Friday, March 16, 2007

Guest Post: Controlling the Spin on Rent Control

Editor's Note: The following post was submitted by SFVYD member Brian Davis. SFVYD welcomes guest posters on our blog.

I like to end my arguments with simple thoughts: Against gay marriage or abortion? Don't have one. Against gays serving openly in the military? Most of our allies, who fight side by side with us in most modern military excursions, allow gays to serve, meaning American troops are already serving with open gays. Opposed to rent control because landlords can barely turn a profit? Than don't become a landlord.

I work for an organization that focuses on tenants’ rights and habitability. Our goal is to combat homelessness by keeping people in their homes and keeping those homes livable. We don't get much recognition but this week we did. The Los Angeles Times ran an article about Los Angeles' most prolific eviction attorney. Our agency was featured.

One of the major themes of the article is how the attorney, Dennis Block, is a crusader for the oppressed: property owners. It is true that a good number of property owners are small business people, many of whom are immigrants, trying to squeak out of living. But in Los Angeles, many properties are owned or managed by HUGE corporations. There are also many ethical, compassionate landlords that treat their tenants fairly and with dignity. There are also many that are blatant criminals who value profit over the health and safety of their tenants.

Rent control is often vilified by these property owners because of the limits it places on raising rents and how it allows tenants to maintain their housing below market rates. This is rare. It happens when a renter lives in a property for a very long time. Most renters, especially in a city of migrant labor like Los Angeles, are highly mobile. It's anectdotal but since 2000 I've lived in 7 places. In some cases, a tenant finds a place they like and stays there for extended periods of time. Unfortunately, the landlord loses out because as the market rate increases, he's limited by the imposed restrictions of rent control. Dennis Block feels his pain:

"I think my position is righteous," he said. "The average landlord is not a rich individual…. Under rent control, unlike any other business on planet Earth, a landlord is being ordered to support other individuals totally at his own costs. This is not fair."
The landlord is not being "ordered" to do anything. The landlord chose that field and must agree to the terms of it. I am a SCUBA instructor on weekends. I am a good, safe instructor, and I don't anticipate any of my students ever having an accident but the corrupt SCUBA industrial complex orders me to have liability insurance. Of course, if I don't want to incur the insurance cost, I guess I do have the freedom to not be a SCUBA instructor.

Block argues that the city's rent-stabilization laws keep him in business by creating conditions in which some landlords cannot make a profit, and in some cases can't even make their mortgage payments, unless they evict their tenants and replace them with people who can pay the market rate.

Apparently, landlords are the worst business people in the world! They can't even make their mortgage payments? Lord, have mercy.

Let's put my Bachelor's degree in Business Administration to work here: I want to become a landlord. I will need to buy a building. I will most likely need to take out a mortgage. Before taking out the mortgage, I should look at who currently lives in the building. How much rent do they pay? How much do I think I will be bringing in each month? Now, let's make sure I can turn a profit. I can? Good, I'll take out the mortgage and buy the building. What's this? It seems I'll bring in $30,000 a month in rents, but I'll spend about $5,000 a month on some maintenance and utilities. And my mortgage is going to run $23,000 a month. Wow, that's not much money for me. Maybe I'll become a baker. Or a shepherd. (Forgive me; I just started reading the Alchemist.)

We needn't use the line that landlords can't feed their families any more. Dennis Block should change it to, "Landlords can't feed their families at Spago any more."

Rent control is not about lost money out of the pocket of the landlord, it's about the dissatisfaction with the opportunity lost to make more money. If I have a tenant who pays $500 each month, but the market rate in the neighborhood is $800 each month, then I am losing $300 in potential income. Not real income. Provided I wasn't an idiot when I bought the building, I knew I could make some money with the rents at the current level. Now with the housing market stretched so thin, without rent control I could make so much more. Unfortunately, these are the rules. I guess I won't make the $300, but don't be fooled into thinking that is money out of my pocket. It's not.

Rent control helps keep families in their homes; that's the reality. Without rent control, in a housing market like we currently have, it would be near impossible for many renters to budget properly and keep a roof over their head. The costs on our communities would be crippling. Parents would need to yank their kids in and out of schools, increasing the costs to taxpayers with poor results. Employers would struggle to keep good employees in their jobs and attract highly qualified candidates. Neighborhoods would be unstable, hindering quality of life and potentially affecting problems like crime and gangs. Renters would have less money to spend on groceries, clothing, and, yes, even recreation. And only landlords and lawyers would be better off.

1 comment:

Michael said...

I live in West Sacramento. 45% of the residents are renters. Renters may be low income, fixed income, seniors, Vets on fixed income and an awful lot of illegals takeing advantage of the low rents that may exist.Causing the rents to have pressure from the bottem, forcing rents up.
I am a rentcontrol advocate. I am hearing horror storys from residents in mobile home parks that cannot afford the airconditioning, or heating of their homes. When they moved in the rent was 150.. a month, now it is up to 600.+ and climbing. While the social security check is 900.. when the landlords want to build another park or building. Just jack the rent up.
We as a society are going to have some serious decisions to make. Are the residents in a building more important then the investor that buys a gamble and hopes it will make him,her or the corporation rich.
Or are we going to sit down and come up with some controls that will make more sense out of the mess we are in.
Thank you for your time.
Mike Breda