-year-old said. He counts just seven of the 35 homes on Victoria Avenue as owner-occupied and worries how far his property value will drop as a result.

“We put a lot of money into our house,” he said. “We'd be lucky to get what we paid for it out of it.”

New Kensington and other small cities across the state are struggling to regroup and keep the bills paid as they transition from communities of older, owner-occupied homes to rental properties.

High rental numbers signal financial trouble, said Kerry Moyer, founder of the Civic Research Alliance, a Mechanicsburg-based research and strategic planning organization.

“Fifty to 60 percent (rental) is a pretty good indicator of economic distress,” he said.

Start of an exodus

A combination of negative economic factors brought such cities to the brink of distress: Jobs were lost when the primary employer closed its plant, homeowners moved out, and the tax base shrank as houses were converted to rental units.

In Jeannette, it started with the loss of hundreds of jobs at the city's three major glass plants. New Kensington lost Alcoa. Arnold felt the impact of the glass and steel industry collapse.

“You take that much investment out of an economy and it ripples upstream and downstream,” said Brian Jensen, executive director of the Pennsylvania Economy League of Greater Pittsburgh.

A factory or mill closing impacts a community's businesses, schools, churches and sometimes hundreds of ancillary businesses. The job losses can mean cuts in city services, higher property taxes and a steady population drop.

“If you can, you move,” Jensen said.

In Western Pennsylvania, 13 small cities have experienced such an exodus over several decades, census figures show. Tenant-occupied housing outnumbers owner-occupied homes in Arnold, Beaver Falls, Duquesne and Uniontown, while Greensburg and McKeesport are near the 50 percent level. Of the others, only Monessen hasn't exceeded the statewide average of 30 percent.

“For older, industrialized, built-out communities, it is a trend,” said Mike Foreman, a policy specialist with the Department of Community and Economic Development.

The Great Recession played a part, as more Americans turned to the rental market for housing following a wave of foreclosures, studies show.

The home ownership rate in Pennsylvania dropped1.3 percent to 69.6 percent in 2010-12 from the previous three-year period, according to the Institute of State and Regional Affairs at Penn State. The state still ranks 16th in the nation for percentage of homeowners, Census statistics show.

Rentals aren't detrimental as long as the properties are maintained, Jensen said, but it can be the start of a downward spiral in hard-pressed communities.

“They can become derelict,” he said. “There is the potential for blight.”

Dennis Scarpiniti, New Kensington city clerk, said the transformation is more than physical.

“It lends itself to transient people who don't have a sense of community, and that adds to a lot of different problems,” he said.

Despite the demolition of 25 blighted New Kensington properties in two years and an ordinance that requires landlords to live within 15 miles or have a local property manager, the rental issue remains a sore spot with residents.

“More and more homes are being sold to landlords,” said Chris Kozlowski, 63, who has lived in the city since 1975. “Some (renters) are not there longer than six months.”

Revenue dwindles

As the number of rental properties increases, tax assessments drop, along with earned-income tax collections, as homeowners are replaced by more transient residents who earn less money, experts said.

The problem is twofold: Future residents, mostly low- to moderate-income, will be less able to pay for services, and the population decline shows people are leaving the community faster than they are moving in. And renters are more likely to slip through the cracks when a city collects earned-income taxes and service fees such as garbage and sewage.

“When you have a lot of renters, if you don't keep good records, it's really easy to miss people,” Jensen said.

Despite fewer people and less money, most cities still employ a police force, collect trash, plow snow and maintain public spaces.

“The dilemma is you're not reducing services in any way,” Moyer said.

In Arnold, renters outnumber homeowners.

“We have no industry, no bank, no grocery store,” said city clerk Floyd Newingham. “We're landlocked … most of our houses are 80 to 100 years old.”

The resulting drop in the city's assessed valuation — from $31.3 million in 1997 to $27.8 million last year — has meant less revenue, leading to tax hikes year after year, Newingham said.

“Small communities in Pennsylvania are like an endangered species,” said Alex Graziani, city manager in Latrobe, where 38 percent of the residents are renters.

Smaller communities are “trending toward hosting more low-moderate income families, which can lower real estate values, while townships have been getting wealthier,” said Graziani, former executive director of the Smart Growth Partnership of Westmoreland County, a nonprofit that promotes smart land use.

Latrobe's assessed valuation dropped from $69 million in 2008 to $65 million in 2013, Graziani said. To make up for the revenue loss, taxes were raised from 19 mills in 2007 to 20.5 mills in 2009 and 21.5 mills in 2011.

One distressed community in Allegheny County tried a new approach to change the negative numbers.

As Clairton marked its 25th year as a distressed city last year, officials held their first delinquent tax sale. Initially hoping to see 30 properties change hands, they have reached 170, said manager Howard Bednar.

“The title searches are a foot-and-a-half thick,” he said. “You've got 170 properties that haven't been on the tax rolls for 30 to 40 years.”

Clairton's effort “goes to show the scale and magnitude of the problem,” said Foreman of the Department of Community and Economic Development.

Craig Smith is a staff writer for Trib Total Media.

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