A Message from AAGLA Executive Director, Daniel Yukelson: The Irrationality of Rent Regulations
Yes…it’s another bright new, shining year! 2023! But will it be a good one for housing providers? I guess we shall soon see.
Already, as I write this in the middle of December in anticipation of our printer submission deadline for our January “Apartment Age” magazine, legislation is lining up in Sacramento in advance of the next Legislative Session that already gives me pause…and, we are not yet even at the starting point! Already in writing there are proposals to limit security deposits to no more than one month’s rent (Assembly Bill 12), expanded eviction protections for senior adults (Senate Bill 37) and a proposed constitutional amendment (ACA-1) lowering the tax raising threshold to just a 55% majority if to fund construction of affordable housing. When will we ever see the end of constitutional amendments seeking to tax us more in our already highest taxed state to attack the problems of mental health, abuse, drug use and related homelessness on our streets being sent to us by other states across the U.S.?
Can we ever build enough housing, particularly affordable housing, here in California? Most likely, not! Definitely, not happening with the way in which we conduct our business here in this state (of suspended reality…) by regulating employers to leave our once “Golden State,” taxing high earning taxpayers into their exodus from our state and leaving the investor money trail with no other choice but to find a home in less restrictive, more business favorable environments like the Carolinas, Nevada, Texas and Florida. Don’t you see this happening all the time?!! Sometimes I think we have too many state legislators with too much time on their hands competing to get bills past the Sacramento goal line just to have their name on something…perhaps Texas has the right formula with its part-time legislature that has fewer bodies to create minutiae and less time to get such garbage passed into law.
And, what’s here in California for housing and us poor, downtrodden housing providers? For six decades, since the 1970s, we have been dealing with the ratcheting down on all of us of more and more cumbersome, excruciating regulations we call “rent control” or “rent stabilization,” and along with that, we have layers of tenant protections to protect against displacement for the multitudes of real or perceived infractions ranging from the most common non-payment of rent to an owner that seeks to remodel his or her property or even “exit” the housing business altogether. And these days, we’ve had regulations piled on which pay for tenant attorneys, allow tenants a “first bite of the apple” to purchase our properties when listed for sale, prohibit owners from undertaking certain tenant screening practices, and that require payment of multiple sets of fees for registration, gross receipts, inspections and on and on and on.
For three years, and counting, we have endured moratoriums not only placed on evictions, but while inflation has been running way to far out of control at 40-year record rates, we’ve been forced to contend with moratoriums on rent increases – the so-called, evil “rent increase freeze.” And, as some jurisdictions have again began allowing us to dribble out a few rent increases here and there, more and more, and we saw this with the City of Santa Monica, these increases are “capped” pretty severely like in the Peoples Republic of Santa Monica at 3% per year that was done through local ballot initiative voted on by the more than 70% of the population who are renters – how is that fair, by the way? Of course, because not many heeded our calls for funding our opposition campaign to defeat Measure H in Pasadena that now sets rent increase limits at just 75% of the change in the Consumer Price Index (CPI), tenant groups are now to be emboldened to seek passage of similar measures in a city near you and me. Watch out Glendale, South Pasadena, Alhambra, and other cities beyond – rent control is on the way. We did not step up and support the opposition, so now tenant groups taste our “blood” and will go for more.
There is just way too much audacity and stupidity associated with all these regulations. They certainly discourage investment in new housing, unless someone is building condominiums or houses that are not being put on the rental market or exempt from punishing rent regulations, and all this complicated mess certainly does not encourage the majority of us (and that includes me) in this rental housing business to want to stay put. It has become so that rental housing is no longer for the faint of heart, but for the “big guys” with “big guns” and teams of lawyers. Perhaps that is the intent of legislators…to rid the world of the small to mid-sized independent owners. Or perhaps it is a conspiracy to ultimately force us out of business and to expropriate our properties? (In case you had already forgotten what Communist life was like during the Cold War, the term “expropriation” is the taking of property from its owner for public use or benefit, or in this case for affordable or homeless housing. Let’s all never forget the meaning of this word and work to avoid its implementation and negative ramifications.)
Let’s look at rent control (or rent stabilization) on its face. Does it make sense that the goal here is to provide affordable housing? When has a rent regulation ever constructed one housing unit let alone the thousands we need! And when did we “landlords” become the villains in this equation? We did not cause nor are we responsible for solving California’s housing shortages? We invested in property to provide housing, not to take away housing. We did not cause, nor do we have much control over mental health, physical or mental abuse, drug addiction, and alcoholism, all of which are the leading causes of homelessness – and not the cost of rent! We have not increased taxes, insurance, the litigious business climate, and the risks of doing business in California – that’s “on” our governments and elected officials. All we have done is bought a little property to rent to the members of our communities in hopes of making a reasonable return and not being hassled by our tenants. Well, that’s not happening!
Why is it that we that own older properties, which is some cases were build pre-World War II and require substantially more maintenance than newer properties, are stuck with the burden of rent controls (a/k/a, price controls) and depressed income potential? What have we of the older property gang done to deserve being treated less favorably then our peers who own the newer properties? We have not engaged in abusive pricing or tried to illegally evict a poor old lady tenant. But, what has happened is the tenants have employed well organized political clout to get a cheap deal on rent – that’s all. And so many that get the price breaks associated with rent control hardly deserve them or need them – there’s no means testing so we often see wealthy renters being subsidized by their poorer, retiree landlords. Walking down South Bedford Drive in Beverly Hills, for example, just South of Olympic, one sees every make and model of expensive German and Italian vehicles owned by renters paying $4,500 per month on up for 3-bedroom duplexes who, but the way, are under rent control in a building owned by someone who is prohibited from increasing rent right now due to a Beverly Hills “rent increase freeze” in place for nearly three years – now how in the hell is that possibly fair!
Sure, some renters do struggle to afford Southern California living, but I could never understand why the government isn’t stepping in more to assist those in need and to do everything possible in its nearly unlimited power to encourage the development of affordable, workforce housing and provide “wrap-around” services to assist those with mental illness and addiction. It happened after World War II and continued until the 1970s…at which point something changed. In came rent regulations and the tossing of the “Golden State” out with the bath water occurred causing building starts to rapidly fall into decline. The government needs to look long and hard at the situation it has created here and to stop pointing its finger at rental housing providers. We will offer our hand to help, but we cannot solve the problem for you Mr. Government.
In the meantime, we here at the Apartment Association of Greater Los Angeles, as your supplier of advice, as your advocate at all levels of government, and your purveyor of this excellent magazine…we will continue to fight on your behalf in every way by putting up the strongest offense possible and play defense when needed. We are in your corner. You never have to worry – we have your back. And, if we don’t get our way, we will file more lawsuits and win injunctions just as we have against the County of Los Angeles. But we cannot do it alone, so please consider helping us by making a generous contribution to one of our Political Action Committees and to our Legal Fund. The additional financial support we get for our government advocacy efforts and to wage legal battles is extremely important – every little bit we get counts and helps us to go the distance. Survival in this business is a team effort.
Before I leave you from this great editorial, let me share with you a thought expressed by one of the prominent landlord attorneys who appeared on a recent webinar:
“A lot of the time, when you are in an organization like the Apartment Association of Greater Los Angeles, you pay your membership fees and don’t necessarily know where they are going towards. Here, in this instance, I can give you concrete proof. Dan [Yukelson] didn’t ask me to phrase it this way, but I can give you concrete evidence…practical results from what it is you are paying for. The Apartment Association of Greater Los Angeles had filed a lawsuit against the County of Los Angeles seeking to set aside and obtain a preliminary injunction prohibiting the County from enforcing certain portions of its [eviction] moratorium. They hired [law firm] Rutan & Tucker …and I followed all of their motions and pleadings. These were probably the finest drafted motions I’ve ever read in my career. It was really, really, top-notch and, as a result…low and behold the judge actually did grant the preliminary injunction and basically told the County that December 1st you [County] are not to enforce the parts of your moratorium that have to do with nonpayment of rent for a variety of reasons…”
- Niv Davidovich, Esq., Managing Partner, Davidovich Stein Law Group
With your support, we can make changes happen and we can win. Please always keep the Apartment Association of Greater Los Angeles at top of mind and in your hearts, and give us the resources we must have to protect your interests and property rights. We will always be there for you…please be there for us too.