Rent Control Discriminates Against Mom ‘n’ Pop Landlords

Santa Barbara's Overlords Don't Get the Economics of Rentals

Credit: WikiCommons

As an American, I never thought that I had the right to control the property or business of another individual as a result of my personal desires, whims, or for political gain. I was raised to believe that the individual who built his business, and who invested, owned and maintained his property, had the right to decide how to run their business and/or property. To this day, I am proud to say that I have never claimed that I had the power, or the right, to steal from anyone, or claim that I had the right to tell anyone how to run their investments and businesses.

As Americans, didn’t we all believe this? When did this become a controversial position?

And why is this concept so important to all of us? Well, if someone, at any time, could decide to take away what one has built up, or such a person could direct the future of someone else’s business, no one in their right mind would ever invest their blood, sweat and tears — the irreplaceable years of their lives — into building, owning, and investing in anything.

In fact, just look at what is happening now with the COVID-19 lockdown. Is it not obvious that many will never be able to rebuild and/or reopen? However, even among those who can rebuild, will they? Should they? Who would invest their life’s work into something that can be snatched from them at any moment again — and again. Should they just carry on while always looking over their shoulder in fear knowing that it can all be taken away from them; that someone in government — who pays no personal cost — can decide their fate?

Would you put all you have into such a venture?

And so we come to the appointed overlords of Santa Barbara who have decided that they alone have the power to decide how rental property owners should be forced to own and manage their properties. Who are these people? Who gave them the right to think that they have this power; a power of control that clearly flies in the face of our inalienable rights.

So, let’s get down to brass tacks, shall we? If these overlords had any business background, or even a sense of basic economics, they would understand that the 2 percent rent cap, huge “relocation” costs, and so on, are not only a violation of rights but are economically untenable.

Properties are expensive to maintain. Just how expensive? Well, let me give you a real-world example of a 1960s-era 15-unit stucco-over-wood apartment building. This is a typical “mom-and-pop” property. Many of our small, multi-residential buildings were built in the 1960s, and they are in need of renovation. Such renovation includes replacing the old plumbing, which is past its useful life, with new plumbing, and much more. Want to guess how much real-world renovation of a circa 1960s bread-and-butter building costs? I am looking at real bids now, and here are the numbers:

First, one will need to call in abatement contractors to deal with the asbestos and/or leaded paint that is in these older properties before you can touch most sheetrock, flooring, and bathroom/shower walls. That alone is thousands of dollars.

Then, the plumber will replace all the old plumbing. Copper supply lines will cost $85,500 (Pex flexible plastic supply lines will cost $69,000). New shower valves will be another $10,800. Then, the main water-line replacement, including trenching and traction, is another $4,100. Then, to remove and replace the old drain and sewer pipes and replace them with ABS piping will cost another $62,250. A new 100-gallon water heater, with a new circulation pump, is another $1,150. The total, going with copper supply lines, adds up to $164,050.

And remember, that $164,050 is only for the plumber’s work. Abatement, sheetrock replacement, shower wall rebuild, new cabinets, new flooring, and so on are not included in that price. Bids for this can come in at $50,000 per unit. If you could do it cheaper, say $40,000 — which would be cheap with new baths, cabinets, and appliances — that would still be $600,000.

Now, what about that old roof? If this is a flat-top roof, and there is a separate carport, the cost of replacing them (including the estimate that much of the underlying plywood will need to be replaced) will cost in the neighborhood of $80,000. (Assuming it is a two-story property. If it is one-story property, then the square footage of the roof would obviously be more.)

And remember, prices are going up. The last time a main roof of that size needed to be replaced, the cost was closer to $25,000.

Repaving? Not even included.

Remember, rents rise because costs rise.

Now, before you mention refinance, let me explain that in the real world, banks want to know that they will be able to get their money back. So, those rent caps and expensive relocation fees, and so on, are going to be taken into account by any bank that might be willing to loan money to an existing owner, or new buyer.

Then, on a day-to-day basis, consider property taxes, utilities, legal and management fees — tell me how this ordinance is going to work? Of course, it will meet the political desires of those who are buying votes with the private equity, sweat, and investment of others, but it will devastate the quality of existing housing and, sure as heck, will chase new housing out of the city; likely out of the state.

Look, property owners want to keep up their buildings; they want to do nice things for their tenants — this is especially true for the small mom-and-pop owners. Many owners are older people who invested and ran their businesses so that they would be able to retire without being a burden to their family, or society. Many planned on paying for their child’s or grandchild’s schooling.

To have a group of people, who themselves will, hypocritically, bear absolutely not a shred of personal cost, decide that they have the right to force others to provide public welfare, which should be a state issue (that’s why we have food stamps versus demanding that grocers absorb the cost), on the shoulders of a small group of private individuals is repulsive. The fact that many of these owners are older people, whose loss of income and equity will be substantial, is repugnant.

This is discrimination.

Father Time: Take special note that these older owners no longer have the time to replace what is being stolen from them and, had they known decades ago that this could be done to them after all their years of saving and management, many would have made different investment decisions; and most of those alternative investments would not have involved dealing with all the headaches that come with managing rental property!

And think about the tenants. While our overlords are free to decide to buy themselves new carpeting, dishwashers, and other nice amenities for their own homes, the renters — those they claim they are “helping,” — will not be able to have certain upgrades as this ordinance will make those things impossible.

This ordinance should never be passed.

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