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
- Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes7y
Originally posted by @James De Stefano:
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.
since my wife and I each have Tesla's I agree with the electric trucks.. not only for fuel etc..however just look at the performance stats of the Tesla semi blows away diesel.. so traffic will move a lot better as well.
- Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes7y
In regards to empty retail buildings. No asset class is perfect. Those that are specialized in a certain asset class and an expert know how to make money with it.
Cold belt states tend to be more overbuilt and with net migration away with population levels the tenants do not want to expand in those states.
In a lot of the warm belt states there is huge growth with populations and businesses want to (follow the people and the money). I know Houston well. There is a lot of flooding there and overpriced cap rates. I like some outskirt areas there with high incomes that do not have the flooding issues like the inner city does.
I tried residential and didn't care for it whether houses or apartments. They are more intensive assets compared to retail properties. Most of my clients buy smaller neighborhood retail and STNL. The really big stuff is more for REIT's, large pension funds, and insurance companies. They can have one sit partially vacant because they own 30 more and portfolio average the returns and still be positive.
One of my friends that also is a retail broker had an apartment listing as they do that also. They had 25 buyer groups show up for the walk through and it was newly listed in Ohio! lol
I guess the saying one persons trash is another's treasure rings true. Even with rent control there are people buying these properties from overseas. If they invest so much money they can get expedited visa's in the states. Lot's of them want to just get money out of their countries as they see the U.S. more stable long term. Some people I talk to are worried about residential rent control and are still staying the course. Others are deciding to cash out while they can and move to commercial or something else.
I love it when people say retail is doing bad. It's more money for me to make. The opportunities are there some people just do not have the expertise to evaluate it or understand it completely. There are some investors that are generalists and just dump money into the next asset class at the bottom of a cycle and ride the cap rate compression up to try and sell for a premium. There are those who are specialists and can make money in any cycle.
Rent control is a mirage. It's another mechanism whereby people think someone is going to take care of their problems of not enough money to live on.
- Shelton, WA · Member since 2018 · 17 posts · 10 votes7y
@Tanya F.
I disagree about the wages,
Here’s why: people earn a wage based on the skills they have ie.. low skills low wages, nobody’s entitled to anything unless it’s earned!
It’s my opinion that rent control is just another take away from landlords/Investors that ironically have better skills than the people that wine about not being able to afford something that they don’t deserve based on their effort put forth!
It’s a business that’s under attack from the people that want to give everything for free in this country and it’s just stupid!!
End of rant
- Rental Property Investor · Madison, WI · Member since 2013 · 629 posts · 339 votes7y
We'll have to disagree, then. Relatively lower/higher wages, sure. Proportional to skill - built in. But even the lowest has to be a living wage. We make plenty as landlords, and we didn't raise our rents this year, except one unit, $20. 100% of our tenants renewed their leases. No vacancy, no problems. They are growing flowers and vegetable gardens, seeding the lawn and doing significant work on the landscape at all of our buildings. We treat people right. Our units are NICE. Everyone deserves an affordable place to live. Rent control, done right, can really help. Anyone in your family an artist? A musician? Maybe a church organist with a couple of kids? A poet? Workers at non-profits? Homeless shelters? I'm guessing not. Artists, writers, teachers, many good service people really need this. Who are our tenants? A retired art teacher who is now a minister, employees at dept of natural resources, and public school nutritionist, philosophy grad students, credit union employees involved in financial literacy education, and a former property manager, an environmental lawyer. All with A+ credit. If we were in a city where market rents were increasing like the ones mentioned above, well, I'm not sure how ANY of these folks would survive there. I mentioned my aunt, who was a folk musician in NYC for much of the past half century, until she retired, and started writing a family history. And she worked in an office, too, until her mid 70's. Very responsible, who couldn't have lived there without some force reining in the market rents. And even then, lived very frugally.
Go to big cities and meet some waitstaff working three jobs. They don't live the least bit irresponsibly and yet can't afford a nice and safe place to live and good food to eat.
People who don't need this, like the silicon valley techies, don't need it at all, but will take advantage of the regulations- every cent they can. And there will be abuses of the system, but you guys are dwelling on that- not thinking of those who will really be helped, and coming with high school economics explanations for how "it works".
Not sure the policies are being written the best ways, with the best wording of the details for the best outcomes, but the general concept is necessary until there is less of an income gap and more fairness. My point was only to say that if there wasn't such a gap, this wouldn't be such an issue. Those of you who claim to know "how this all works" probably believe trickle down also works, and well, no. Not. at. all.
And there's my rant. Lets just say that we disagree.
- Member since 2018 · 214 posts · 175 votes7y
Rent control is designed to help people to have affordable housing.
Section 8 is designed to help lower income people to have a place to live.
Government depends on the private sector to build houses and depends on the landlords to provide housing to those people, then want to use rent control to regulate the landlords, then the landlords and the property managers are not happy about the regulations.
Government mistake, mistake, mistake.
Government should not hand the section 8 money to the landlords and depends on the landlords to provide housing.
Real estate is a good way to make money.
To really help the lower income people to have affordable housing lifetime.
Government should not count on private sector.
Government should have built their own many many affordable housing, never sell it to anybody, keep it for the government themselves forever, apply the rent control rules to their own affordable housing built and belonged to the government.
Since the government never sell the affordable housing to make money, the government can keep their own affordable housing rent as low as they can instead of bothering the landlords.
this is the real solution that the tenants can live and stay in the government owned affordable housing forever, and reduce all the conflicts between the landlords and government on the rent control.
Stop all the section 8 payment!
Instead, use the section 8 payment to build more affordable housing that are owned and belonged to the government to help the lower income people!
very seriously,
Government, solution is not rent control!
The real solution is, you (government) build many many affordable housing yourself and keep them forever yourself!
You (government) can apply any rent control rules to your government owned affordable housing!
- Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes7y
Originally posted by @Account Closed:
Rent control is designed to help people to have affordable housing.
Section 8 is designed to help lower income people to have a place to live.
Government depends on the private sector to build houses and depends on the landlords to provide housing to those people, then want to use rent control to regulate the landlords, then the landlords and the property managers are not happy about the regulations.
Government mistake, mistake, mistake.
Government should not hand the section 8 money to the landlords and depends on the landlords to provide housing.
Real estate is a good way to make money.
To really help the lower income people to have affordable housing lifetime.
Government should not count on private sector.
Government should have built their own many many affordable housing, never sell it to anybody, keep it for the government themselves forever, apply the rent control rules to their own affordable housing built and belonged to the government.
Since the government never sell the affordable housing to make money, the government can keep their own affordable housing rent as low as they can instead of bothering the landlords.
this is the real solution that the tenants can live and stay in the government owned affordable housing forever, and reduce all the conflicts between the landlords and government on the rent control.
Stop all the section 8 payment!
Instead, use the section 8 payment to build more affordable housing that are owned and belonged to the government to help the lower income people!
very seriously,
Government, solution is not rent control!
The real solution is, you (government) build many many affordable housing yourself and keep them forever yourself!
You (government) can apply any rent control rules to your government owned affordable housing!
Govmit has done this they are called Projects in most cities and get stigmatized.. And as I said above now San Francisco is bull dozing their projects.. crime and all sorts of other social issue evolve.. the only place I have seen this sort of high density public housing look pretty good and kind of work is in Charleston SC.. were there is a very heavy police presence..
Govmit with Section 8 in my mind already sets the rents and that's rent control un in itself if you want the reliability of getting paid on time each month you take what section 8 will pay in most markets.. you will see some co pays for a 100 or so more than the voucher but that's about it..
- Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes7y
Originally posted by @Tanya F.:
We'll have to disagree, then. Relatively lower/higher wages, sure. Proportional to skill - built in. But even the lowest has to be a living wage. We make plenty as landlords, and we didn't raise our rents this year, except one unit, $20. 100% of our tenants renewed their leases. No vacancy, no problems. They are growing flowers and vegetable gardens, seeding the lawn and doing significant work on the landscape at all of our buildings. We treat people right. Our units are NICE. Everyone deserves an affordable place to live. Rent control, done right, can really help. Anyone in your family an artist? A musician? Maybe a church organist with a couple of kids? A poet? Workers at non-profits? Homeless shelters? I'm guessing not. Artists, writers, teachers, many good service people really need this. Who are our tenants? A retired art teacher who is now a minister, employees at dept of natural resources, and public school nutritionist, philosophy grad students, credit union employees involved in financial literacy education, and a former property manager, an environmental lawyer. All with A+ credit. If we were in a city where market rents were increasing like the ones mentioned above, well, I'm not sure how ANY of these folks would survive there. I mentioned my aunt, who was a folk musician in NYC for much of the past half century, until she retired, and started writing a family history. And she worked in an office, too, until her mid 70's. Very responsible, who couldn't have lived there without some force reining in the market rents. And even then, lived very frugally.
Go to big cities and meet some waitstaff working three jobs. They don't live the least bit irresponsibly and yet can't afford a nice and safe place to live and good food to eat.
People who don't need this, like the silicon valley techies, don't need it at all, but will take advantage of the regulations- every cent they can. And there will be abuses of the system, but you guys are dwelling on that- not thinking of those who will really be helped, and coming with high school economics explanations for how "it works".
Not sure the policies are being written the best ways, with the best wording of the details for the best outcomes, but the general concept is necessary until there is less of an income gap and more fairness. My point was only to say that if there wasn't such a gap, this wouldn't be such an issue. Those of you who claim to know "how this all works" probably believe trickle down also works, and well, no. Not. at. all.
And there's my rant. Lets just say that we disagree.
Tennant quality is a major factor in landlord experience.. I bought a mobile home park some years back that the owners were Hubby an wife and spent 30 years running it.. so they were uber picky as to who moved in.. And that park was a dream. it was because of them only taking the absolute best candidates up front.. Not the richest but they had a minimum 700 credit score etc..
I bought another park that was run the opposite way owner let anyone in.. it was tweaker ville.. And I had to clean everyone out.
its not the rent per month per se that I have an issue with.. Especially in semi rural areas the tenants can only afford what they can afford if you don't adhere your going to be vacant.
whats happening now is how you deal with qualify a tenant far above HUD rules of discrimination. and how you go about evicting a tenant.. those to me are the real issues.
- Rental Property Investor · Madison, WI · Member since 2013 · 629 posts · 339 votes7y
Interesting, @Jay Hinrichs. So you don't think the rent per month is most of it? That's probably (I'd guess) what most tenants pay attention to. There should be a way to separate that from the rest of the issues related to tenant qualifications, right?
- Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes7y
Originally posted by @Tanya F.:
Interesting, @Jay Hinrichs. So you don't think the rent per month is most of it? That's probably (I'd guess) what most tenants pay attention to. There should be a way to separate that from the rest of the issues related to tenant qualifications, right?
I really don't for the new wave of rent control going in force today across the country.. rents are already at all time highs in the markets were its being put in.. and like Oregon they allow for 7% raise a year plus CPI which is 3 so that is 10% each and every year.. so what you could have happen is landlords just raise the rents every year there by defeating the purpose of rent control..
In markets were rents could not be raised with rent control think SF Berkley NYC rents stay way low for decades that's different..
I think the bigger issue is how you deal with new prospective tenants.. like your tenant list I suspect was carefully vetted by you and approved.. with these new rules from what I hear you kind of have to take your first applicant that is qualified and you cant deny for criminal of more than 7 years ago or something like that and you cant arbitrarily say that 3X is what you need for rent etc etc..
then evictions like in Oregon for no cause will cost you 4 to 5k.. in parts of SF bay area its not uncommon to pay tenant 20 to 50k to get them to vacate..
so its regional.. but the market will set the rent rates.. by and large with new units coming on line or houses that are legally vacant.. but now have to adhere to these new rules for vetting the tenant.. that to me is bigger issue for landlords.. and again I have no dog in the hunt at this time.. but the higher the rents go the more people buy new homes from me.. that I like and frankly for most home ownership is better than life long renting at least for their personal wealth building..
- Rental Property Investor · Madison, WI · Member since 2013 · 629 posts · 339 votes7y
And ... our tenants most often leave us when they decide to buy their own house. We actually require lawn care and gardening so that has worked in our favor. They self-select. We get the ones who care about making the place beautiful.
(we also require a high credit score and 3X the rent),
Wow. I can't fathom 10% per year with tenants in place. Even between tenants, we'll go up, maybe at most, $100, from something like $1200 to $1300.
Oh, and related to a comment above, we had a Section 8 tenant who stayed for 9 years. In general she was good. BUT we needed to coax her out to move to a smaller place after both of her kids finished high school. She was good at milking the system, (which got us upset) but we worked with her caseworker to get her to downsize. Section 8 here has good integrity. They don't stand for moochers in our county's housing office. They provide a very valuable service.
- Rental Property Investor · San Francisco, CA · Member since 2013 · 1k+ posts · 1k+ votes7y
@Jay Hinrichs yes the rent control issue has 2 major components: limiting rent increase and eviction controls (unless there is “just cause.”) You can’t have rent control without eviction control- otherwise every LL will find a way to remove tenants that are under market rent. And yes, the laws you mentioned in Oregon and Washington are very repressive, basically forcing LL’s to accept the first “qualified” tenant. But I believe these laws are already getting challenged in court, aren’t they?
And yes, all the nasty projects you mentioned in SF have already/are getting torn down and re-imaged...meaning the new affordable developments taking their place are re-qualifying tenants, and are NOT managed by HUD anymore, which is god sent. There's a couple in the Mission, 10+ years going, and mostly minor problems; meaning that the private homes very nearby are still selling and renting to solid people at market rates.
As for Stanford, Google, Facebook, etc. contributing to housing in the Bay Area, its a fig leaf at best ;) A- the left leaning municipalities trust corporate efforts about as far as they can throw them. B- I don’t think it will be traditional corporate housing where the Corp can control which people can buy or rent their units, as I can’t fathom that having a chance in hell of being allowed. At best it will be these corps playing a traditional developer roll in an effort to show they are helping the housing situation.
Kind of reminds me years ago, some large power company had issues with birds landing, and getting killed, on their electric wires. So they built these wooden platforms on top of the polls for the birds to land on safely. They spent X thousands of $ building platforms, and subsequently spend 10X $ advertising and promoting what good corporate citizens they were! So...I’m not holding my breath on Corp housing, but it’s sure fun to talk about it!
@Llewelyn A. so are your units off RC because their rent is already over that “magical” NYC threshold? Also, aren’t all 2-4’s with the lower rents under RC in NYC, or only 5+ Bldgs?
I think SF's RC laws are a lot more harsh. As you mentioned, 2-4's were put under RC back in 1994 (prop I), but they were only exempt if they were owner occupied prior to 94, so Corp LL's never had that advantage. Additionally, if you went to the planning dept and asked about converting your triplex to a large SFH, you'd be laughed out of the office here! Can't remove housing units from the market here; almost impossible to do.
But like you said, the oppressive RC regs create inefficiencies in the market that really help market rate units (or RC units that turn over) soar! Although I think SF is one or two steps closer to restricting everything including new construction, condos, SFH's and possibly introducing vacancy controls. If and when that point arrives, like you, I'll be looking at my options. And I have good ones too, as all my units are a priori designed to be sold off as very attractive individual homeowners units, either as condos or TIC's. (Similar to you, my optimized triplexes have the value of many RC burdened and run down 6-10 unit apartment buildings!)
And if that happens, then I guess I’ll be exploring the charms of 1031 exchanges, and possibly commercial properties. Although like @Jay Hinrichs mentioned, I have reservations about entering that space. 10-15 years ago established NNN commercial was seen as a safe and secure no brainer: you accept the limited returns, but benefit from the Corp backed stability. I'm sure the owners of Sears and Toys R Us thought that too. Now you have to be deeply knowledgeable like @Joel Owens to ferret out the good properties. And for a guy like me, who developed my own expertise in my local market, getting into an entirely new market is fraught with risk.
Most of my SF peers plan to keep their properties locally. We still see a good 20 years of strong appreciation and future rent growth. Even with the dark clouds of more RC, it won’t stunt every unit in my portfolio. Plus I can always turn over day to day management to a property manager and F-off from the rat race!
@Llewelyn A. what potential exit options are you looking at?
- Investor / Broker · Brooklyn, NY · Member since 2016 · 665 posts · 1k+ votes7y
This is a general rule for Rent Regulated buildings in NYC:
1) Below 6 units
2) Have not taken advantage of tax benefits that specifically causes the building to join the Rent Stabilization pool.
In 2008, I bought a new Construction of a 3 Unit building that applied for the tax benefit that would have made it Rent Stabilized. I terminated the application despite having very favorable tax benefits. I knew that in the future that rents are more likely to be higher, probably substantially. Limiting that future income for this benefit was not a good trade off if you were thinking of long term buy and hold.
For my exit strategy, I have already laid the ground work by becoming a RE Broker and starting a Brokerage Firm.
If I suspect 4 family and under will be scrutinized for RC, I'll immediately apply to convert to Condos or sell the buildings myself through my Brokerage Firm.
I may even convert a few buildings to single family as there are so many very wealthy NYers looking for BIG homes in good Brooklyn neighborhoods. These I will wind up making up for any loss, hopefully, in the others.
- Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes7y
Originally posted by @Jay Hinrichs:
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.
Rents have been going up in Portland, Eugene and Bend. The rural areas, not so much. Oregon has seen a huge number of Californians move in, many of whom have tons of money to drop on housing. Home prices, congestion and rents have all been skyrocketing. This has lead to a lot of calls for various rent control or rent control-like measures. For example, they just removed the ability of landlords to give no-cause notices without paying a bunch of money. They're trying to implement a revenue tax and I guess the Republican state senators fled the state to prevent a quorum on a vote over some cap and trade bill that would raise gas prices to something like $5/gallon. It's a real mess in my former state from everything I can tell.
- Investor / Broker · Brooklyn, NY · Member since 2016 · 665 posts · 1k+ votes7y
Hi Tanya! I'm glad there are others who can give a different view on RC than the majority.
I do think that in very dense Cities, like NYC, there is a fundamental problem with implementing RC.
I think there is no "if RC is done right" for large, very desirable Cities. Maybe for large Cities that may be on it's way down where there is no problem with Vacancy shortages. But if they have NO Vacancy shortages, why would they need RC?
You are absolutely correct that we should support our Artists like your Mom, and other classes of Citizens that contribute to our great diversity pool,
HOWEVER, there are very big problems that won't happen until much later, most likely decades from now.
An example is when a family gets the benefit of a RC apt, say a 3 bedroom. Then over a few decades, the family naturally reduces their utility of that 3 bedroom apt. For instance, parents with 2 or 3 children who needed the 3 Bedroom apt, where over the decades, the children grew up, married, moved out, and then one of the spouse's passed away.
We don't see this as a problem when we first take advantage of RC, but it is a VERY big problem 2 o 3 decades later.
In NYC, you are required to downsize your 3 bedroom apt to a studio or 1 bedroom if your family has also downsized. BUT... while this is in the RC laws, it is NOT enforced because other tenants come to the rescue of the "victim being pushed out of her apt."
BUT..... in a City where the waiting list has reached decades for a family to have a decent sized apt, it is a tragedy that a family that could have an appropriate sized apt cannot because of the big shortage of large size apts. Unfortunately, if a person who lived in an over-sized apt their entire lives and have an attachment to it, it is seen as very CRUEL to ask them to move to an appropriate sized apt.
There are MANY types of these kinds of issues, human issues, that makes RC fail in the future. It's like a slowly spreading illness that you did not realize until it become too late.
There are many studies that show how problematic this is in desirable Cities. I think you may agree that vacancy rates for large cities with RC is a big problem or that it contributes to low vacancy rates which increases the rent for those who were not lucky enough to benefit by having one of these RC apts?
Here is an article on Stockholm: The city’s queue for rent-controlled housing is so long that it’s being considered by the Guinness Book of World Records. On average, it takes nine years to be granted a rent-controlled property – and that jumps to two decades in some of the most popular neighbourhoods.
I think if RC really did work in the long run, MANY of us Landlords, would certainly be in favor of it.
I would have to say that if I were a tenant and was asked if it's ok to support a specific group, say Artists, but in about a decade there will be a shortage of apts that the Artist can help solve by downsizing to a more appropriate apt, I would be very ok with that. BUT, knowing human nature and how greedy we all are, People who are in RC do NOT downsize when appropriate. What they do is live life without much thought about the other poor family that needs that large apt regardless if that apt's only purpose is to have 2 rooms full of family heirlooms and not housing children.
BTW, I do have lots of Artists living in my apts since I own a few buildings that are very close to Pratt Institute in Brooklyn. I don't really treat them differently but if you are my tenant, you will be treated really well, no matter if you are an Artist, IT worker or Lawyer.
I don't really raise my rents up more than about 3% per year even though I can. My long term tenants are always under market rates regardless.
But I don't really know if there are any big Cities that are a success story.
Does any know of any big, highly desirable Cities that has successfully implemented RC?
Just curious.
- Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes7y
Originally posted by @Llewelyn A.:
Does any know of any big, highly desirable Cities that has successfully implemented RC?
Just curious.
Nope, just doesnt exist. Rent control just has the opposite ends than what is actually intended. The example you use of people not moving is a great example. Housing and rental costs just skyrocket when rent control is implemented. Properties fall into disrepair. The very people (as a group, nor necessarily individuals) that it is supposed to protect becomes victims of rent control. While those in the political arena, and laymen may disagree on rent control....economists on both the the liberal and conservative ends have near unanimous agreement on it. Housing scarcity, no elasticity of demand, housing falling into deplorable conditions,
"The analysis of rent control is among the best-understood issues in all of economics, and -- among economists, anyway -- one of the least controversial. In 1992 a poll of the American Economic Association found 93 percent of its members agreeing that ''a ceiling on rents reduces the quality and quantity of housing.'' - Paul Krugman
But rent control, for the savy investor can be a good thing. Housing scarcity not only drives up rents on non-rent controlled units, it helps drive up asset prices as well. It is not a coincidence that the cities with the most restrictive rent controls coincidentally end up having the highest housing prices. Restrictions on supply, whether real or artificial, help drive up prices for the people who own in those areas.
District Invest Group546 Reviews - Rental Property Investor · San Francisco, CA · Member since 2013 · 1k+ posts · 1k+ votes7y
@Llewelyn A. ok got it on the RC in NYC- not so bad, compared to SF at least ;)
Have you given any thoughts to what you'd do if you end up selling in the future? Like 1031 exchange into other apartments or NNN, or pay taxes and work with the cash? I'm always interested in hearing people's options.
- Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes7y
Originally posted by @Amit M.:
@Llewelyn A. ok got it on the RC in NYC- not so bad, compared to SF at least ;)
Have you given any thoughts to what you'd do if you end up selling in the future? Like 1031 exchange into other apartments or NNN, or pay taxes and work with the cash? I'm always interested in hearing people's options.
sorry to jump in .. but one thing that is lurking out there is rent control for MHPs in the bay area even in the 80s or so.. if you wanted to close a park for HBU you had to pay a very big severance to the tenants.
lots of guys are jumping into parks.. as they know the folks that live there don't have the means to move the trailer if the rent goes up.. and this is causing a lot of problem for fixed income folks I can see this one coming to national attention as well.
I owned a park in Vancouver WA granted small only 45 spaces but we had rent control on that park and I bought that one in 2003 I think took me 4 years to get rents to market then we sold.
- Investor / Broker · Brooklyn, NY · Member since 2016 · 665 posts · 1k+ votes7y
I have been creating my own software in order to scale each part of the Real Estate Business.
For instance, I currently purchase properties with Partners.
Partners add a huge amount of complexity to a business, especially when it comes to Transparency and necessary reports that go along with that.
For instance, one building might have 4 partners, call them P1, P2, P3, P4.
I expose through online reports a bunch of different reports such as:
- Taxable Income for the Year which you give to your CPA
- Rents Collected including which tenants were late
- Maintenance tracking and which Contractors have completed each job and their rating
- Bank Transactions so you can see EVERY single transaction for Partners who want to perform their own Audit
etc.
NOW, the complexity happens when we mix and mingle Partners.
So, let's say we have 2 more new partners, P5 and P6. These two partners were recruited by P1 and P2 to purchase a building so that the building is owned by P1, P2, P5, and P6.
The scenario looks like this when any of the Partners log in:
P1 and P2 can log into his account and will see ONLY the reports for Building 1 & 2
P3 and P4 can log into his account and will see ONLY the reports for Building 1
P5 and P6 can log into his account and will see ONLY the reports for Building 2
It also gets more complex than this as I have teams for managing buildings. I can create Branches such as NYC Branch with a set of Managers and Contractors AND the same for say, Philly.
None of the Managers will see each others info in the same way the Partners cannot see building info except for their own buildings.
Not only that, but it is accessible on any device, including your cell phones. A Building Manager can get a service call and log it in even if he is not in the office. In fact, usually, a tenant will tell a Contractor about another problem while the Contractor is assigned and is fixing something in the apt. The Contractor can then log in the problem for us and take pictures at the same time.
Anyway... this is stuff for another topic! haha! It goes on and on... for instance, I'm now automating door locks, lights, and cameras with smart technologies. These will help with maintenance as I can watch the Contractors perform the fix remotely. I can also detect leaks, etc. So many ways you can make this stuff work for you.
BUT... by making these systems scalable, I will either sell the software to a much bigger firm OR I will scale my own Property Portfolio when I'm ready for that.
I look at my current portfolio as a stepping stone to a much LARGER business to come.
If I exit Owning Real Estate completely, I can just building Real Estate Software or own a very large Real Estate Management company.
There are so many routes to building businesses that I feel I can take any of those routes if one of them suddenly has a road block!
- Rental Property Investor · Los Angeles, CA · Member since 2017 · 2k+ posts · 5k+ votes7y
Originally posted by @Tanya F.:
But even the lowest has to be a living wage.
You're completely missing the point. If there are 1,000,000 people who want housing and only 800,000 houses, it doesn't matter what the people on the low end of the wage scale make. They will never be able to afford a home in that marketplace. There isn't enough supply. Whether the people on the low end of the scale make $10/hour or $100/hour, they will never be able to afford housing in that marketplace. It is literally impossible when demand far outpaces supply.
No it can't. Much like socialism, it has never in history worked. Rent control provides a massive disincentive for developers to build new units which would ultimately reduce rents. It encourages landlords to not make repairs and upgrades. It reduces the property taxes the cities could be collecting by suppressing valuations. It is a taking of property by force from one and giving to another. It frequently reduces rent for people who don't need it. It prevents the relocation of tenants and promotes lost opportunities for those tenants as they don't want to lose their cheap place. It help prevent people from getting the housing they need because existing tenants won't move even if they could have a more appropriate place. It takes rental units off the market as landlords sell their units to homeowners.
How would you feel if the tenants were prostitutes, drug dealers, porn stars, and gang enforcers that couldn't afford housing? Still believe that rent control should be there to help them?
And is it the responsibility of a private citizen (a landlord) to have to subsidize them?
Be careful, those people teaching "high school economics" are the ones (teachers) you believe should have handouts. And whether it be high school economics, college economics, or people with PhD's in economics, they all agree that rent control is bad and doesn't work. When all the experts disagree with you, perhaps you should rethink your position.
- Investor · San Francisco, CA · Member since 2016 · 338 posts · 444 votes7y
@Jay Hinrichs, Going to your main point about rules for selecting tenants, it just doesn't seem very enforceable to me. I guess it might make some landlords think twice, but if we are being honest... there are always landlords that bend the rules on fair housing (whether on purpose or because of ignorance). How can a city possibly keep an eye on everyone?
Also, 20k-50k buy out is considered cheap in SF now. haha. But that does bring up another side point - in SF, you technically have to register with the rent board now before you offer a buyout for a tenant or else you can be sued. However, I know for a fact there are still lots of people not doing that. There's a lot of hurdles to making oddball laws like this enforceable - the tenants need to know their rights, they have to be willing to sue, AND they have to have the time and money to take a landlord to court, plus proving the charge. It's tricky.
- Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes7y
Originally posted by @Robert C.:
@Jay Hinrichs, Going to your main point about rules for selecting tenants, it just doesn't seem very enforceable to me. I guess it might make some landlords think twice, but if we are being honest... there are always landlords that bend the rules on fair housing (whether on purpose or because of ignorance). How can a city possibly keep an eye on everyone?
Also, 20k-50k buy out is considered cheap in SF now. haha. But that does bring up another side point - in SF, you technically have to register with the rent board now before you offer a buyout for a tenant or else you can be sued. However, I know for a fact there are still lots of people not doing that. There's a lot of hurdles to making oddball laws like this enforceable - the tenants need to know their rights, they have to be willing to sue, AND they have to have the time and money to take a landlord to court, plus proving the charge. It's tricky.
my wife and I were chatting about this recently.. we don't talk about landlord issues much.. she is a full time high producing retail Broker. so does not really work with tenants unless they are buying their first house..
Her point was that the professional tenant who knows the laws better than landlords are going to be the ones filing complaints and what not.. And we do know that these agencies send in spies all the time to respond to your adds for rents.. So some will get caught in these type of stings.. and you can bet the professional tenant will be all over this.. that was HER thought..
- Rental Property Investor · San Francisco, CA · Member since 2013 · 1k+ posts · 1k+ votes7y
@Llewelyn A. huh, interesting. I never would have guessed you were deep into building these management systems :) Most of my peers are like you, in that they have some short of shtick that works well for them, and they’re busy scaling that up and building systems and management to grow it.
I take a different route, sort of the slacker investor/owner ;) I’m minimizing the # of properties and units, but own everything by myself, and maximize rental return per unit, so the portfolio is very profitable with a small footprint. I also track all (relevant) financial and management info, but use basic excel spreadsheets, which is easy to do with a small and streamlined operation. So the 13 units I own (split between larger 3/2’s and 2/1’s, condo quality) are really more like 30+ average Bay Area rentals, and more like 100+ class B out of state rentals.
I’m happy with this set up, and really don’t want to sell, but I am worried about oppressive RC legislation. Hopefully it will calm down, as rents really have been mostly flat the last 3 years in SF. If legislators (or voters) aren’t able to get something significant off the ground by 2020, I think this RC hysteria will pause.
@Jay Hinrichs I agree with your wife’s POV. Another reason to have less total rental units, less turnover, etc. I’m all about minimizing exposure.
and @Robert C. indeed buyouts have gone bonkers in SF! I’m lucky I made my moves before all the legislation, which also publicizes buyout amounts for all future tenants to see! The whole secret to buyouts was to do them quietly and in neighborhoods before they gentrify. That way tenants are more open to it, and it’s much easier to make both LL and tenant happy. Now every tenant in SF knows the deal, and in high impacted neighborhoods like the Mission (where I live and also own a few rental condos) tenants are up in arms! I know of a 6 plex nearby where the new owner had a deal with all 6 tenants to buy them out at $125k EACH (not the entire bldg LOL), and they reneged after initially agreeing! Now it’s at a total standstill and political clusterf*ck with eager lawyers involved, and could easily drag on for years.
I much prefer the buyouts I did last decade in the Mission...like the two bike messengers in one dumpy unit of a triplex...nice guys...were happy to move out for $5k each. I paid $215k/unit, spent another $100k for a full gut remodel and condo conversion. Now they’re worth north of $800k/unit (tiny buggers too at 750 sq ft each). But developing in the Mission these days is a blood sport...or akin to giving up your first born...I miss the good ole days in the Mission :)
- Investor · San Francisco, CA · Member since 2016 · 338 posts · 444 votes7y
@Amit M., Same here - all the buyouts I did were before the new requirements. The most I ever paid out was $30k for a couple. Three others were $5-$10k. It's not just the amount of the buyout now, though. Even if you offer $200k, tenants still assume you're trying to rip them off or pull a fast one on them. It's not worth the headache, imho. I only own two buildings in SF - a triplex that is vacant, and a 6-unit in haight ashbury. The latter is a good investment, but the rent controlled tenants there are by far the most bothersome of any I've had to deal with. Most everything else I do is in Redwood City, but even they have passed some tenant protections recently (stupid ones that don't achieve anything).
You mention one big advantage about investing in markets like ours that I think doesn't get talked about much. If you own 100 units out here, that's equivalent to like 700-1000 apartments (or even more) in some other market. That's 1/10th the management headaches, with historically higher return if you hold long term.
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