June 13, 2017
To the Members of the City Council:
I apologize that I cannot appear before you in person this evening. But, now as an apartment living, apartment owner, I wanted to voice my concerns about the City’s rent control ordinance.
About 3 years ago, my wife and I decided to downsize. We sold our home on Roxbury Drive and purchased an apartment building that we now live in near Camden Drive and Olympic. After purchasing our building, we spent nearly $400,000 on improvements such as central air, new electricity, kitchen and bath remodels, paint, appliances, landscaping and other upgrades.
If we knew at the time we bought our building that there would be a 3% rent control restriction, it would not have made financial sense for us to spend so much money upgrading our building. Additionally, it would have cost us thousands of more dollars under this rent control ordinance to evict a tenant in order to be able to live in the unit we now live in. Moreover, studies have shown that costs for operating buildings have increased much more than 3% per year (e.g., look how much we now pay for water in the City, and as a landlord, I cannot control how my tenants consume water).
Price controls do not benefit any economy, and rent control is no different. Rent control will not encourage landlords to improve their buildings, and it certainly will not encourage development of multi-family rental dwellings within our city. The inventory of rental units in our City will decline as rental units will be redeveloped into condominiums at a faster pace. Would the City ever consider imposing restrictions on how much lawyers can charge for legal fees, economists can charge for economic studies or anesthesiologists can charge for their services?
What you are asking multi-family property owners to bear under this rent control ordinance is similar to placing limitations on the sale price of your own single family homes. Everyone that owns property does so as an investment. Why not limit the price you can get when selling your single family home in order to encourage young families to move into Beverly Hills or allow seniors more affordable homes to own and live in? It is my property, and I should be able to manage it in the manner I see fit provided I properly maintain my building and provide adequate safety and security for my tenants.
The truth is that landlords are not in the eviction business. When I have good tenants, I do everything in my power to keep them. Keeping good tenants often means not increasing rent. Landlords are not looking to gouge tenants with constant 10% increases each year. To the contrary, if the rent gets too expensive, tenants move, units can and often will become temporarily vacant, and landlords incur expenses for painting, cleaning and other required maintenance. The potential “gain” in raising the rent of a tenant is often far outweighed by the cost of lost rent, painting, etc.
I understand the need to protect from “pricing out” fixed income seniors that may have lived in their rental units for many years. And, the City should absolutely consider providing some protections for seniors. But, I have a tenant, for example, that is supported by a trust fund that the City has no business in protecting through a rent control ordinance. With much of the apartment buildings in our City being owned by “mom and pop” operators like me, an often unintended consequence of rent control will become prevalent in that people of relatively modest means (like my wife and me) will be subsidizing the housing of the wealthy. In the “tech boom,” cities like San Francisco and Santa Monica have experienced this.
At the time we purchased our building in Beverly Hills, although under no obligation to do so at that time, in order to take possession of a unit to live in, we worked out an arrangement with the tenant that we evicted to compensate her for moving and other costs. This tenant told us that the previous owner rarely increased her rent during the 20 years that she lived at the building, and because of that, during years when she had made a good living and could have afforded to buy a property of her own, she did not do so and merely spent her money. She told us how much she regretted not buying a property when she had the chance. Rent control also discourages people from buying property of their own.
I encourage you to consider an ordinance that is more balanced and fair. Some considerations:
- If you insist on continuing these rent control measures, 3% is just too low and does not cover increased operating costs.
- The City should consider giving those in need a rent subsidy rather than asking landlords to pay for affordable housing through a rent control ordinance.
- Rent increases should be permitted to encourage landlords to make capital improvements. Even under Los Angeles’ rent control ordinance, landlords are permitted to recover capital improvement costs over a 5 year period.
- The costs proposed for a “no fault” eviction are excessive, and at a minimum, should be based on a tenant’s monthly rent. Why compensate a tenant some $20,000 when they are paying and can only afford $2,500 per month?
- Consider that most of the rental housing in the City is owned by “mom and pop” owners like me. I have a fulltime job and do not have time to fill out forms, meet inspectors and comply with the burdensome regulations that are being imposed on me.
- If you really want to do something my tenants would appreciate, consider increasing the amount of overnight parking available on both sides of Olympic between El Camino and Roxbury Drives.
Please allow me the privilege of operating the property that I own. I took the risk, made a very large investment, work hard to operate and maintain it, and I should be able to determine how much I can charge for rent.
Thank you for your consideration.
Very truly yours,
Beverly Hills, CA