Message from the Executive Director August 2024

Introduction

As a child, I learned that one size doesn’t fit all. Yet it always seems that the policies and approaches imposed upon us by our elected representatives are predictably standard and never tailored to individual needs. As a result, despite the best intentions of our legislative bodies, it seems impossible to avoid unintended consequences, and very often, the obvious lack of foresight can turn out to be harmful or trigger the entirely opposite results than those intended.

Case Study: Assembly Bill 2216 (“Pet Bill”)

• A case in point is this year’s proposed state Assembly Bill 2216 or better known as the “Pet Bill.” Proposed with seemingly the best intentions to allow pet owners and their furry friends to have more housing choices and to be able to more easily find housing by forcing rental property owners to accept standard household pets with very few exceptions, it’s passage would have resulted in unintended consequences abound. 
• Passing the “Pet Bill” would have resulted in far fewer housing choices for California’s renters, and result in a whole host of other complications.  
• First, there are renters that do not want to live next to or within close proximity of animals because they suffered a dog bite and fear being around dogs, and others who suffer from severe allergies to pet fur or a pet’s dander.
• To add insult to injury, this poorly thought-out proposal was authored by the same member of the state assembly, Matt Haney, who’s 2023’s Assembly Bill 12 restricts security deposits to one month’s rent. Nice guy that Mr. Haney!
• Fortunately, our Association’s advocacy efforts on this poorly thought-out bill bore results, and Assembly Bill 2216 failed to move forward.

Issues with Rent Control and Tenant Protection Regulations

One Size Fits All

• Moreover, rent control and tenant protection regulations in general are themselves created to be a one size fits all approach, but are in no way a workable solution as all such regulations carry far too many unintended consequences – in fact, an exponential quantity of unintended consequences! Why? Because everyone benefits from the poorest of the poor to the richest of the rich tenants. 

Wealthy Tenants

• Consider a wealthy tenant in the City of Santa Monica who lives in an Ocean Avenue apartment with a 180-degree ocean view or a tenant living along the Wilshire Corridor in a high-rise, and can afford $5,000 per month…heck, even $10,000 per month rent or more apartments.
• These wealthy, upwardly mobile tenants have also been protected by local rent “caps,” and in the case of the City of Santa Monica, for example, they are protected with a very low allowable annual rent increase equal to a small percentage of the Consumer Price Index (CPI) that is further limited to just $76.00 per month for this upcoming fiscal year.
• How in the world does what in effect has become “stealing” from owners renting these luxury units end up helping those tenants who struggle at the lower end of the income scale? Here, one size does not fit all for sure.

Property Ownership

• Moreover, there have been documented instances abound where wealthy or moderately wealthy tenants, having held onto their low rent, rent controlled apartments for years, have been able to afford a property or properties of their own.
• Continuing with our Santa Monica example, there are instances where these low paying, subsidized, extremely entitled tenants live in the property they own someplace outside of the city while they continue to maintain their “beach pad” under Santa Monica’ rent control regime. 

Long-Term Tenancy

• This property-owning tenant situation creates the obvious unintended consequence of reducing the supply of badly needed rental housing within a city.
• The fact is that under rent control, tenants stay in place far longer that needed, even after the usefulness of their rental unit has ended, such as when a single parent hangs onto a three-bedroom, rent-controlled apartment for many years after their children have moved along and their spouse has passed-away (or divorced) because they are so far below market that even a one-bedroom unit at market is more expensive.
• Again, this is an unintended consequence that not only reduces housing supply but takes a rental unit off the market that is best suited for a family with children.

Effects on Career and Lifestyle

Reluctance to Relocate

• Renters who live in a rent-controlled apartment often are unwilling to relocate under any, even the best of circumstances, including to pursue career advancement opportunities, and often they chose to not take that better, higher paying job. 

Community

• Most often when they do choose to take the better job, they are more often willing to commute long distances rather than move and give up the coveted, below market (landlord subsidized) lifestyle and apartment. 

Private Welfare 

• In effect, rent control has become a form of private welfare that has been imposed solely on the backs of rental housing providers. But, perhaps in this instance, private welfare is an intended consequence.

Economic Impact

Revenue Effects

• The rent subsidy given tenants through the imposed rent limitations or “price controls,” not only leads to lower income and thus lower income tax revenues, but also lower property values and thus lower property taxes.
• These private welfare subsidies are spread across the board, to rich or poor, and often can force the best of us out of the rental business particularly during years of continued skyrocketing costs, unavailable and/or higher cost insurance coverage, and the ongoing regulatory restrictions placed on property owners that vastly increase the risks associated with providing the very necessary roofs over tenants’ heads.

Luxury Vehicles

• As I walk the streets in some of the rent-controlled cities, I pass by apartment buildings that have a variety of cars that are parked in parking spots or on the street in front or the alley in back.
• I am often struck that the people who are living at these rent-controlled properties can often afford luxury cars by Audi, Mercedes, Lexus, Porsche and Tesla…and sometimes even more luxurious brands. While some may be successful in their careers, I have to conclude that in many instances, these tenant luxury vehicle purchases are funded, in part, with the rent subsidy provided by rental housing providers like us.

Proposed Solutions

Means Testing

• If only the rent subsidy of rent control could be provided to only those who need and qualify for it.
• Then, property owners could charge higher market rent to tenants who can afford to pay, more income and property taxes will be generated for the government’s coffers.
• And then the government would have the funds to afford the rent subsidy in the form of providing rental assistance to those who are truly in need. 

Conclusion

Only through means testing of tenants and qualifying tenants for rent breaks based upon income levels, and using government provided rental assistance can we eliminate the unintended consequences associated with draconian rental housing regulations that have plagued us for the past 4-plus decades.

Daniel Yukelson is the Executive Director of the Apartment Association of Greater Los Angeles. He lives in a Los Angeles Area apartment with his 140-pound St. Bernard named Bella.