All Forum Posts by: Jon Schwartz

Brent,

Tearing down older homes and replacing them with beautiful homes is big business all over LA. Though, usually the homes aren't actually beautiful; they're just big, "modern" boxes because more square footage will produce a higher sales price.

BP is mostly mom-and-pop investors, so I'm not sure you'll get the best input from these forums, but your business model is profitable and executed in LA all the time!

Best,

Jon

Jonathan,

I know ADU builders and investors who have built ADUs. I don't think I've worked with anyone yet who's built an ADU for the investment. And I began to build an ADU, but it was actually more economical to sell the house before the ADU was fully permitted, so I didn't complete it.

Would you be interested in referrals to ADU builders?

Best,

Jon

My pleasure! With LA's rent control and insane market, proper research really gives an investor the edge.

And right now seems like a smart time to buy a condo as they're out of fashion in this COVID moment.

Best,

Jon

@Nick Moreno, made any progress on figuring out your next move?

Hey Collin!

I'm an LA investor with a focus on data analysis -- though, not like AI or anything that fancy. I'm more about crunching Census Bureau data to find good pockets for longterm growth.

What kind of investing are you into?

Best,

Jon

Dude, killer!

I'm househacking with a wife and baby -- but we just bought a duplex and moved into one side.

You are killing it! Much impressed.

Pablo,

I've heard of Socal investors having plenty of success renting on Airbnb and VRBO with 30-day minimums. Post your rental on those platforms ASAP! 

Best,

Jon

Here's a resource for retail, but it ain't free:

https://retailopeningsandclosi...

@Kyle J., I’m satisfied that anybody who’s actually interested in understanding Prop 21 will read my post.

Moving on!

Sorry, Kyle, but this isn't an "agree to disagree" situation in my book. I'm happy to disagree over politics or sports, but it's really important that you and @Bruce Leong and everybody else who's voting in CA this year understand what these propositions mean. It's also really important that anybody who chimes in with an explanation actually knows what he's talking about.

So let me make two general points, and then I'll dissect the actual text better so that you understand.

My first point is that you're misunderstanding even the text of the voter guide, which says:

Allows rent increases in rent-controlled properties of up to 15 percent over three years at start of new tenancy (above any increase allowed by local ordinance).

You conveniently left off the parenthetical, but when you include it, it's pretty clear what the prop does: allows increases of up to 15% over local ordinance at vacancy.

Understand that, in a legal sense, "allows" means the same thing as "protects" when you're talking about state law, which is superior to local ordinance. So by "allowing" an increase up to 15% over local ordinance, this state law would actually protect an increase up to 15% over local ordinance.

For example, if a state law "allows" abortion through the twentieth week of pregnancy, the law would actually be protecting that duration from local ordinance. (Sorry to bring up a controversial issue, but it works perfectly as a similar example). Local ordinance might make rules about facility condition or administrative requirements, but local ordinance wouldn't be able to impinge on that 20-week period because it is allowed/protected by state law.

So Prop 21 would allow/protect a rent increase of up to 15% at vacancy in addition to whatever vacancy control ordinances are put into place by cities and counties.

(As I'm sure you know, currently no vacancy control ordinances exist because Costa-Hawkins outlaws them. So Prop 21 would apply to ordinances enacted in the future.)

Also, you missed some language that follows the bullet points. Look at the sentence that starts at the bottom of page 52 of the voter guide and continues onto page 53:

In addition, cities and counties can limit how much a landlord can increase rents when a new renter moves in. Communities that do so must allow a landlord to increase rents by up to 15 percent during the first three years after a new renter moves in.

That sentence is confusing, but there's no way it means that cities and counties must cap rent increases on a new renter at 15%. It clearly says that cities and counties that pass vacancy control laws must allow landlords to raise rents up to 15% before the local laws can start restricting the landlord.

My second point is that Prop 21 is literally a re-writing of Costa-Hawkins. If you look at the actual text of the prop at Ballotpedia, you'll see regular text, italicized text, and strike-through text. This is literally original Costa-Hawkins language, new language, and original language that's being struck.

So keep in mind what Costa-Hawkins is: it's a law that puts limits on cities' and counties' reach when enacting rent control. Costa-Hawkins says, "Cities and counties can enact rent control, but not on single-family homes, not on building built after 1995, and not when there's a vacancy."

Prop 21 is literally adjusting the language of these three exemptions. It's not in itself a rent-control law. It's actually a law that restricts rent control, and the third exemption is being changed to say, "Okay, now cities and counties can enact rent control when there's a vacancy, but if you do, landlords shall be allowed to raise rent by up 15% regardless of what ordinances you come up with."

Now let's go back to the text, and I'll try to break it down phrase-by-phrase so that you can comprehend it. I'm going to quote the text in italics, then rephrase it for you in quotes, and then explain the phrase when necessary:

(a) Notwithstanding any other provision of law, and except as provided in Section 1954.52 and in subdivision (b) of this section,

"Whatever we're about to proclaim has some exceptions, including subdivision (b)..."

a city, county, or city and county may by local charter provision, ordinance, or regulation control the initial and all subsequent rental rates for residential real property.

"... cities and counties can set rents and rent increases"

Okay, so far, we're giving all rent-control power to cities and counties, but with a few exceptions, including subdivision (b), which immediately follows. Keep in mind, now, that subdivision (b) is an *exemption* from the power just bestowed.

(b) In any jurisdiction that controls by charter provision, ordinance, or regulation the initial rental rate of a dwelling or unit, if the previous tenant has voluntarily vacated, abandoned, or been evicted pursuant to paragraph (2) of Section 1161 of Code of Civil Procedure,

"In any city or county that passes an ordinance to control rent at a vacancy..."

This phrase is necessary because, thanks to Costa-Hawkins, no city or county is currently allowed to regulate rents when there's a vacancy. This is called vacancy control. Costa-Hawkins outlaws vacancy control. Prop 21 allows cities and counties to enact vacancy control. So this phrase makes it clear that subdivision (b) applies to cities and counties that decide to pass some kind of vacancy control ordinance.

the owner of the dwelling or unit shall be permitted to establish the initial rental rate for the vacant or abandoned dwelling or unit provided that

"...the landlord is permitted to set whatever rate he wants for the vacancy if..."

Well this is good news! It looks like subdivision (b) is going to let landlords set their own rates at vacancy even if the city or county enact vacancy control. Yay! Oh, but there's an "if." Let's see what this "if" is...

the initial rate established pursuant to this subdivision,

"...the new rental rate..."

in combination with any increases in the rental rate during the subsequent three year period

"...plus whatever increases are allowed over the next three years..."

is no greater than 15 percent more than the rental rate in effect for the immediately preceding tenancy.

"...is no greater than 15% more than the rent of the outgoing tenant."

There you have it, Kyle. I'm going to string my re-phrasings together so it's very clear:

"In any city or county that passes an ordinance to control rent at a vacancy, the landlord is permitted to set whatever rate he wants for the vacancy if the new rental rate plus whatever increases are allowed over the next three years is no greater than 15% more than the rent of the outgoing tenant."

So by state law, which is superior to local ordinance, a landlord can set any rental rate he wants on a vacancy so long as the increase over the outgoing rental rate is 15% or less. I know this is confusing, but what it means is: the landlord is protected in setting any rate he wants up to 15%.

Any increases in the initial rental rate permitted by and established pursuant to this subdivision may be in addition to any increases in rental rates otherwise authorized pursuant to local law.

"The rental increase we're discussing in this paragraph is in additional to anything that local ordinance says."

This last sentence says that the landlord's protected rental increase of up to 15% exists on top of any local law.

Is this still unclear to you, Kyle? If so, rather than "agree to disagree," please let me know where I'm wrong.

And again, keep in mind that this law sneakily allows vacancy control. It strips Costa-Hawkins of its protection against vacancy control. And subdivision (b) only apply to cities and counties that decide to enact vacancy control.So if Prop 21 passes, how will that affect us as landlords when we wake up on Nov. 4? As regard vacancy control, there will be no immediate change. Cities and counties have to pass a vacancy control ordinance for subdivision (b) to apply to them. And if a city or county does pass such an ordinance, subdivision (b) is the mechanism by which a landlord can set his own new rate: so long as it's no greater than 15% above the previous rate, he can do it. I know, the language is confusing, but that's how legalistic language is.

Best,

Jon