First Rate Property Management Blog

   The National Association of Residential Property Managers published a recent survey conducted by the SW Idaho chapter of NARPM during the month of June 2018. The survey took 7,091 total homes into account. These multi-family and single-family homes are spread across both Ada and Canyon county. 

The market is trending down heading into the winter months. According to these statistics dating back to 2014, the vacancy percentage is the lowest it’s been in quite some time considering the seasonality of this business.

First Rate Property Management’s vacancy rate in June 2018 was 0.72%. This is quite the improvement compared to last year’s 1.83%. First Rate manages a portfolio of apartment buildings, duplexes, and single family homes.

Of the 7,091 homes that were surveyed in June 2018, 2.03% were vacant. This is an opportunity for property management companies to capitalize on the market and really differentiate themselves among their competitors not only in the SW Idaho Chapter but even nationally.

The data shows vacancy rates to have decreased from 3.6% in Q1 to 2.0% in Q2. The rental rates in Ada County single family homes increased $149 per month per unit. We saw an increase of $6 per mont, per unit in single family homes just since the previous quarter. Assuming these trends continue, we can anticipate higher rents and lower vacancies than we’ve seen in half a decade.

You can find out more about Idaho’s premier organization of residential property management professionals at www.swidaho.narpm.org.

Julie Tollifson, Leasing Team Lead
First Rate Property Management, Inc.
Boise, Idaho
Contact me for more information about this blog.

Boise's rental market is undeniably booming. This growth has been the case for several years now and is expected to maintain its strength for months to come. Boise’s rental demand is contrary to the trends in other metropolitan areas in the United States where vacancy rates have steadied. In Ada County, there has been an increase in rental rates between 6-8 percent.

First Rate Property Management's vacancy rates have been successfully trending downward. Last week our vacancy was at 0.7%. Last year’s vacancy rate at this time was at 1.85%! This is all due to a combination of high demand, low supply, rental market saturation, diligent staff, and qualified tenants.

When vacancy rates are low, rents go high. The demand for housing exceeds the supply of available units, and renters lose their bargaining power.

Boise is one of the fastest growing cities in the United States right now. Property investors are able to capitalize on this growth. According to Yardi Matrix all rents are are being increase on average by 4%. First Rate is able to place many families in these homes but it is clear the demand is high and the supply is low. This market is ideal for investors who have budgeted a conservative amount in vacancy cost. We expect to see these trends continue to grow for years to come.

Julie Tollifson, Leasing Team Lead
First Rate Property Management, Inc.
Boise, Idaho
Contact me for more information about this blog.

Friday morning Housing and Urban Development (HUD) filed a formal complaint under the Fair Housing Act against Facebook. The claim alleges Facebook to use its advertising platform to engage in housing discrimination. These claims maintain that Facebook allows advertisers to control which users receive housing-related ads based upon any and all of the protected classes. The classes include but are not limited to race, color, religion, sex, familial status, national origin, disability, and/or zip code.

The allegations also hold that Facebook enables advertisers to express unlawful preferences effectively utilizing “targeted advertising”.

While these claims are still just claims, Facebook has the opportunity to respond. However if after review it is determined that reasonable cause exists and there has been a violation of the Fair Housing Act, a charge of discrimination may be filed. These charges may be resolved through settlement, through referral to the Department of Justice, or through an administrative determination.

HUD’s complaint alleges Facebook’s platform violates the FHA allowing advertisers to effectively pre-screen internet users to reach/or not reach either only men or only women, users interested in assistance animals, users in a particular place of worship, religion, or tenet, users located outside a coded line around specific zip codes.

These claims were immediately followed by a statement of interest filed by the U.S. Attorney for the Southern District of New York (SDNY) on behalf of a number of private litigants challenging Facebook’s advertising platform. 

Read full article below ~

August 17, 2018

Earlier today HUD announced that it has filed a formal complaint under the Fair Housing Act for allowing landlords and home sellers to use its advertising platform to engage in housing discrimination.  As Assistant Secretary for Fair Housing and Equal Opportunity Anna María Farías notes, “"When Facebook uses the vast amount of personal data it collects to help advertisers to discriminate, it's the same as slamming the door in someone's face."  For more, see below

Jeff McMorris, HUD Northwest Regional Administrator

* * *

HUD FILES HOUSING DISCRIMINATION COMPLAINT AGAINST FACEBOOK
Secretary-initiated complaint alleges platform allows advertisers to discriminate

WASHINGTON – The U.S. Department of Housing and Urban Development (HUD) announced today a formal complaint against Facebook for violating the Fair Housing Act by allowing landlords and home sellers to use its advertising platform to engage in housing discrimination.

HUD claims Facebook enables advertisers to control which users receive housing-related ads based upon the recipient's race, color, religion, sex, familial status, national origin, disability, and/or zip code. Facebook then invites advertisers to express unlawful preferences by offering discriminatory options, allowing them to effectively limit housing options for these protected classes under the guise of 'targeted advertising.' Read HUD's complaint against Facebook.

"The Fair Housing Act prohibits housing discrimination including those who might limit or deny housing options with a click of a mouse," said Anna María Farías, HUD's Assistant Secretary for Fair Housing and Equal Opportunity. "When Facebook uses the vast amount of personal data it collects to help advertisers to discriminate, it's the same as slamming the door in someone's face."

The Fair Housing Act prohibits discrimination in housing transactions including print and online advertisement on the basis of race, color, national origin, religion, sex, disability, or familial status. HUD's Secretary-initiated complaint follows the Department's investigation into Facebook's advertising platform which includes targeting tools that enable advertisers to filter prospective tenants or homebuyers based on these protected classes. 

For example, HUD's complaint alleges Facebook's platform violates the Fair Housing Act. It enables advertisers to, among other things:

·        display housing ads either only to men or women;

·        not show ads to Facebook users interested in an "assistance dog," "mobility scooter," "accessibility" or "deaf culture";   

·        not show ads to users whom Facebook categorizes as interested in "child care" or "parenting," or show ads only to users with children above a specified age;

·        to display/not display ads to users whom Facebook categorizes as interested in a particular place of worship, religion or tenet, such as the "Christian Church," "Sikhism," "Hinduism," or the "Bible."

·        not show ads to users whom Facebook categorizes as interested in "Latin America," "Canada," "Southeast Asia," "China," "Honduras," or "Somalia."

·        draw a red line around zip codes and then not display ads to Facebook users who live in specific zip codes.

Additionally, Facebook promotes its advertising targeting platform for housing purposes with "success stories" for finding "the perfect homeowners," "reaching home buyers," "attracting renters" and "personalizing property ads."

In addition, today the U.S. Attorney for the Southern District of New York (SDNY) filed a statement of interest, joined in by HUD, in U.S. District Court on behalf of a number of private litigants challenging Facebook's advertising platform.

HUD Secretary-Initiated Complaints

The Secretary of HUD may file a fair housing complaint directly against those whom the Department believes may be in violation of the Fair Housing Act. Secretary-Initiated Complaints are appropriate in cases, among others, involving significant issues that are national in scope or when the Department is made aware of potential violations of the Act and broad public interest relief is warranted or where HUD does not know of a specific aggrieved person or injured party that is willing or able to come forward. A Fair Housing Act complaint, including a Secretary initiated complaint, is not a determination of liability.

A Secretary-Initiated Complaint will result in a formal fact-finding investigation. The party against whom the complaint is filed will be provided notice and an opportunity to respond. If HUD's investigation results in a determination that reasonable cause exists that there has been a violation of the Fair Housing Act, a charge of discrimination may be filed. Throughout the process, HUD will seek conciliation and voluntary resolution. Charges may be resolved through settlement, through referral to the Department of Justice, or through an administrative determination.

This year marks the 50th anniversary of the Fair Housing Act. In commemoration, HUD, local communities, and fair housing organizations across the country have coordinated a variety of activities to enhance fair housing awareness, highlight HUD's fair housing enforcement efforts, and end housing discrimination in the nation. For a list of activities, log onto www.hud.gov/fairhousingis50.

Persons who believe they have experienced discrimination may file a complaint by contacting HUD's Office of Fair Housing and Equal Opportunity at (800) 669-9777 (voice) or (800) 927-9275 (TTY).

Julie Tollifson, Leasing Team Lead
First Rate Property Management, Inc.
Boise, Idaho
Contact me for more information about this blog.

In a million years, would you have ever thought that ascending rents would cause parking problems?  Well, it is, and not just in multi-family complexes either.  As Boise area rents have increased, many tenants have solicited roommates to help defray costs and many of these have their own vehicles as well.  Drive by a complex or a rental home and you will see more cars parked on the side of the road than before. 

Let's look at an example.  There is a 4 plex development with 11 four plexes.  Each unit has three bedrooms and 2 baths.  There is 1 assigned parking spot per unit with another 50 open parking spots within the complex which is first come, first serve and is used by residents and visitors. In looking at just one building of the 11, we know that one of the units has 3 couples in each room and each has a car.  Two units are families with two working parents.  The last unit has 3 roommates, each who have a vehicle.  The total vehicles for this one building is 13.  If everyone within the complex is home at the same time, that means 5 to 8 of the vehicles, for just this one building, are parking on the street.  Or worse, they park in the open parking, which means other residents can only park their one vehicle within the complex and all others on the street.  As our streets fill with parked cars, the amount of parking has become important to prospective tenants. 

The lack of parking is not the only issue developing.  Storage is another.  With more and more roommates, the amount of storage space needed is increasing. Self-storage is big business these days. 

Tony Drost, Chairman
First Rate Property Management, Inc.
Boise, Idaho
Contact me for more information about the Investment Real Estate and Property Rental markets in Boise and Idaho.

Jack Harty with Harty Mortgage Advisors frequently updates his clients with wit and humor.

WARNING: Don't believe the Subject line above.  

There is no reliable method for predicting interest rate movement beyond the next fiscal quarter.  While there are many methods for predicting the future of rate increases, none are highly reliable.

Some methods are marginally more reliable than others, but in the end predicting rates is as reliable as predicting how dice will roll. 

Since December 2015 the Fed has raised short-term interest rates seven times.  At its August meeting the Fed held steady and did not raise rates (see step-graph below).  

However conventional wisdom, strongly anchored in Fed pronouncements, anticipates another rate increase in September 2018 and probably yet another by December.  Looking into 2019, which is through a glass darkly (1Corinthians 13:12), the betting is that rates will be increased another two to three times.  

Counter forces that may restrain future rate increases include effects of a trade war, political turmoil in the US and elsewhere and domestic employment dynamics, to wit: While unemployment has declined over the past two years (from 4.9% to 3.9%(, the rate of wage growth has also declined during the same period (from 2.8% to 2.7%).  In 2018 wage growth has barely exceeded and at times fallen below inflation.  In 2018 inflation has ranged from 2.1% to 2.9%.

Federal Reserve Rate Increases 2014 - 2018 

There is an obvious stair-step pattern to interest rate increases during the past couple of years.  

The picture for upward movement of future interest rates is a cloudy picture (see cloudy picture below).

Graph for Rate Increases 2019 - 2020

Notwithstanding future interest rate uncertainty, it is currently certain that interest rates are still at virtual 40-year low point...and that ain't so bad.

 10 Yr Treasury Bond Yield: 1978 - 2018

Jack Harty 

Harty Mortgage Advisors

www.HartyMortgage.com 

Tony Drost, Chairman
First Rate Property Management, Inc.
Boise, Idaho
Contact me for more information about the Investment Real Estate and Property Rental markets in Boise and Idaho.

First Rate Property Management received the below email from the Deputy Chief - Fire Marshal of Meridian Fire.  Also, they provided the attached Smoke and Carbon Monoxide Detector Log Sheet and Parking Lot Safety Tips.

FRPM:  tests, replaces, and adds detectors as needed at each tenant turnover.  Additionally for those property investors who choose to opt into our preventative maintenance, these detectors are tested again and repaired or replaced as necessary.

Good morning managers and owners. We recently had a fire in an apartment complex. The crews arrived on scene and found the smoke detectors were not functioning. I pulled it off the ceiling when I was doing my investigation to find it was 17 years old. Smoke detectors have a 10 year life span and CO detectors are about 7 years. They need to be replaced and checked at a regular interval.

I have created a log sheet to help capture the data, so you can keep track of these types of alarms. When we come for your annual fire and life safety inspection, we may ask if you are using the log.

As a reminder CO detectors are also required if you have gas fired appliances, or an attached garage.

PS – I have also attached a flyer for parking lot safety. We developed this for a complex here in town.

If the fire department can help with anything, please let me know! Have a great week!

Parking lot Safety Flyer

CO/Smoke Detector Log

Joe Bongiorno CFEI

Deputy Chief – Fire Marshal

Meridian Fire

33 E. Broadway Ave., Ste. 210, Meridian, ID 83642

(Direct) 208-489-0458 (Cell) 208-936-9554

Tony Drost, Chairman
First Rate Property Management, Inc.
Boise, Idaho
Contact me for more information about the Investment Real Estate and Property Rental markets in Boise and Idaho.

Below and attached is an article from the Mortgage Bankers Association who reports that the demand to rent is holding up to the rapid growth in supply across the nation. 

A 'Resilient' Multifamily Market

Michael Tucker mtucker@mba.org

July 26, 2018

The first half of 2018 ended well for the multifamily sector as rents rose $12 in June to a record-high $1,405 per month, reported Yardi Matrix, Santa Barbara, Calif.

Year-over-year, rents are up 2.9 percent as of June, a 20-basis-point increase over the previous month, the Yardi Matrix Multifamily National Report said. "The strong performance is a good sign that demand generally is holding up and that robust supply growth is not an impediment to rent growth in most markets," the report  said.

Rents grew 2.6 percent during the first half. "Those numbers compare favorably to most years except the peak years of the cycle in 2015 and 2016," the report said. Though recent performance has remained strong in general, gains continue to be highest in "booming" secondary markets including Orlando, Fla. (7.4 percent), Las Vegas (5.6 percent) and California's Inland Empire (5.6 percent).

"The resilient U.S. multifamily market demonstrated its strength and consistency in the first half of 2018," the report said. "Despite headwinds presented by consistent supply growth and lack of affordability in many major metros, rents continue to grow steadily."

The first-half growth number is the best since early 2016, when rents increased by 2.9 percent. The healthy showing might put to rest anxiety that rent deceleration from the cyclical peak in 2015 and 2016 will turn into flattening or negative growth. However, the report acknowledged some doubts about the strength of property income growth. The market is in the middle of a four-year period in which 1.2 million new units will be added, while affordability concerns have sharply curtailed rent increases in some markets including New York and San Francisco. In addition, the report noted, the long economic cycle will come to an end.

"All those issues created legitimate questions about the ongoing strength of the market," the report said. "However, the doubts seem to have been answered by the healthy and widespread gains we are seeing so far this year."

https://www.mba.org/mba-newslinks/2018/july/mba-newslink-thursday-7-26-18/commercial/multifamily/a-resilient-multifamily-market      

Melissa Sharone, President
First Rate Property Management, Inc.
Boise, Idaho
Contact me for more information about the Rental markets in Boise and Idaho.

Over the past few decades, there have been several property managers go out of business and the rumor is, when they did, they took and/or spent tenant deposits and rents.  As of recent, a number of Ada and Canyon County investors have filed claims against another local property manager.  First Rate Property Management has taken on a number of properties over the past few years from this company and we reached out to them asking what the telltale signs were that made them change management companies.  Some say "the writing was on the wall", while others say they knew the company was struggling, but had hoped that the management company would pull through.  When things like this happen, a great deal of people are hurt financially  In no typical order, we have provided the list we put together based on these clients responses.

Links to recent news publications:

https://www.idahopress.com/meridian/news/property-manager-skips-lawsuit-leaving-tenants-businesses-in-the-lurch/article_6200f6f7-bbb8-513f-89fb-73ad66574124.html

https://www.idahostatesman.com/news/local/article214098034.html

https://www.idahostatesman.com/news/local/crime/article213922379.html

1.  Communications:  Poor communications or lack of response can imply poor organization or time management, but constant communication troubles are a flag.  Inconsistent or untrue communications are an immediate flag.

2.  Employee turnover.  Constant employee turnover should be a concern.  Additionally, when employees tell clients that employee paychecks are bouncing and/or payroll taxes are not being paid, is a serious flag.

3.  Financial:

                a.   Irregular  posting of owner statements.  No statement at all is unacceptable.

                b.  Irregular or delayed owner distributions.  No distribution would be of immediate concern.

                c.  Regular inaccuracies on owner statements.

                d.  Undisclosed fees/kickbacks.

                e.  Undisclosed mark up or upcharges of invoices paid by the property manager on behalf of the property owner/investor.

                f.  Unpaid or long delays in paying vendors.  Additionally, when maintenance providers (vendors of the property manager) contact property owners stating that they have not been paid, yet the expense appear on the owner's statement, something is awry.  Worse is when these contractors file liens.

                g.  Contact from tenants stating they have not received their security deposit back or lack of communication from the Property Manager.

                h.  Real estate sales persons sees delays in transfers of funds after a property under the management company's care is sold.

4.  Company growth.  Accompanied by any of the other flags listed above, Rapid growth  or a shrinking business could be a sign.  You would think that seeing that a company is losing properties/clients quickly would be an easy one, but honestly rapid growth can be just as equally concerning.  In the companies we have seen fail, they did so because they were growing too fast and were out of control.

Below are some thoughts we had on how to better protect yourself, the property, and your tenants.

                1.  Don't hire solely based on the lowest fee.  We like to compare it to hiring a painter.  Painter A's bid is half the cost of Painter B's.  And would you believe it, Painter A may actually make more money.  How?  They use lower quality paint, do little to no prep, and don't carry the appropriate worker's compensation and liability insurance.  End result, Painter A makes more money, provides an inferior product, and puts the property manager and the property owner at greater risk.

                2.  Hire a company with experience and longevity within the industry.

                3.  Hire a company who prescribes to Professional Standards and has both personal and company professional designations.  Just being a member of a professional association doesn't cut it.  Many companies simply join these professional associations  to be able to use their logo for marketing purposes.  Choose a company that is involved with these professional associations.

                4.  Read the company reviews and company responses.

                5.  Ask for references and call existing property owners/investors.

                6.  Ask for proof of insurance or if applicable, fidelity bonding

                7. Look at how funds held are held and reconciled.  Ask to see a copy of their 3-way reconciliation (Transparency is key)

                8.  Does the company have 3rd party audits of funds held in trust?

Tony Drost, Chairman
First Rate Property Management, Inc.
Boise, Idaho
Contact me for more information about the Investment Real Estate and Property Rental markets in Boise and Idaho.

Below is an article in the July issue of the Residential Resource, written by Colleen Harding from Miami.  Within the article, Colleen describes factors that are making up today's housing rental market.  Much of what Colleen has to say is what we have reported in the past.  There were a few points that I found very interesting.

                1.            Millennials find value in investing into rentals, but prefer to rent.

                2.            Class C properties will be the bread and butter for investors.

                3.            Over 15% of the nation's rental properties are owned by institutions.

                4.            The number of rentals across the nation are expected to grow by another 25% in the next 5 years

Below is a summary with some of our own input.

 MILLENIALS:

                Colleen reports that millennials are staying home longer, have high student loan debt, and some reservations about home buying after seeing the last housing crash.  They like flexibility, by not being tied down.

                We have seen much of what Colleen has stated.  We are however seeing a good number of millennial renters, but they seem to prefer roommates to help defer costs.  Colleen also stated that milennials look for luxurious amenities.  Perhaps that’s case in many parts of the nation, but in Boise, we're seeing that they are looking for the most for the least amount of rent.

 OWNERSHIP VS RENTALS:

                Colleen states that "Lower-income Class C properties will continue to be the bread and butter areas for rental investment, accentuating the need for good professional property management".

               We've been concentrating on  B properties.  We think that when rents finally top out and we see a rental correction, the B properties purchased right, will outperform the A properties that are being sold at premium prices and require premium rents to perform.

 HOME OWNERSHIP TENURE:

                The length of time a person owns and hold their home has increased.  One reason was it took some time to recover value after the housing crash.  With values increasing, this may decrease.

The full article is posted below.

Where Is It Going?
RENTAL HOUSING MARKET

     At the recent IMN Single-Family Rental Investment Forum in Miami, Florida on May 21-23, 2018, this was one of the major discussion topics. A study has shown that the number of Americans living in rental properties has increased by 37% since the Great Recession.

Millennials

     This generation is staying home with their parents longer. High student loan debts and a tight job market, with little overall increase in pay, have not helped. They have witnessed the crazy housing market, when some of their parents lost their homes, and the stress it caused the family. All of these factors contribute to staying home longer. Some Millennials are not interested in owning a home; they don’t want to be tied down and like to stay mobile. If they buy, they are waiting five years later to buy than those in the older Generation X. The new trend for Millennials is home ownership without occupying the property. They are buying rental investments and living in other areas. They find value in having the availability to move freely, generate equity, and diversify their investments.

     Millennials have higher expectations, whether they own the asset or rent it. They want better distribution of products and services, affordability, and quality housing with luxurious amenities, including gym, pool, Wi-Fi, and entertainment nearby.

Ownership vs. Rentals

     Healthcare and college education costs continue to rise much more quickly than middle-class incomes, further limiting the ability of Millennials to buy as early as their parents. Mortgage interest rates have stayed low during the recovery from the recession, but are expected to rise now, further limiting the ability for the younger generation to buy homes.

     Lower-income families will remain as renters and their chance to achieve the “American Dream” of home ownership and the stability this has brought to their Boomer parents, are diminishing rapidly. The top 5% are doing just fine, with annual income growths of 6.9%. Earnings of the top 20% are also good at 5.7% yearly. However, incomes are growing at around 4% for the remaining 80% of the American population.

     This is the sector that contains almost all of our tenants. Over the short term, this is good news for rental income investors. But will there be less stability, over the longer view, if this continues?

     Home ownership percentages in the wealthier neighborhoods ranges from 60 to 79%. In the poorer areas, from 46 to 59%. Lower-income Class C properties will continue to be the bread and butter areas for rental investment, accentuating the need for good professional property management, especially in such areas.

     I was fascinated to learn that there are almost 8,700,000 owners who have from one to ten homes, 58,960 owners with 11 to 25 properties, 11,502 owners who have 26 to 100 properties, 879 owners who have 101 to 500 properties each and 56 of the biggest investors with more than 500 properties each. My Miami market ranks within the topmost 13 markets in each of the size ranges.

Home ownership tenure

     This figure has increased from the long-standing rate of four to five years, to as much as 8.05 years in 2017. This was caused by a variety of reasons as the value of their homes recovered from the recession of 2008. Lack of equity, inability to move up, and less attractive financing, were other main reasons. The length of tenure is expected to drop soon.

Monthly foreclosure activity

     This activity is now back to normal levels at about 75,000 vs. the peak in 2009 and 2010 when it reached 350,000. There are still good buys available in the off market from some sources who are obtaining them directly from the big banks

Where do we go from here?

     There are 13 million rental properties nationwide and projected to increase to 17 million by 2024. Two million of these properties are owned by institutions. The potential to own properties is very good. With capital flowing into rental housing and attractive interest rates, more supply will be added to the rental market. The end users are willing to pay more for quality rental properties which will help to enhance the quality of life and a better environment for all.

Tony Drost, Chairman
First Rate Property Management, Inc.
Boise, Idaho
Contact me for more information about the Investment Real Estate and Property Rental markets in Boise and Idaho.

Tenant advocates in California have received enough signatures for a ballot initiative to repeal the Costa-Hawkins Rental Housing Act. This would allow extreme Rent Control in California cities and counties where many saw rents increase by 40% over the past 3 years.

                The purpose of Rent Control is to give cities and counties the ability to better deal with affordable housing by not allowing rents to increase at such a high rate. However, many feel that this will not work and will actually “pour gasoline on the fire of California’s affordable housing crisis”. Many people will stay in a rent controlled unit for many years well after their need for affordable housing. This still limits the amount of affordable housing for those who really need it.

     If this initiative is passed, many landlords’ investments will no longer be profitable. If this happens, there are fears of foregoing repairs and letting buildings deteriorate, or even selling and moving their investments somewhere else. If the current landlords sell to owner-occupants, which is likely, that property is no longer on the rental market, further limiting affordable housing.

               In Idaho, this could result in even more people from California investing in Idaho properties. This could continue to drive the property values, and therefore, rents higher as well!

We will have to wait and see what happens this November!!!

Full article below: California Draws Battle Lines in Rent Control Conflict

 Kathy Fettke | 28 May 2018

The battle lines have been drawn in the war over California rent control. Tenant advocates announced recently they have enough signatures for a ballot initiative to repeal the Costa-Hawkins Act, which could open the floodgates for extreme rent control in California and put some landlords right out of business.

Why Rent Control Doesn’t Work

While the idea of rent control may sound like a nice one (help keep real estate affordable for families who otherwise would be forced to move), the concept is, by nature, easy to exploit. Tenants may hold onto low-rent apartments for years despite employment gains and higher salaries, crippling landlords’ ability to collect market rents for decades. This not only hurts the landlords, it also eliminates affordable housing for people who truly need it and creates a stagnant rental market.

Rent control also creates a losing situation for landlords in terms of operating income. If a landlord cannot generate enough money to maintain properties, they will be forced to forego repairs and let buildings deteriorate. In California, that can lead to tenants being able to legally refuse to pay rent while being protected from eviction if a trigger maintenance issue arises. Landlords often tend to opt out of the rental game, sell their properties, and put their money elsewhere. If they sell to owner-occupants, which is likely, that removes those rentals from the market entirely and, again, reduces available housing for the renters who desperately need it.

We are on the Cusp of Massive Rent Control

If this ballot measure wins voter approval, investors with property in California are on the cusp of what could be a massive shift toward rent control. Cities that currently have rent control ordinances include Berkeley, Beverly Hills, East Palo Alto, Hayward, Los Angeles, Los Gatos, Mountain View, Oakland, Palm Springs, Richmond, San Francisco, San Jose, Santa Monica, and West Hollywood. Notably, Thousand Oaks has rent control but is phasing it out.

Because a repeal of Costa-Hawkins will substantially broaden the legal alternatives for cities to implement rent control, California landlords currently operating under the protection of the act may need to rethink their investment plans if the measure is approved in November.

Investor Insight:
If this ballot passes and you own California rental real estate, you may need to reevaluate your investment strategy.

Jim Sharone, Vice President
First Rate Property Management, Inc.
Boise, Idaho
Contact me for more information about the Investment Real Estate and Property Rental markets in Boise and Idaho.