Since when the landlord becomes the tenant personal banker?

23 Replies

http://northwestapartmentinvestor.blogspot.com/201...

So now does the landlord is obligated to shop for the bank bearing highest interest for the tenants? Or the landlord will be penalized if fails to do so? How about paying tenants dividend or 10% captain gain as if they are the shareholder of your rental property? 

Chloe Eudaly needs to use her time on fixing the broken bridges getting ready for the BIG ONE and filling pot holes all over PDX.

Portland Commissioner Chloe Eudaly announced she plans to call for reform of rental housing deposit regulations and is considering:


(a) limiting the deposit amount;
(b) requiring that it be held in an interest-bearing account; and
(c) clarifying the definition of reasonable wear and tear.

In an article published in today's Portland Tribune, Eudaly claims to have set up a stakeholder committee meeting of landlords, tenants and housing advocates. Upon learning of the commissioner's plans, Multifamily NW -- the state's largest association of housing providers -- asked Eudaly's office to be allowed to participate. The request was declined. Sources report Eudaly's stakeholders have already held one of three planned meetings to discuss the issue prior to recommending reforms.

There are requirements similar to the interest-bearing account for assisted living facilities and it's pretty easy to comply with them. It just says interest-bearing, doesn't require a specified return. Throw it in a separate account, allocate the 6 cents of interest each month and move on. 

It's not about the easiness of throwing the deposit into interest-bearing account. Beware that this is just the beginning of Chloe Eudaly's game to drive the small owner up against the wall. No cause eviction, rent control, limited security deposit, moving fees...what else? And how does any of this new ordinances solve the affordable housing? I can't held thinking if Chloe Eudaly works with the big developers behind the scene wiping out small owners to help the big players monopolize the rental housing market. Just look around Portland these day with the new development of luxury apartment grows like a weed. Remember big developers pay big money every year to the City including development fee, property taxes and all sort of benefits behind. The small owner does not. 

I can very confidently state that Eudaly isn't working with big developers to pinch us small guys. Find good tenants, treat them like fellow human beings, and you'll be just fine. 

I spent 6 hrs watching the Moving Fee drama unfolded in the City Hall. The Moving Fee as a form of income to low income family is a toxic pill because 

1_the moving fee is taxable by the City and State 

2_Additional income could get their Earn Income Credit and Housing Assistance reduced and disqualified  

3_Additional income could make the low income family disqualified for Medical benefit which force them paying out of pocket for Obama care or penalized by IRS for being uninsured.

In that meeting, only small owners showed up giving testimonials and protest. No big player even bother to show up as none of these new ordinances can put them out of business. Chloe Eudaly simply took advantage of people emotion passing a moving fee ordinance knowing that it would only back fire the low income family as an "Unintended" consequences. 

At the end of the day, Chloe Eudaly is a politician. 

@Kelvin Lee Eudaly's ultimate goal is to overturn the ban on rent control. She's doing these little things to prepare for that. When all else fails (because these will fail to solve the rent problem) she'll have more ammo for passing rent control laws in Portland. Fortunately there's plenty of cities in the PDX metro area not affected by this. 

I agree with Steve totally. All these new ordinances if passed would only mow down all small rental property owners, which are the majority of rental housing supplier, and open the gate for the big developers taking over the rental market. The vulnerable low income tenants can only see forever increasing rent with this out of balance ecosystem. Big player won't be affected much by rent control as they have sufficient cash flow from over thousands of units. After all, Chloe Eudaly who uses low income people emotion to wipe out small owners, becomes a winning child to the City and State who successfully generates more revenue from and for the big players.

I agree, @Kelvin Lee and @Steve Moody , Eudaly is bad for tenants and small landlords. She, and many of her supporters, misunderstand the mechanics of the residential real estate market. I don't know whether she's taken the time to understand the consequences of her actions. 

@Matt Garboden , it's not that simple. The controls proposed by Eudaly raise substantial barriers to small real estate investors that cannot be surmounted by being nice. A REI who buys in today's market from a seller who bought at a substantially lower price MUST raise rents to cover the mortgage on today's price. Buyers will start requiring vacancy or price reductions to account for the rent shortfalls buyer will face when attempting to carry the property. 

I would like to educate renters and Eudaly but I am not optimistic. 

 @Max Brunke  I get it, those are valid statements, but isn't the commissioner's concern for rent affordability valid, as well? This isn't a vigilante legislator. There's a large portion of the city's population calling for something to be done. It feels as if you're dismissing one side of an equation. Is there something you would propose to help with this problem?

After all, the real estate market is a free one and if the returns desired aren't there, capital will flow elsewhere, prices come down, necessary rents come down, rinse, repeat. Correct?

Can anyone explains why the City keep approving luxury apartment new construction one after another instead of building an affordable apartment for the low income group on the same piece of land?

Originally posted by @Kelvin Lee :

Can anyone explains why the City keep approving luxury apartment new construction one after another instead of building an affordable apartment for the low income group on the same piece of land?

Because the goal of a real estate developer is to generate profit, not to facilitate someone else's needs.  Development has many fixed costs that are the same for luxury apartments vs affordable housing.  If your return is better for building luxury, why on earth would you build into a market with worse returns?

@Matt Garboden , the concern for rent affordability is valid. If the response to the concern is pointing fingers, we have a problem and not a solution. The ability for the largest land owners to absorb costs does not prove other landlords are price-gauging jerks. The responsibility to provide affordable housing is not the responsibility of a single group.

In my view, there are conditions in the Portland real estate market that are beyond the control of most landlords. Landlords did not set federal interest rates which have been at historic lows causing increases in prices. Landlords did not (well maybe some) make Portland a desirable place to live and work. For many landlords, who we call moms and pops, the controls proposed are too onerous. 

I disagree that any U.S. real estate market is a free market. There are hundreds of regulations from the local level up to the federal level directing real estate market participants. Landlords cannot discriminate against protected classes of individuals. Landlords cannot rent dangerous units. Nor should they. 

The fact that landlords and tenants respond to market factors does not make the Portland market free or efficient. I agree with you, @Matt Garboden, if rents or cap rates aren't good, if investments don't pencil out, investors will not invest. But that's the problem if you take a market approach. It doesn't necessarily follow that prices will fall. Demand would have to be constant (stagnant) for supply shifts to explain 100% of market price. Rental affordability (price) is not solely a factor of supply or demand. It's a combination. 

A VERY unpopular opinion I enjoyed is this: Much of Portland should be down-zoned. This view assumes sales prices are high because everyone thinks their property will be the next higher-density development. They want the big payout the last guy or gal got. So everyone holds out. The problem of hold outs is well studied and I think it explains some of the pricing and affordability problems in Portland. 

I also believe demand partially explains Portland's high rents and prices. I don't believe setting a price ceiling or imposing taxes on supply will give us more affordable housing. We need more units constructed to catch up with demand, not fewer. Portland should be doing everything it can to attract real estate developers to increase housing supply to reduce rents. Right now, the new buildings coming online have ridiculous prices, more competition, in the market theory, is the right response. How this ought be done is another story.

Originally posted by @Frank Jiang :
Originally posted by @Kelvin Lee:

Can anyone explains why the City keep approving luxury apartment new construction one after another instead of building an affordable apartment for the low income group on the same piece of land?

Because the goal of a real estate developer is to generate profit, not to facilitate someone else's needs.  Development has many fixed costs that are the same for luxury apartments vs affordable housing.  If your return is better for building luxury, why on earth would you build into a market with worse returns?

Well said. So the way the Ted Wheeler and his team wiping out small landlords is for bigger profit from the real estate developers? If so, do you think they get kick back from the developers behind? 

Originally posted by @Matt Garboden :

 @Max Brunke  I get it, those are valid statements, but isn't the commissioner's concern for rent affordability valid, as well? This isn't a vigilante legislator. There's a large portion of the city's population calling for something to be done. It feels as if you're dismissing one side of an equation. Is there something you would propose to help with this problem?

After all, the real estate market is a free one and if the returns desired aren't there, capital will flow elsewhere, prices come down, necessary rents come down, rinse, repeat. Correct?

Yes Max, affordability is a problem, and Chloe is trying to "do something" about it. Milton Friedman said (approximately), policy should not be judged by intentions, but rather outcomes. Remains to be seen whether these policies will solve the Portland housing 'crisis,' doubtful. On the other hand this crisis has already been used as a pretext to erode individual liberties, which could turn out to be a bigger deal in the long run. Regardless of cash flow, ROI, my optimism about Portland in general, I am reluctant to invest more in a city and likely the state want to increasingly constrain my business and property. Just philosophically does not suit me. Surely I am not alone. Reduced investment, reduced new units, and that outcome is presently in affect.  I already know the new rules better than the people who wrote them and I will continue to be the best landlord my tenants ever had.  However, if the city (people) of Portland want me to put more skin in the game then they will have to put their money where their votes are. This could take the form of a means tested voucher system funded by all residents if.  

@Kelvin Lee

The term you are looking for is called "regulatory capture"  and we have certainly seen that big business is now a strong supporter of left wing politics in an effective effort to drive smaller competitors out of business.  These mid and small businesses can't easily pay government imposed fee's and conform to expensive compliance mandates.  This has help to lead to a compression of the middle class in this country over the last 14 years.  This self-sabotaging process also helps sell more of the same problem to economically ignorant voters which exacerbates the problem the politicians are pretending to solve.  

Now, I'm not sure if large Portland developers are engaging in regulatory capture, it's unclear if hampering smaller landlords with regulations, forced subsidies, taxes, and mandates really benefits them, but I wouldn't discount that notion out of hand.  However where you really went off the rails is that silly statement of thinking to punish your perceived enemies by asking them to subsidize class D tenants on Class A property;  that's a terrible idea. Who do you think is going to pay the difference between the fake, subsidized rent and the actual market rent?  At least Section 8, aka housing vouchers, make some economic sense.  Mandating an allocation of low-cost, highly subsidized, housing in class A areas is just terrible economics.  You should try to be more ideologically consistent, otherwise you come off as juts a self-interested landlord, not unlike many of our swarmy politicians.

@Matt Garboden   we can engage in a Socratic conversation dealing with lofty moral proclamations and virtue signalling.  However at the end of the day I think any reasonable person would see that Chloe Eudaly is clearly a self-important, economic ignoramus, who is a power hungry SJW on a mission to impose as much socialist regulation as she possibly can.  All things that don't inconvenience her in the least - just others.    So it's kind of silly to defend her under the guise of "well just be a good person and it won't effect you". Who do you really think is going to pay for the majority of these "tenant friendly" regulations?  It's the tenant that is going to end up losing and paying more, as most intelligent landlords are pretty adept on passing on rental related costs to the tenant.  But as long as there are more tenants than landlords this crap sells in Portland, especially as we are picking up more of the "educated" highly-paid, west coast effete elites from San Francisco and Los Angeles who are moving up here largely to avoid the problem they created at home.

Portland = San Francisco -10/15 years. Our rent control political advocates are out of control. We have had so many nutty SF rulings overturned for violating state law it's not even funny. Study our rent control evolution to get a glimps of your potential future... it ain't pretty!

Who believe Chloe Eudaly and Ted Wheeler know nothing about the "Unintended Consequences" would be naive. There is no coincidence fooling the low income group with their own emotion to mow down small owners with all sorts of ordinances, working with big players to generate more revenue by approving land use for building luxury apartment only yet screaming for Housing Crisis for lack of resource on affording housing?? And now luring the individual home owner to install a "FREE" micro ADU in the back yard for the homeless to give the City an excuse to raise the property taxes 5 years after. At the end of the day, both middle and low income classes suffer. The biggest winners in this game have always been the City and the 1% richest.

@Matt Garboden Help me understand how these regulations help? It is not like they are proposing anything new that has not been tried by other cities. 

I have not seen any of these regulations translate into the result they are seeking. 

Matt, do you own any real estate?

@Derrick Aragon I do have several rental properties.

I think several other posters have turned my original comments into something of a straw man. 

I'm not strongly for or against the regulations that have been proposed. I get the need for tenant protections against drastic rent increases and no-cause evictions which cause chaos in the community. The 90-day notice of rent increase seems pretty reasonable, I'm more on the fence about the no-cause, cash for keys thing. 

I personally see the investor/tenant relationship as symbiotic rather than adversarial and think that railing against every protection like it's the end of the world is a bit silly. 

@Matt Garboden

It is not symbiotic relationship, it is a contract between 2 parties.

Landlord tenant relationship can act symbiotic in small cases, but if either one of those parties doesn't agree they revert to the contract. 

thanks for sharing. 

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