For the question about who is now suffering a loss in the CA property market, the answer today is “most Californians”. by Corey Chambers
Coinciding with the passing of leftist or socialist-style statewide rent control, along with deflating of the real estate bubble, September 2018 to 2019 (MLS areas 23,42 & 1375) property values have dropped 7% — and that decline is dramatically accelerating. Homeowners now are paying high taxes on homes that are dropping in value, in part because owners cannot easily rent them out for what they are worth. The biggest losers are landlords, along with virtually every homeowner. #california #rentcontrol
Rent control causes several other problems, including a housing shortage, inefficiencies, consternation and ultimately higher rents. Rent control reduces overall homeownership, and sticks more renters into the tenacious cycle of poverty.
A quick read seems to indicate that the new rent control law may have the unintended consequence of causing 5% to 7%+ rent increases, even in recession years when the rent would normally be stable, and when renters can least afford it. Californians forget that the U.S. has had several periods of inflation from 10% to 30%. The new rent control law means that rents could go up by 15% to 35% per year during periods of high inflation. Its ban on non-cause evictions could mean that landlords must now painstakingly spy on tenants to ensure that they always have “dirt” on their tenants — just cause, a dossier or “negative file” handy for when they need to evict.
There is no way around the basic laws of supply and demand. The laws of economics don’t care what Californians think about money. Money has its own rules. It does not care if humans break those rules. Where there is large demand and short supply, people will have to pay extra one way or another. The most financially astute, the wealthy, always pay about 17% of their net income in taxes, as a group, regardless of where the tax laws are going. In reality, the wealthy will not pay more than that. They will move out of the state as they have been doing more and more recently. Rent control always causes less new construction, poorer maintenance of buildings, fewer rentals to be available, less choice, more corruption and ultimately higher rents. Rent control will contribute to a dwindling tax base, resulting in higher taxes for the middle class, and worsening services from the government.
Price controls always create shortages because they destroy incentive to produce new products or services at the same time that they increase pent-up demand. Price controls create upward pent-up price pressure that always finds an outlet. That outlet is sometimes expressed as countless big loopholes in the rent control law. With expanded rent control laws, property owners are now forced to raise rents every year by the maximum amount, even in down years when the rent would normally be reduced or kept the same. | VIDEO
Rent control creates a sad, anti-human adversarial relationship between landlord and tenant. Landlords feel unnaturally squeezed financially. They must squeeze back with limited maintenance and virtually no building improvements. The landlord spies on tenants. If the tenant accidentally breaks any rules, they are out. Some renters find themselves evicted after they made long-term plans based on the false thought that they were protected. | COMMENT
All of Los Angeles has already been under rent control law, yet most properties have had loopholes, often so large that the owner may in effect charge as much rent as they want. Ultimately, the real rent control is the market. Renters will only pay so much for a rental based on the location and quality of that rental. Downtown lofts are an excellent example of loopholes. In reality, most loft condominiums in Downtown L.A. are at market rate rents. They are luxury properties in higher prices ranges that give loopholes, and they are that are built at times that give additional loopholes that usually allow the owners to charge market rents.
Rent control laws are always plagued by at least one of these two conditions: Loopholes that allow property owners to charge market rates, or housing shortages.
There are a few — very few — lucky renters who benefit from rent control in plain, primarily in mediocre apartments built around the 1960s. For those who do not live in Santa Monica, West Hollywood, Beverly Hills, or the city of Los Angeles, there has effectively been no rent control until now. In Los Angeles, only buildings built and occupied before October 1, 1978 had rent control restrictions. Today, nobody really knows what the new rent control law is and what the loopholes are until they are tested, tried in court and hashed out over a number of years. Then, they will change. The end results is good for a few, and costly for most.
Renters are already the biggest losers to begin with. Many renters would like to own, but cannot make enough money. Their rents are high, but rent is actually cheap today compared to what it will ultimately land at. Sadly, rent control shall ultimately provide less housing to renters, and could otherwise transform today’s slight, artificial housing crisis into a real, full bonafide housing shortage with extraordinary cost and unexpected side-effects like pandemic tent cities that morph into explosive megalopolis sh!tholes with increased crime and worsening of inequality.
At worse, new rent control will have too much restriction and too much teeth — debilitating bureaucratic and legal interference that cause massive shortages and unexpected expenses with legal fights between landlords, tenants and the government. When the government becomes vicious, landlords get defensive and vicious. There’s an equal opportunity for another outcome: At best, rent control laws are all “show,” put on for political spectacle to make it seem like the politicians care about the little guy, yet offer plenty of loopholes that cause only minor inefficiencies. At first glance, we recently got the latter. The biggest downside will be an increase in administrative and legal costs, and worst of all: a loss of privacy and liberty for both homeowners and renters.
The real and true effect of rent control is to increase government interference in the private affairs of renters and landlords, at extreme expense to both renters and landlords. Let’s hope that these priceless losses of freedom are limited, and let’s work to ensure that government price controls are prevented and overturned in the near future. Your thoughts? | COMMENT
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Copyright © This free information provided courtesy L.A. Loft Blog and LAcondoInfo.com with information provided by Corey Chambers, Realty Source Inc, BRE#01889449 We are not associated with the homeowner’s association or developer. For more information, contact (213) 880-9910 or visit LAcondoInfo.com Licensed in California. All information provided is deemed reliable but is not guaranteed and should be independently verified. Properties subject to prior sale or rental. This is not a solicitation if buyer or seller is already under contract with another broker. | COMMENT