Rent control coming to San Diego and Orange County!?

Chesapeake, VA · Member since 2017 · 26 posts · 10 votes

I have been reading and listening to local news here in San Diego. I am still a rookie looking to invest in my first deal this year. But while I was researching I found that 55 % of voters support the implementation of rent control and 60% support for the state as a whole! From what I have read and listened to now audio books this is a very bad thing for the local markets. I was wondering if anyone had any experiences they would like to share if they live or invest in areas that already have implemented rent control. Is this something SoCal investors should worry about or are there strategies to turn this into a great thing. Thanks all for your opinions in advance.

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Ned CareyPro Member

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Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes

That is because 55% of voters are ~~morons~~ (sorry poor choice of words They are not morons, they are simply ignorant) . Rent control has been proven time and time again to be counterproductive especially to the poor who it is designed to help.

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Ned CareyPro Member
Moderator
Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
8y
That is because 55% of voters are ~~morons~~ (sorry poor choice of words They are not morons, they are simply ignorant) . Rent control has been proven time and time again to be counterproductive especially to the poor who it is designed to help.
8 Reply
Sai T.
Investor · West Chester , PA · Member since 2011 · 620 posts · 138 votes
8y
@Chris A Godbolt
Don’t worry much but make it happen and buy your 1st property first!
1 Reply
Robert A Garcia
Fairway, KS · Member since 2018 · 82 posts · 28 votes
8y
I think rent control is a sign of a great market (NYC) and while it becomes law may even be a better time to acquire property as people fear they will loose out so want to sell. Naturally because someone has a lease and you can't change it, then you may not make as much as you feel you should have. But you can change your thinking. See it as free insurance that you will always make at least this much. Seriously
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Robert A Garcia
Fairway, KS · Member since 2018 · 82 posts · 28 votes
8y
Hey Ned Carey As to if the voters are ignorant, they are not ignoring their interests. Most of the informed renters would want the ability for their rent to stay the same, that is paying attention to their interests. It just shows how few of investors there are.
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Ned CareyPro Member
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Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
8y
@Robert A Garcia my point is they are ignorant of the results of rent control. Rent control has proven time and time again to be harmful to renters. This is especially true of Poor renters.
Poor renters are more subject to being in a position of being forced to move (not by the landlord but by economic or personal reasons) they then wind up in a different unit paying current market rent. While more affluent people have the economic wherewithal to stay in 1 place for a long time.
Also due to the rent not going up, landlords do less maintenance and the quality of rentals decline. Rent control is a bad policy for tenants. Short term it looks good, longer term it is bad policy. The people who want it the most are sadly the ones who suffer the most from it.
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Russell BrazilBusiness Member
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Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
8y
Rent control creates slums and leads to neglect of properties.
[email protected]301-893-4635 Podcast Guest on Show #192
District Invest Group546 Reviews
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Robert A Garcia
Fairway, KS · Member since 2018 · 82 posts · 28 votes
8y
Russell Brazil, My girlfriend grew up in Stuyvesant town NY 20th street and still has family and friends live in a great location for less than half of what new leases are being written for. That is neither a slum nor has any neglect and the owner may not be making as much if they abolished the rent control you don't like, I think the community is served by it.
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Robert A Garcia
Fairway, KS · Member since 2018 · 82 posts · 28 votes
8y
Also the neglect by landlords is a function of what they can get away with..That is why government has to step in for tenants. As a landlord I have learned that when I know the laws and follow them its better for me and my tenants.
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Dan H.Pro Member
Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
8y
San Diego and OC already do not have positive cash flow upon retail SFR purchase. Without rent increases SFR purchased at retail make no sense as rentals.
Rent control will result in every SFR rental being sold as soon as current lease is up. In addition no one will build new apartments in this scenario. This will result in a rental shortage.
Assuming San Diego implements rent control, the rental demand in nearby cities will increase as the San Diego rental units decline. So renters will be required to move further from their desired location to nearby cities that do not have rent control (Chula Vista, Escondido, El Cajon, etc).
Most of my units are in Escondido and out of our 7 San Diego units 2 are STR (and will remain so as long as regulations permit). I would sell the San Diego SRF as soon as it's rent fell enough below market rent. I would raise rents above market on the San Diego quad units as soon as rent control is announced realizing a shrinking supply will result in the units getting rented shortly if current tenants depart due to the increased rent. With the reduction in number of San Diego rental units driving up the demand on my Escondido units, I would raise rents of all Escondido units.
In other words, it could prove to be quite lucrative to my cash flow.
Who would lose: 1) current SFR renters: those in SFR will have units sold and those units exit the rental market 2) future renters: there will be no supply. Current tenants will be hesitant to upgrade to ownership or nicer rentals due to their rent controlled rent and no one will desire to build additional rental units. 3) those only invested in apartments in the rent control area and not invested in cities close to the rent control city. They will likely raise rent prior to the rent control being implemended but eventually the rent will fall below open market rent.
The rent controlled units will receive minimal maintenance and decline over time.
Who wins: mostly landlords in nearby cities (I.e. me).
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Russell BrazilBusiness Member
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Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
8y
Originally posted by @Robert A Garcia:

Russell Brazil, My girlfriend grew up in Stuyvesant town NY 20th street and still has family and friends live in a great location for less than half of what new leases are being written for. That is neither a slum nor has any neglect and the owner may not be making as much if they abolished the rent control you don't like, I think the community is served by it.
Everyone has anecdotal evidence contrary to anything. Every study however disagrees. Among academics this is the least controversial topic. Economists both on the left and the right are in near unanimous accordance on the issue.
Paul Krugmann - "The analysis of rent control is among the best-understood issues in all of economics, and -- among economists, anyway -- one of the least controversial. In 1992 a poll of the American Economic Association found 93 percent of its members agreeing that ''a ceiling on rents reduces the quality and quantity of housing.'' Almost every freshman-level textbook contains a case study on rent control, using its known adverse side effects to illustrate the principles of supply and demand. Sky-high rents on uncontrolled apartments, because desperate renters have nowhere to go -- and the absence of new apartment construction, despite those high rents, because landlords fear that controls will be extended? Predictable. Bitter relations between tenants and landlords, with an arms race between ever-more ingenious strategies to force tenants out -- what yesterday's article oddly described as ''free-market horror stories'' -- and constantly proliferating regulations designed to block those strategies? Predictable."
[email protected]301-893-4635 Podcast Guest on Show #192
District Invest Group546 Reviews
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Susan O.
Fresno, CA · Member since 2015 · 552 posts · 181 votes
8y
Everyone in California should be concerned they purposely put the vote moved to Jan 9
It will be in affect and cause issues to all home owners and anyone hoping to buy a house.
Rent control will come to single family houses and duplexes.
California Apartment Association “ CAA” calls for action : a Bill to repeal the "Costa-Hawkins Rental Housing Act" (Costa-hawkins Rental Housing Act) has been scheduled for the first hearing in the state legislature, to repeal a landmark legislation to protect owners from radical rent controls. The Housing and Community Development Committee will hear the bill AB 1506 submitted by democratic State Representative Bloom on Thursday, January 11.
Call your local rep and all landlords or home owners!! Tell everyone because they tried to ppss this underneath our noses
The hearing will begin 9 o'clock in the morning at California's capital. The adoption of AB 1506 would allow local governments to impose rent controls on all types of housing, including single-family homes, and prohibit owners from resetting rents to market prices in the case of vacancy. Prior to the hearing, the California Apartment Association called on property owners, property managers and industry partners to send a letter to their members to urge them to oppose AB 1506. Click here for the communication system for writing to members of the convening Committee and visiting the CAA: https://www.votervoice.net/mobile/CAA/campaigns/50453/respond?from=groupmessage The repeal of the Costa-Hawkins Rent Control Act would have disastrous effects on the already serious housing market, exacerbating the housing crisis in California. We must let the members of the gathering know the importance of this.
Hearing info on 1/11/2018, the address: 1315 10th Street Sacramento, CA 95814 http://ahcd.assembly.ca.gov/hearings
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Ned CareyPro Member
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Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
8y
@Robert A Garcia do you realize you are actually bragging about the very issue I bring up. Rent control leads to a great disparity of rents paid. Some people pay high rents and some pay dramatically low rents.
i don't blame your sisters family for wanting to keep their low rents. Good for them. However as a mater of public policy how many people are paying higher rents to subsidize her family?
4 Reply
Anthony GaydenPro Member
Rental Property Investor · Omaha, NE · Member since 2014 · 2k+ posts · 3k+ votes
8y
Originally posted by @Robert A Garcia:

I think rent control is a sign of a great market (NYC) and while it becomes law may even be a better time to acquire property as people fear they will loose out so want to sell. Naturally because someone has a lease and you can't change it, then you may not make as much as you feel you should have. But you can change your thinking. See it as free insurance that you will always make at least this much. Seriously
Do you invest in a city with rent control?
Podcast Guest on Show #21
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Susan O.
Fresno, CA · Member since 2015 · 552 posts · 181 votes
8y
Originally posted by @Anthony Gayden:

Originally posted by @Robert A Garcia:
I think rent control is a sign of a great market (NYC) and while it becomes law may even be a better time to acquire property as people fear they will loose out so want to sell. Naturally because someone has a lease and you can't change it, then you may not make as much as you feel you should have. But you can change your thinking. See it as free insurance that you will always make at least this much. Seriously
Do you invest in a city with rent control?
The problem with rent control is it leads to blite in cities. Disproportionate economics with some randomly rewarded and others hit hard. It's supply and demand. Left and right economists area 95% in agreement that it leads to 1. less housing as people take their rentals off market 2. ultimately less affordability 3. messed up tax and entitlement system
They're voting on it this week in california to expand rent control to condos, single family houses, and new builds (which were banned before) Costa hawkins AB 1905 tell your local assembly member to vote no...
for California Assembly info go to this california .gov site
http://findyourrep.legislature.ca.gov/
Call before this Tuesday the 9th because they're voting on this HUGE impactful Rent control legislation for all cities in California.
This is actually bigger and more impactful to landlords and property owners than the Trump tax reform if you live in California.
1 Reply
Cara Lonsdale
Realtor and Investor · Scottsdale, AZ · Member since 2017 · 1k+ posts · 1k+ votes
8y
YUCK! I can't think of a worse way to tie an owner/Landlord's hands for properly maintaining a property in direct correlation to the rental income coming in than Rent Control.
Sounds great for the Tenant, but ultimately it is bad for everyone.
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Robert A Garcia
Fairway, KS · Member since 2018 · 82 posts · 28 votes
8y
Hello Anthony Gayden no I never have had a property that was under rent control.. But I have had a property that was in a commercial area and the city wanted to make an eminent domain District and at the time I did not like the idea. I felt that I was loosing control of my property, and I was against the district formation. It was made anyway and in retrospect I can see that the district benefits the common good this is very similar to the idea of rent control. The argument made earlier where poor people can lose their lease because they're not able to pay by Ned Carey is not only illogical (that they would be forced to leave for economic reasons) does not have anything to do with rent control. If you can't pay your rent you don't get to stay. Rent control is about keeping the landlord from raising the rent to Market rates and is usually used in areas where people feel that it's in the best interest of the common good similar to an eminent domain belief. If you look at all the comments above they are made by Landlord type point of view. I want to make money as an investor and a landlord however we need to keep perspective on our money making, and we need to see that sometimes people who make rules for the common good can be right. Even if they're not right, we still have to live with them. I happen to think in certain situations, like when market forces would force out families who have grown up in close knit neighborhoods, rent control fits.
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Christi HawkinsPro Member
Columbus, OH · Member since 2017 · 237 posts · 142 votes
8y
This whole conversation is terrifying. I feel pretty confident the CA Legislature will vote this into law. I saw a sign on another forum about this and it said "Housing is a Right" it isn't. I think this will have devastating outcomes to both investors and renters and I can only hope that other States do not follow suit.
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Thomas S.
Member since 2016 · 13k+ posts · 12k+ votes
8y
Being a investor in a rent control, pro tenant, area I know first hand the long term impact. Rents fall below market, landlords cut corners to maintain profits, new builds are stagnated, bad areas get worse.
The long term tenant that many landlords seem to cherish becomes a albatross to your business interests.
To survive you learn ways around the regulations and you are forced to break rules to survive. You do what is necessary. Tenants are viewed much differently by landlords, screening is stricter and many have difficulty finding housing. Every tenant is a potential negative cost factor. Even the best tenants become undesirable when they stay more than 2-3 years. You begin to do things to encourage them to leave when your rents fall behind market.
Good long term tenants are too costly to have. Cash flow drops and property values stagnate.. I have at least 10 tenants, all excellent tennats, that are each $100 - $150 below market. I would be happy if they all left tomorrow.
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Ned CareyPro Member
Moderator
Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
8y
It has everything to do with rent control. If they have to move, they move to a unit at today's market rate. This leads to disparity in rent. Those who are fortunate enough to be able to stay in one place get bargain rents. Those that have to move pay higher current market rates. Those current market rates are usually higher to compensate for the rent controlled units.
You have made an assumption that an economic reason means they cant pay there rent and would be evicted. I didn't say that, nor imply that. Getting a new job is a economic reason, not being able to afford transportation to the new job is an economic reason. Plus there are many non economic reasons for a move.
Both myself and @Russell Brazil who put forth the strongest arguments have said rent control is bad because it hurts the poor. I am glad you recognize that good landlords are pro tenant.
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Sam Josh
Sunnyvale , CA · Member since 2017 · 373 posts · 362 votes
8y
This proposal is unfortunate and absurd. Rent control discourages home ownership and encourages renting. It keeps poor people poor and does not create any incentive to quit renting and buy a home and build equity. We all know well that owning a home is one great way of building equity and wealth. Renters lose in the long term as do the landlords. Socialism at its very best I would say.
2 Reply
DL Martin
Rental Property Investor · Cincinnati, OH · Member since 2013 · 292 posts · 280 votes
8y
Originally posted by @Robert A Garcia:

Even if they're not right, we still have to live with them. I happen to think in certain situations, like when market forces would force out families who have grown up in close knit neighborhoods, rent control fits.
: )
Add "being able to stay in the neighborhood where I grew up" on to the list of inalienable rights.
DL
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Robert A Garcia
Fairway, KS · Member since 2018 · 82 posts · 28 votes
8y
Thomas S like Carly Simon not qualifying for the Dakota ?
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Mike McKinzie
Investor · Westminster, CO · Member since 2009 · 1k+ posts · 1k+ votes
8y
There is NO SUCH THING as "the common good." What a misnomer! Rent Control? How about gas price control? Health Insurance Premium control? Food price control? Clothing price control? For anyone who wants to make a serious study of true "high population economics", they will see that any price control leads to economic hardships and downfalls. Just as monopolies are BAD, government controls are also BAD. No entity, government, religion, corporation should have that kind of control. If California institutes rent control, I would sell all 11 of my rentals, 8 of which rent for less than $1,000 a month. 11 families would be stuck paying HIGHER rent, I would invest elsewhere (not real estate) and the rent pool decreases. It would not hurt me at all, but those 11 families would be hurt seriously. Anecdotal? Yes! Possible? Definitely!!
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Robert A Garcia
Fairway, KS · Member since 2018 · 82 posts · 28 votes
8y
That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed
We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defense, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.
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Mike McKinzie
Investor · Westminster, CO · Member since 2009 · 1k+ posts · 1k+ votes
8y
The “consent of the governed!” who has consent, Donald Trump or Hillary Clinton?? Which proves my point, there is NO common good. For what may be good for one may be bad to someone else. 32 states voted to make marriage ONLY for a man and a woman, and yet it was over turned by the Supreme Court. How STUPID is a government to allow an Unconstitutional amendment to be on a ballot!! Money wasted on both sides.
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