CEDAR FALLS - A new ordinance that will hamper a tax-saving move by landlords is one vote away from law in Cedar Falls.

The City Council approved the second reading Monday of an ordinance that would make it more difficult for landlords to convert apartments to condominiums.

Some landlords have made the move to reduce their tax bills. Apartments pay taxes as a commercial property; they do not benefit from the rollback afforded residential property owners, which includes condominiums. This coming budget year with the rollback, residential property owners pay taxes on 45.6 percent of the property value, while commercial owners pay on 100 percent.

"Right now there's been a number of properties that have been converted because they have taxes that are about half," said Mayor Jon Crews.

After conversion, those properties are still rented out as always but benefit from the lower tax rate. Most of them don't change physically, but the property owner has to create a condo association to make the change.

The new Cedar Falls ordinance would make the process more difficult. A property owner wishing to make a conversion would have to bring the property up to current building codes for condominiums. Such a move would require older buildings to meet new building codes, but meeting the condominium code could also require expensive upgrades such as firewalls between units.

"What this does is clarify the state code that if a property is converted it needs to meet the building codes," said Developmental Services Director Ron Gaines.

City Administrative Services Director Richard McAlister has seen the effect of conversions on the city tax base. For the upcoming year, Cedar Falls saw a $6 million decrease in commercial property value, a figure McAlister attributes largely to conversions.

The ordinance will be final in two weeks if it is approved on its third reading by the council.

Contact Jon Ericson at (319) 291-1461 or jonathan.ericson@wcfcourier.com.