Landlords in the Black

“Landlords operate on very thin margins in Santa Barbara.” That’s the first of many unsupported claims made in the Voice titled “Rent Control Will Harm the Poor” in last week’s paper. Not just unsupported, in my experience laughably untrue.

My landlords have been consistently and significantly in the black, a circumstance that’s not hard to achieve when the house has been owned for more than a few years.

Oh, but wait, his bio says the author, Jeffrey Harding, is a real estate investor and adjunct real-estate investment professor. The author’s concerns are driven by a “real estate as an investment” agenda, not “real estate as a place to live.”

In many markets, 20-30 percent of recent single-family home sales have been to investors, with the intent of offering them for rent. Minimizing the down-payment, as an investor would seek to do, means maximizing the monthly rent to cover the costs of servicing a larger mortgage. These are the people Mr. Harding is watching out for.

For each category of Santa Barbara rentals (single-family homes, apartments, etc.), I would like to see following breakdown for purchases made for investment purposes:
– percent bought within the last three years
– percent owned for 5 years
– percent owned for 10 years
– and so on to 25 years. These data would speak to the profit margins on which Santa Barbara landlords operate.

Editor’s Note: We asked Jeffrey Harding if he’d like to respond: “As a landlord/investor, I see rents increasing over the years because of (1) a shortage of rental housing, and (2) inflation, which is caused by the Fed. Also, operating costs rise because of (1) inflation and (2) rising maintenance costs. I’m sure there are landlords who aren’t operating on thin margins, but I know a lot of them and it’s a struggle. One reason I don’t invest in apartments is that today in Santa Barbara, your net profit, even if you pay all cash, is about 3 percent. Only if you hold it for years do your profit margins improve. Plus there is the sword of rent control hanging over your head. I’ll stand by my assertion (backed by data) that rent control harms renters.

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