What is a Multifamily Improvement District?
On January 1, 2005, SB 1404 Multifamily Improvement District legislation became law in California.
This was the first piece of legislation of its kind in the Country. It allows multifamily property
owners to create assessment districts to fund physical improvements as well as ongoing services to
improve their neighborhoods. The biggest news is that with a positive vote of 66% of the apartment
owners, 100% of the benefiting properties can be taxed. This can directly impact the uncooperative
slumlord. (This can also include commercial properties but not single family homes.)
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Overview:
The adoption of Multifamily Improvement District (MID) legislation in California provides a tool and
process for the improvement of dysfunctional multifamily neighborhoods through the coordination and
cooperation of impacted property owners
In today’s economy, many of California’s cities are struggling with budgets that only enable them to
take care of the day-to-day needs of the city. There are little or no extra funds to invest in the
renovation of troubled multifamily residential neighborhoods. In addition, many multifamily property
owners are unwilling to invest funds in buildings located in substandard residential neighborhoods.
They believe such investment is unwise unless all owners in the area are also making improvements.
MID’s can bring financial assistance from these reluctant owners to help with area wide improvements.
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Where did Multifamily Improvement Districts Come From?
A common problem exists with certain multifamily apartment neighborhoods throughout California. These
problem neighborhoods typically consist of multiple four-plex or larger apartment buildings, each with
a different owner. They are also blighted and often harbor significant criminal activity. Left unchecked
these conditions can destroy an area.
This situation places the property owner, neighborhood residents and the city in jeopardy. Without
coordinated professional assistance at many levels, regaining control of the neighborhood and reversing
the blight and criminal activity is nearly impossible.
In simplest terms two basic actions need to be taken. Bad tenants need to be removed from the
neighborhood and the physical environment of the area must be improved to attract quality tenants.
These steps require the close cooperation of all property owners.
It is nearly impossible to improve a dysfunctional multifamily neighborhood unless substantially all
owners are cooperating. One substandard building with tenants openly involved in illegal activity can
make it all but impossible for neighboring properties to obtain quality tenants.
A Multifamily Improvement District (MID) can, in most situations, eliminate these obstacles. MID’s
allow responsible apartment building owners to join together, tax themselves, work with their City
officials and improve their businesses and neighborhoods.
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Solution - Multifamily Improvement Districts:
The ability to create MIDs can greatly simplify and reduce delays in the improvement of substandard
neighborhoods. MIDs may also reduce or eliminate the use of public dollars in such projects.
In the past cities had to rely on the formation of property owners associations. Multifamily owners’
associations have been formed to date and the results have proved to be extremely rewarding.
Unfortunately, the process is difficult and time consuming to complete. The single, biggest constraint
to the formation of owner associations is the need to have 100% participation by all owners. One
reluctant ‘slum lord’ can hold an entire neighborhood hostage. MIDs can eliminate most of these
problems, they only require 66% support of property owners in order to assess 100% of the properties
for improvements.
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