GUEST VIEWPOINT
If a property’s value and the owner's rental income declines, so will tax revenue

An industry advocate points out that expanded rent control will put a dent in property tax revenues and we all suffer because misguided rent control policies will adversely impact everyone as cities, counties, special districts, and schools are depleted of money. 

Throughout our legal careers, Bornstein Law has been committed to educating the rental housing community on an ever-changing and complicated regulatory regime, but we don’t work on an island. In a team effort, our industry partners share this goal, so we reached out to Noni Richen, the former President of the Small Property Owners of San Francisco Institute and board member.

With calls for expanded rent control, Noni points out that in “strict” rent control where the owner cannot bring rents up to market rate when they become vacant, the value of the property and the owner’s income is decimated.

With calls for expanded rent control, Noni points out that in “strict” rent control where the owner cannot bring rents up to market rate when they become vacant, the value of the property and the owner’s income is decimated.

Reduced property values, declining income, less gross receipts, taxes, and other sources of governmental revenue will be reduced, right? This means less money for police and fire services, schools, public works, playgrounds, libraries, transportation, etc.

This is not only Noni’s premonition - a state budget analysis has stated in no uncertain terms that an expansion of rent control will tank the value of rental properties and reduce the amount of taxes paid by landlords, but it doesn’t end there.

Already cash-starved municipalities will need to add additional costs to carry out these laws. Putting rent regulations in place is an arduous task totaling tens of millions of dollars and these costs will likely be passed onto landlords.

We can confirm Noni’s observations that investors are doing an about-face and putting their investment dollars in other states, and why wouldn’t they given California's hostile public policy towards landlords?

Economists we are not. But you don’t need to be a financial wizard to understand that when there is draconian rent control, owners simply walk away from the building when there is no incentive for profit. She cites New York City as a case in point.

In our exchange, Noni parrots our earlier sentiment that the the longer a tenant stays in the unit, the cheaper the rent becomes and tenants want to reside longer, disrupting the normal flow of people making a chapter change in their lives and moving elsewhere.

There are many reasons for rental property owners to oppose Proposition 33, dubbed the Justice for Renters Act, or as we like to call it, Weinstein 3.0.

But our community of rental housing providers needs to win over the hearts and minds of renters who will not get justice from increased regulations but reduced housing stock and a decline in their quality of life.

This, in our view, is where the messaging is misfiring. It's not landlords against tenants. It's not David versus Goliath. Ill-conceived rent control policies hurt everyone.