Mike Parker: Open Season on Landlords? A Reply to Tom


By:

blogimage.jpg

Tom Butt’s latest E-Forum (reprinted below) is designed to throw gasoline on the fire. There are numerous false statements and exaggerations.

Demonizing landlords
Tom tries to make the case that supporters of Rent Control demonize all landlords. Exactly the opposite is true. Rent Control supporters went out of their way to make sure that landlords do get a fair return on their investment. We agreed to rent increases at the full Cost of Living rate (typically 3%) even though landlord costs do not go up at this rate. For example property tax increases, a major part of landlord costs, are currently capped at 2%. In addition, it is possible for landlords who make capital improvements or have hardship situations to get rent increases to cover these.

To prove his case Tom cites one quote from Jovanka Beckles. But as the quote actually makes clear, Jovanka was referring to landlords who suggested that if the city passed rent control, they would evict people as retribution. Such statements were made by landlords at the last Council meeting.

Similarly Tom attacks ACCE for “fighting back against …greedy landlords.” Although there are many good landlords, there really are greedy ones as well.

Landlord’s rate of profit.
Tom’s suggestion that we should compare the CALPERS (public workers pension fund) expected rate of return of 7.4% with the CPI increase allowed landlords is ludicrous. Tom, as a smart and successful as he is in business, knows better. A landlord’s profit is not the CPI. A landlord’s profit rate comes from two sources. First it comes from the increase in value of the property the landlord owns. Property values are going up very fast. It is true that rent control will slow down the increase of the rental property value, but it will continue to go up, as is clear in the cities that have rent control . Second profit is built into the rent that the landlord charges. A good business person pencils this out when setting the initial rent. As explained above, the CPI increase actually slightly increases the landlord’s rate of profit. So landlords who are making a fair rate of return on their investment will get a still better rate. But the CALPERSs pensioners expected real rate of return will not increase with CPI.

How the market works
In one place Tom has a good point. “The difference is that food, medical care, transportation and education are largely provided or subsidized by the public sector and augmented by the nonprofit sector. Rental housing is fundamentally different; it is predominantly provided by the private sector.”

Actually all but one of these industries are very much controlled by private interests and education is rapidly being privatized. But let’s assume that Tom is referring just to providing these services to the poor.

Tom’s examples show that in America the market “works” but it does not work well for poor and working people. Judging from results the market does work very well for the wealthy who are getting much wealthier and are virtually the only beneficiaries of all productivity gains made in America in the last two decades. Since the market works so badly for the poor, we, the public need to subsidize food, medical care, transportation as Tom says. There is some subsidy for housing also but it is not enough. And Tom is right the answer is more public works and public spending on providing affordable housing.

But public spending on housing is going down, not up. We have a rightwing Congress which is a roadblock to doing what is required. I haven’t checked but I would be willing to bet that the Apartment Owners Association and the biggest landlord’s from Trump down have spent their political money on candidates who fight government housing programs. So, until we build the kind of housing that we need, we have to do what we can to help renters live stable and sustainable lives.

Previously Incarcerated
Finally, the most appalling part of Tom’s essay is the fear mongering about previously incarcerated individuals returning to Richmond. In a previous essay he raised the specter of child molesters next door. Housing for previously incarcerated whether working or homeless is a real problem. The item being brought before the Council is simply to ask staff to look into this and present the Council with options. Housing is included in San Francisco’s Fair Chance Ordinance. Where does Tom expect the previously incarcerated to live on reentry? Does he think that making them homeless will reduce the recidivism?

Time to move on
After six months of very intense discussion, where Tom, more than anyone else, had his say through his E-Forum, interviews, and his supporters, the Richmond City Council has voted to try rent stabilization and requiring just cause for eviction. It is time to pull together to make this work as well as possible and fix problems that emerge. It is time to move on to other pressing problems in the city.

Reposted from Mike Parker of the Richmond Progressive Alliance

Showing 3 reactions

Please check your e-mail for a link to activate your account.
  • commented 2015-07-27 19:43:49 -0700
    Get your facts right Mike and STOP lying to people as the RPA does.

    Richmond is not Congress.

    The RPA members on our city council are acting like a dictators, when none of them are qualified to hold a seat..
  • commented 2015-07-27 18:41:55 -0700
    I find it funny that you say its time to move on to other pressing problems while the RPA has just voluntarily created the biggest problem the city could ever face. By enforcing rent control the city council ended any chance Richmond had of becoming relevant in the bay area, and being a place people actually want to live.

    Richmond is not Oakland, it’s not San Francisco. Those cities have surging property values even with rent control because they just happen to be two of the most sought after places to live in the nation. Sorry but Richmond isn’t even close to being on that radar. Compared to the rest of the bay area Richmond has the most affordable rent, and its for a reason. The only chance Richmond had to come up in the bay area is through gentrification. A free market in which new property owners move here, choose to invest in the their property, improve it, and start a chain reaction of rebuilding the neighborhoods in this much neglected city. As neighborhoods improve small businesses will follow, and jobs, and all the other good side effects that come with that.

    I live here, I own a house here, and I own rental properties I manage in the neighborhood. I’ve been a landlord who hasn’t raised his rent in 7 years taking into consideration the financial struggles tenants have had in the recession years, meanwhile maintaining my property, and improving it year in year out. Having pride of ownership and optimism about the city’s future. I’ve survived the tough years. I’ve dealt with countless tenants who have done nothing but take advantage of me, often times damaging my property, and leaving me with the bill as they leave free and clear. I dealt with it, believing that when the economy improved, and rental demand increased, my losses in the past would be evened out by gains in the future. But apparently thats not the case. By not being a “greedy” landlord and raising my rents as soon as possible, I, and the rest of similar landlords are being punished by a misinformed, unrealistic bureaucracy, To try and think a CPI increase is fair, only holds water if landlords are able to start at market rent before the rent control is in place. But the issue is the majority of landlords haven’t been given the opportunity to do so. So its not fair, and its not reasonable. Rent control will lower the housing supply in the city, it will completely lessen property owners motivation to improve their property and maintain it, it will create even more overcrowding in undersized units, it will lower property values, and increase the overall neglect of the city. All of these factors are inevitable, and a city that has just started showing signs of improvement, is now destined to lose.
  • commented 2015-07-27 15:35:48 -0700
    Though I consider Tom a friend, I have to agree that the major has been overly contentious on this issue, and I’m not sure where I stand regarding rent control, but willing to see how it works. But that said, Mike, you do make a mistake in the above argument: The capital appreciation of a property is NOT profit for being a landlord. It is profit for being a real estate speculator and such appreciation is only realized when the property is sold. It is much better for renters for landlords NOT to sell their property, because with a lower basis in the property, they have less of a need to raise rents to cover their investment/loan, and more of an incentive to improve the property to retain good renters.
Fight your California speeding ticket and win here. Fight your red light camera ticket here. Fight your cell phone ticket here.