Rent control sweeping the nation ?
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votesRent control sweeping the nation ?
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Greg ScottPro Member
Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votesThis month's Unit Magazine (published by NAA) had a great in-depth article on the topic.
There was one data point that surprised. Economists never agree on anything. But, a survey they quoted showed that something like 93% of economists agreed that rent control limits housing development and in the long-run makes housing affordability worse, not better. They even had some quotes from socialist economists arguing against rent control. So, it would seem like most of the best minds agree that it is bad idea.
Of course, many politicians don't care about facts, whether or not what they are doing is effectiveness, or even whether or not it helps or hurts their constituents They just want to get elected.
106 Replies
- Member since 2019 · 6 posts · 3 votes7y
@Patrick M. You are being asked to comply with the Fire Code, I am a Fire Inspector and landlord (9 doors). Departments make more money doing initial inspections not reinspections. None of these request should set you back any real money, unlike the lawsuit if someone were to die in a non compliant unit.
- Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes7y
Originally posted by @Sterling B.:
@Patrick M. You are being asked to comply with the Fire Code, I am a Fire Inspector and landlord (9 doors). Departments make more money doing initial inspections not reinspections. None of these request should set you back any real money, unlike the lawsuit if someone were to die in a non compliant unit.
YUP just think about the one in Oakland a few years ago when a bunch of people died in a fire.. those landlords are getting tried for homicide.
- Rental Property Investor · Red Bank, NJ · Member since 2017 · 1k+ posts · 1k+ votes7y
@Sterling B. I have no issue, I was pointing out to another person the things we need to do on renting out an apartment. Personally, only take issue with the scheduling, which has to happen after a tenant has signed a lease but before they move in. We deal with a volunteer department so I could only dream the fee was going to them.
My Fire Marshall takes issue with the new regs in NJ. Rather than encouraging a tenant to stay and fight a fire, they should be encouraged to vacate the apartment and contact the fire department. But that is neither here nor there.
- Rental Property Investor · Red Bank, NJ · Member since 2017 · 1k+ posts · 1k+ votes7y
- Member since 2018 · 1k+ posts · 1k+ votes7y
"When I asked why, the city said that's who they get the most complaints about. My thought, "So why not fine the guys who are getting complaints against them vs. making everyone get a license?" "
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Simple. The guy who gets the complaint whines and stalls and says "Town didn't tell me it was deficient," and is now fighting private litigation. Do an inspection between rentals and you take away the excuses of "I didn't know." It's the difference between being proactive and being reactive.
- Member since 2018 · 1 post · 0 votes7y
@Jay Hinrichs I'm assuming the criminal/income piece is only for Portland metro, and not part of the statewide bill that just passed? I thought I was following the state bill, and your comment suprised the hell out of me. Southern OR invester here.
- Investor · New York City, NY · Member since 2015 · 388 posts · 563 votes7y
@Jay Hinrichs - thanks for starting this conversation. I’ve been curious about the economics of rent control as long as I’ve been an investor(16 years.) An economist I once listened to put it this way regarding gentrification(which in some ways is the opposite of rent control):
“When nice apartments are built, people fear being priced out of a neighborhood. Why is nobody concerned when nice cars are built? Because they know that a really fancy car won’t impact the availability of affordable cars.”
Rent control appears to be a long-term negative for society(or, at best, it’s close to neutral.) But we landlords deal with government regulation fairly often. My eviction attorney blew his stack at the recent regulations from NY. We can cry and gripe about it(ok, I did a bit of both of those,) or we can figure out how to make more money because of it.
My main PM said to me the other day, “These regulations will put the little guy out of business!” I replied, “Good! Let’s get ready to pick up some cheap houses.”
Ok, pep talk over, everyone, now get out there and adapt.
MG
- Real Estate Agent · Los Angeles, CA · Member since 2018 · 2k+ posts · 1k+ votes7y
I didn't read all of the posts so I apologize ahead of time if I reiterate what others are saying.
My best guess is that (1) those in government truly think this is a protection measure or (2) is areas where I live, Los Angeles, there is a high rental population. This means from a constitute standpoint (aka voters), government officials want to appease those that will most likely vote for them and ultimately keep their jobs.
I do firmly believe this will raise rents. For one, it will scare people out of landlord market (I know someone who wants to sell their rental and buy in Arizona, just waiting for the existing tenants to leave), thus decreasing supply. The second is (which others have said) that landlords may hold out for higher rents to compensate. At some point tenants will have to give in if they want to live in a particular area.
- Rental Property Investor · Los Angeles, CA · Member since 2017 · 2k+ posts · 5k+ votes7y
Originally posted by @Tanya F.:
I think that the whole issue is a direct consequence of wages and salaries being too low for a significant portion of the population. Pay people a living wage and rent control is not necessary.
This is absolutely not how it works. The idea of a living wage is just propaganda spread by people who don't understand inflation and basic economics. There is always going to be a pay scale with the people who have the most common skills receiving the least amount of pay. Common skills means lots of supply of this skill which means wages are low.
If you inflate the wages of the common skill workers, the increase in wages will reverberate upward. The guy who cleans the floors makes $10/hour, the shift supervisor $15, and the manager $20. Now $10/hour isn't a "living wage" so they Fight For $15 and get it. Only problem is that the shift supervisor, who is more valuable to the company and harder to replace, now demands his 50% raise commensurate with his rarity. The manager does the same and demands $30. Now everyone has more money, but no one has any additional purchasing power. The supply of goods is still limited and the market is highly efficient, so prices rise (inflation). The guy who couldn't afford rent making $10/hour still can't afford rent making $15/hour, because the efficient market pushed up rents 50% to adjust for the purchasing power of the buyers. Over a fairly short amount of time the cost of everything will rise 50% and people aren't better off.
There is no way around this except increasing supply.
- Investor · Los Angeles, CA · Member since 2017 · 523 posts · 476 votes7y
Originally posted by @Jay Hinrichs:
Seems like Rent control in some form or fashion Is gaining a lot of traction around the US.. Oregon just passed state wide.
Washington some new rules.. California of course has had rent control in many cities for decades.. NY same thing.
Minneapolis has some new bills etc etc..
There seems to be a target on the landlords back.. Is this just along party lines or do you landlords think this Is what the future holds over the next decade and like Cannabis laws starts in one place and will end up nation wide.
It seems these are meant to create affordable rent situations / or keep rents in check.. when I talk to landlords. I hear the oppostie
most say they will raise rents as aggressively as possible.. one to keep from having to rent to renters that heretofore U could have just rejected because of criminal or other issues..
This being a landlord dominated site would be interested in view points from others.. I have no dog in the hunt only a few rentals left but I did own hundreds of them at one time.
Bottom line I can see this in many areas having the exact opposite affect than the law makers envision.
Great topic. I hate going near politics on BP, but regarding the question of whether this is something favored by one party or another, clearly, Democrats on average are more supportive of rent regulation, so you are more likely to see that in blue areas.
With that said, we've seen a trend in the past few years where left leaning economic proposals, when placed on the ballot in more conservative states, do quite well. For example, in 2018, Arkansas and Missouri voters chose to raise the minimum wage considerably, while voting for Republicans for many other offices. Utah, Idaho and Nebraska voters all chose to expand Medicaid in the same year, even though these states are all "red states" by any definition. Not taking a position on whether this is good or bad - just an observation.
The point is that some economic positions we might associate with the left seem to do well with voters in conservative states. What this means is, if you invest in a red state where rents in many areas are increasing, or housing costs are otherwise becoming an issue, don't be shocked if rent regulation ends up on the ballot, and does quite well.
Since home ownership rates have dropped, I think that across the nation, fewer people probably care about property taxes and other landlord friendly issues, vs 30 years ago, and more care about rents (since we've seen the portion of renters increase, and homeowners drop). This is especially true with somewhat younger voters. So yes, in general, I think we should assume that things move in the direction of more rent and housing regulation, not less.
- Spokane, WA · Member since 2016 · 103 posts · 76 votes7y
As soon as I heard the Oregon announcement, I dropped it from investment or move considerations. Wasn't high on the list for either, but that's a big no-sir from me. I'll invest places where they have a bare modicum of respect for people taking the risk of providing rentals.
- Rental Property Investor · Ann Arbor MI · Member since 2018 · 58 posts · 43 votes7y
@Russell Brazil
Convenient.
- Rental Property Investor · San Francisco, CA · Member since 2013 · 1k+ posts · 1k+ votes7y
Yes I think that nationality rent control is getting a lot more attention in the last few years as a function of rents in general going up (due to Great Recession, less homeownership, and a lot less new construction), and also the Democratic Party getting über galvanized as a reaction to the current administration. The sweeping laws passed in Oregon were a surprise to me, as well as all the new rent controls recently passed in numerous CA cities. We will see what happens in CA statewide, if the current legislation gets fully approved, with the upcoming ballot initiative in 2020. I fully expect some form of statewide changes, but it gets complicated because I don’t know how they can do that without rescinding or modifying Costa-Hawkins...so there may be court challenges as well.
Now the interesting question, in my mind is, with all this rent control political noise on a national level, will the new balance of the Supreme Court step in and outlaw it on a national basis? There was a recent Supreme Court ruling that allows plaintiffs to supersede state court of appeals and appeal directly to the Supreme Court that includes (I believe) housing related issues (don’t quote me on the deets.) If so, I’m sure that the Pacific Legal Foundation (which fights a lot of higher level “takings” cases will be all over this.
Soooo....there may be hope!
- Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes7y
Originally posted by @Amit M.:
Yes I think that nationality rent control is getting a lot more attention in the last few years as a function of rents in general going up (due to Great Recession, less homeownership, and a lot less new construction), and also the Democratic Party getting über galvanized as a reaction to the current administration. The sweeping laws passed in Oregon were a surprise to me, as well as all the new rent controls recently passed in numerous CA cities. We will see what happens in CA statewide, if the current legislation gets fully approved, with the upcoming ballot initiative in 2020. I fully expect some form of statewide changes, but it gets complicated because I don’t know how they can do that without rescinding or modifying Costa-Hawkins...so there may be court challenges as well.
Now the interesting question, in my mind is, with all this rent control political noise on a national level, will the new balance of the Supreme Court step in and outlaw it on a national basis? There was a recent Supreme Court ruling that allows plaintiffs to supersede state court of appeals and appeal directly to the Supreme Court that includes (I believe) housing related issues (don’t quote me on the deets.) If so, I’m sure that the Pacific Legal Foundation (which fights a lot of higher level “takings” cases will be all over this.
Soooo....there may be hope!
there is a reason the GOP walked out of the ORegon sessions and left 180 bills dangling they left the state.. Oregon tends to pass these sweeping regulations without a vote of the people.. not that they would lose.. to me the monetary rent control is not that big of an issue.
in Oregon its basically a moot point.. rents do not go up 10% year in year out.. and if the place is vacant you can start at market..
the bigger issue is how you deal with qualify tenant and evictions either for cause or no cause.. those are the bigger issue I see that is wrapped up in the rent control laws..
city of Portland passed one that I think is similar to SEattle or all of Washington.. were you cant refuse those with credit criminal issues and or DTI you know the 3X rent rule most landlords use.. to me this just opens up landlords to all sorts of complaints by life long tenants who know the laws as well if not better than landlords..
But lets look at SF as a prime example last time I was down there I saw all the projects being torn down. ( govmit housing) at least the one on Potrero hill were OJ was raised.. not sure if the one by the cow palace has been bull dozed or the ones over by fisherman's wharf..
But regardless that was low income high density housing and they are ripping it down.. I had clients when I was a cub scout real estate agent in the mid 70s in those housing projects.. sold them little lots up at Clearlake for 2k to 5k.. so they could some day retire and get out of the city..
- Rental Property Investor · San Francisco, CA · Member since 2013 · 1k+ posts · 1k+ votes7y
@Llewelyn A. I read about the sweeping new rent control laws just passed in NY, how severe they are, and how stunned the real estate community in NY is. I’m sure you’re all read up on the details, so a couple specific questions for you:
- was some form of vacancy control passed?
- don’t these new laws severely effect your Brooklyn rentals? (And I f not not, why?)
I’m always fascinated by the way NYC vs SF handles these situations. So far, in my case, I have found work arounds and ways to generally benefit from oppressive rent control laws. But with the potential new changes coming to CA (particularly repelling Costa-Hawkins), I’m wondering if this rather obtuse and ornate dance will finally be coming to an end :(
- Member since 2018 · 36 posts · 11 votes7y
Originally posted by @Nicole Heasley Beitenman:
Have any areas removed rent control after realizing it was a stupid idea?
Yes, Boston.
- Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes7y
@Amit M. I think I posted a few articles on this thread about what Stanford endowment is doing and some of big tech to address work force housing.. which is all great if they can get the land and get land use approvals.
to me its like going back 100 years to big industry that owned the town and all the houses.. Like rural logging communities the town of Scotia up on the EEL river south of Eureka comes to mine.. and probably dozens of them for mining companies scattered around the West..
maybe we are going back to the future.. maybe in our high priced areas if companies need talent but said talent cant afford rent or buy a home they start building their own company towns..
ON a small scale one of my clients In San Jose area is wrestling with that right now.. trying to find locations or Smaller MF he can buy and part of the perk and how he retains talent is some sort of subsidized housing for his employees so taken care of at the private sector level
- Member since 2018 · 36 posts · 11 votes7y
Originally posted by @Lee Bell:
If the max increase allowed by rent control is above the inflation rate locally, what problem? You can increase rent to market when a tenant leaves.
What if the tenants never leave? It's not uncommon in the SF Bay Area for tenants to buy non rent-controlled SFR's and still live in their rent-controlled apartment. Also very common for those tenants to get roommates to pay for the rent and they live rent-free. Speaking of gaming the system.
- Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes7y
A lot of stuff of rent control and things like it are going on in Oregon I know. I think it's a natural thing when market's shoot up in value because affordability becomes challenging. I don't think rent control helps in the long run, but I think we'll see more of it unless the market begins to soften.
- Member since 2018 · 36 posts · 11 votes7y
Originally posted by @Tanya F.:
I think that the whole issue is a direct consequence of wages and salaries being too low for a significant portion of the population. Pay people a living wage and rent control is not necessary.
Not entirely true. Techies in SF (nothing against them) make tons of money, many cases much more than their moms and pops landlords. And still get rent control in their Apartments.
- Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes7y
Originally posted by @Andrew Syrios:
A lot of stuff of rent control and things like it are going on in Oregon I know. I think it's a natural thing when market's shoot up in value because affordability becomes challenging. I don't think rent control helps in the long run, but I think we'll see more of it unless the market begins to soften.
Andrew of course you would know better than 99% of folks on BP about landlording in Oregon.. given your history..
but from my perspective and again I was not a landlord of any size in Oregon.. but rents seem to be very very stable from when I got here in 92 ish.. until after the GFC and at least as it relates to Portland metro.. rents in the last 7, 9 years have just sky rocketed.. I mean double in many instances..
I think in rural Oregon which is 95% of the state by land mass.. the economy ( which is dead and dying in many of those small towns like much of rural US) will take care of rent rates on its own.. if the locals cant afford it you will have vacancy.
I think the stress right now that hear from PM's that are bigger.. is the new Construction A buildings in some parts of Portland are struggling.. as rents are at or above what a mortgage payment would be on a median priced home in the market place.
- Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes7y
Glad I do commercial real estate with more favorable landlord laws. It seems the lawmakers do not take as much sympathy on the businesses as the general public! ... lol
- Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes7y
Originally posted by @Joel Owens:
Glad I do commercial real estate with more favorable landlord laws. It seems the lawmakers do not take as much sympathy on the businesses as the general public! ... lol
I think you may see a lot of folks move out of resi for these reasons and into commercial.. the issue with commercial is choosing right..
when I travel the deep south.. I am always astounded at the boarded up and closed shopping centers .. we don't see that very often in our areas on the west coast..
if you owned one of those and your tenants leave because the city or neighborhood turned.. your done.. :)
In Oregon on the commercial side you can do a lock out in a matter of a day or two once rent is not paid.. you see that all the time with Restaurants going out of business.. they are open one day.. come the next day doors are chained shut and employees milling about.
- Investor / Broker · Brooklyn, NY · Member since 2016 · 665 posts · 1k+ votes7y
For my portfolio of properties, which are NOT rent regulated at all, it will remain unregulated under the new rent control laws.
These laws were made to stop the leakage of rent regulated apts from leaving that pool. Basically, there was a push to use loopholes to deregulate apts, for instance, once an apt reaches a certain monthly rent, say, $2,500 per month AND the tenant's income reaches above $250k per year, the Landlord was able to deregulate the apt. Another example would be that a Landlord would conduct Major Capital Improvements (MCIs) and just that to increase the rent, which then can be a burden on a regulated tenant. From what I understand, they can no longer raise the rents substantially with a MCI. Etc.
It does NOT add properties that were unregulated into the regulated pool in NYC. NOT YET anyway. However, as others from a different County mentioned to me in a different thread, Municipalities can opt-in to adapting the new laws if they don't have it already. I'm not sure about that, but it was mentioned to me. That's where it will be extremely bad.
@Puri Indah pointed out to me, however, that in 1994, SF pass a law to make even 2 to 4 family properties rent regulated.
Prior to 1994, Large Landlords who were affected by Cali's rent regulations started buying 2 to 4 family buildings. They probably boosted up the price of these smaller multi's until the 1994 laws took into effect. I suspect this will be the same and will give me a very good exit point if I feel that NY will regulate even the small multi's.
While NY is leaning VERY LEFT.... I'm hoping we don't get that far left otherwise I'm going to have to execute my plans of take the money and run!!!!!! Probably by converting to Condos and selling it out quickly, or just making the buildings in the very large single family homes.
If NYC does NOT pass regulation laws adding my properties into the pool of regulated apts, then my buildings become a VERY desirable building.
We already know that 4 family buildings that are unregulated will be worth even more than 10 unit buildings that ARE regulated.
Also, there were some rules that were passed overall that might affect ALL properties, including unregulated apts. For instance, I believe we can no longer use rent history in our criteria to evaluate a tenant. That means we should not be using the fact there is an eviction in a tenant's history to make a decision.
SO.... that will make Credit Reports even more important. I already have a high threshold of 720 or above to qualify. Now I might boost it up to 750. There are plenty of qualified tenants with high Credit Scored in my areas of investment.
While it's not a guarantee, a High Credit Score GENERALLY (note, not always) will generally tell you two things, that the tenant pays their bills AND that they probably have not been evicted. So this is a sort of workaround.
Either case, those with Rent Regulated apts will be much worse off. But on the other end of the token, those with market rate apts, should not only be fine, but do very well unless NY then look to regulate even these small multi's.
Again, there is an exit strategy for me if that happens.
Looking at other historic scenarios, Cambridge deregulated entirely. We know that after the deregulation, yes, apt rents went up, but that's mostly due to improvements. We also know that the area's crime rate plummeted.
I suspect this will be the same kind of situation.
In one of my areas of investments, Ditmas Park, Brooklyn, it's mostly single family homes with a few multi's. I own 2 buildings that are 3 family units here. This area will increase in price and desirability as a direct result of the new laws.
If I convert these 3 family buildings to a single family houses in my exit strategy, it fits into the characteristics of the neighborhood as these are Victorian houses. I'll still be fine in this regard.
Regardless of the outcome, I have to prepare for ALL outcomes. But for right now, not only is my portfolio safe, but is looking quite promising.
However, being prepared never hurts.
- Real Estate Agent · Houston, TX · Member since 2017 · 290 posts · 233 votes7y
Originally posted by @Jay Hinrichs:
Originally posted by @Joel Owens:
Glad I do commercial real estate with more favorable landlord laws. It seems the lawmakers do not take as much sympathy on the businesses as the general public! ... lol
I think you may see a lot of folks move out of resi for these reasons and into commercial.. the issue with commercial is choosing right..
when I travel the deep south.. I am always astounded at the boarded up and closed shopping centers .. we don't see that very often in our areas on the west coast..
if you owned one of those and your tenants leave because the city or neighborhood turned.. your done.. :)
In Oregon on the commercial side you can do a lock out in a matter of a day or two once rent is not paid.. you see that all the time with Restaurants going out of business.. they are open one day.. come the next day doors are chained shut and employees milling about.
Yup, commercial is intense. Houston is a huge, sprawling area, and there are numerous commercial lots and buildings that have been sitting empty for years+ Brutal!
This thread will be damn interesting to bump in about 5 years to see how things have changed. Automation is eventually going to crush certain job sectors, 18 wheeler/ trucking is one that seems to be the most worrisome. Those self-driving trucks will get here, only a matter of time/ safety standards. Look out, that's a high paying, easy-entry field.
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