Many political friends and radio, television and newspaper directors fail to appreciate or understand the difference between very large, newly built, luxury apartment projects and the many small apartment owners who, typically, are families. Perhaps they own a duplex. One of the units becomes vacant and they’ve lost one half of their income.
Our political friends do not fully understand that during the Coronavirus, so many tenants simply stopped paying rent and others surrendered their unit and left. Yet, government-mandated responsibilities continued unabated.
The landlord still needed to handle earthquake retrofit, restoration and repair of balconies and stairs, installation of smoke/carbon monoxide alarms (now requiring a special 10-year battery), parcel taxes, bonds, property taxes, mortgage payments, business license fees and rent control fees – all of which continued without any discount, adjustment or relief.
Costs Have Increased
The costs of operating our apartment business became increasingly expensive. Ten years ago, we could purchase a 40-gallon hot water heater for $199 with installation costing an additional $200. Today, the same water heater would run $1,500, including earthquake strapping and the special relief valve system.
Ten years ago, a garbage disposal was $35 and today, it’s $200 including installation. Ten years ago, a plumber charged $35 an hour and maybe $20 for their assistant. Today, a two-man team will charge $125 per hour.
Refrigerators, stoves, microwaves, garbage disposals, lighting fixtures, flooring, paint, pest control, mode abatement, locks, windows and screens have probably increased by 300% or more.
The dirty, little secret is that municipalities use their “monopoly over utilities” to secretly extract taxes and fees. In Los Angeles, four years ago, a trash bin accommodating a 10-unit apartment complex would be $100 per month – today, it’s $300 per month. And … in Santa Monica, it may be as high as $600 per month or more.
Water and sewage charges have increased.
Unfair Rent Increases
So, with all of these operational increases, our “friends” suggest that the small apartment owners get an annual rental adjustment. That’s a fantasy! The annual rental adjustment is based upon 211 items in the CPI basket – yet if you examine those items, only a few pertain to property management expenses making the CPI illegitimate.
And … in so many cities, the rent increase or adjustments have been frozen. Makes you wonder why these politicians haven’t frozen the prices on the sale of single-family homes if their real objective is to force owners to provide low-cost housing! Or … only if they wanted to be fair, what would be wrong with allowing rents to track the price of home sales? (Guess that would not buy many votes, would it?)
Industry Expenses
Let’s sit at the kitchen table and examine our industry’s real expenses. There are mortgage payments, insurance, property taxes and of course, municipal bonds and parcel taxes excluding the deferred maintenance for the common area, laundry room, plumbing, electrical and structural. Not only do we need basic insurance; we now have to purchase an excess/umbrella insurance product and then special discrimination coverage. The largest growth in California is litigation.
Conclusion
So, when a newspaper, magazine or radio station asks you about small family-owned apartment groups, I don’t think we should be focusing our comments on the fact that the owners are senior citizens enjoying their “golden years” and depend entirely upon their rental income to survive.
That’s a talking point that seldom, if ever, receives consideration. Tell them the truth – that the costs of managing, operating and handling apartment industry obligations imposed by the government is not being met by the current rent stabilization or rent control protocols. The CIP is illegitimate. The utilities are not being passed through to the tenants.
Why should a tenant not be responsible for paying for water, sewage and trash? Why should a tenant not be responsible for one-half of the cost of balcony and stair repair and earthquake retrofit? Why should tenants be beneficiaries of free rent and forced labor? Why should housing providers be forced to work and not receive compensation from the recipients?
If a municipality passes a school bond or a parcel tax to clean the beach, at least one-half of the cost should be accepted by the tenant. What would happen if a law required all housing consumers to check in at the beach and be forced to pick up trash? All heck would break loose!
So, I celebrate and complement each of you for your devotion to our industry and your leadership. Thank you for all of your free labor; no other industry has owners who would contribute so much just because their Governor asks them to “volunteer”! However, you need to aggressively explain that all owners are being suffocated or otherwise destroyed by the rent control system that accepts and expects providers to pay increasing expenses, provide free rent and forced labor!
AOA Comments:
- To discover how you can start passing on utility and other costs click on “R.U.B.S. Software” under “Member Benefits” at AOAUSA.com, or call: (877)-789-6027.
- Please tear out this article or make a copy and send it to our Governor as he might be more inclined to listen now that he is facing a recall. His address is: Governor Gavin Newsom, 1303 10th Street, Suite 1173, Sacramento, CA 95814.
If you add your own comments, you might mention that you think it is unconstitutional to enslave an individual or force an individual to provide their labor and not be paid! We are doing just that and it should be our voluntary decision whether or not to work for free for someone who loses their job or is sick. On second thought, this could be the makings of a billion-dollar lawsuit!
To donate to the AOA Political Action Committee, please go to page _______. You might also send a copy of the protestors on that page to the Governor and other politicians in your city!