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Rent Control is an Ego Play by Politicians

By Carl J. Lambert Esq.

Politicians love to buy votes with your money. That is exactly what is happening now in Sacramento. By appeasing the tenants in the state with a promise of cheaper rents they can justify their failed housing policy which has constricted supply. Voters hate new projects next door especially if it is a low-income project. So, it is more politically correct to cap rents even if it ultimately increases rents for new or moving tenants.

This article is written before the final vote on AB 1482 so there may be some amendments and minor changes before passage or defeat. However, there are a few things in the long history of Rent control that do not change. There is no such thing as temporary Rent control laws. New York has had an emergency temporary rent control since WWII. Apartment builders were always lulled into building more with the promise of no restrictions on new projects only to have the voters and politicians to say, “Just Kidding”. That is what is happening now.

When rent control was passed in the late 70s, builders were promised that new construction would be exempt. Once again history is repeating itself and buildings constructed between 1979 and 2009 will be placed under rent control. In the City of LA, that will be an increase of 375,000 units and almost double the number the City and HCID control. The County total will grow by about 1.2 million rent-controlled units.

HCID already has a problem functioning so the increased number of units will only exacerbate the problem. Their budget from registration fees will almost double but there will be a long lag in hiring more bureaucrats to handle the deluge of unit registration. Apartment owners who will have their first experience with rent control are in for a rude awakening. Even owners with past experience will be caught off guard by the way the newly enlarged bureaucracy will treat them.

I bought my first building in Santa Monica in 1984 and it was an Orwellian experience with big brother! I read the Rent control ordinance from cover to cover and thought I knew what to expect. WRONG! The way it was administered was very different than the way it was written. As the Controllers became more emboldened, the more pernicious the administration.

The most critical time for owners is when they register their units. I spent long hours with the old-timers in the industry, most of whom are now gone. I gained their insights as to the mistakes in the conventional wisdom from that time and advice as to how to avoid it in the future. HCID has already started with the annual registration of your units with the rent levels, amenities, and included services. They will eventually require that we register each time we rent a unit. Your workload will increase. The worse part is how much your income and building value will be impacted by seemingly minor mistakes. Everything from building policies, tenant relations, to handling ministerial

HCID forms. Almost everything will have an impact. This does not mean that we should be insensitive to our tenant’s needs but we will have to change the way we do business. Non-rent-controlled tenants are customers. Rent controlled tenants change their attitudes and we are now their caregivers.

Now is the time to start shifting your management style and policies. If you wait until the passage and registration; it will be too late. There are several simple strategies that can be implemented now that can save you money and market value in the future. Unfortunately, I cannot write the details here. I would be happy to share my expertise in a brief phone call.


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