By Linda Koffman, Michael Manzi, and James Porter – Smith Gambrell Russell

(Editor’s Note: While the topic of the office market is a bit out of our “wheelhouse” here at our apartment association and may not fully align with our typical content on multifamily residential properties, many of our members currently own or are interested in investing in various types of commercial properties, including office buildings.  Whether you own or are interested in investing in an office building, or not, you will surely find this article of interest. Where the demand for office space goes, so goes the demand for residential rental properties to live in.)

When it comes to business, much time and money is devoted to limiting uncertainty, and this may be especially true in the real estate business.  Justice Oliver Wendell Holmes said, “The longing for certainty … is in every human mind.  But certainty is generally illusion.”  And so, it was for office owners and tenants as the impact of COVID-19 began to take effect in March 2020. 

DON’T LET YOUR PROPERTY RIGHTS BE RESTRICTED EVEN FURTHER!

CALL TO ACTION: Please Help Us!  Contact the Members of the Assembly’s Appropriations Committee Immediately, Today!  Tell the Committee Members to vote NO on Assembly Bill 854.  We, as Landlords, have had enough already this year!  This bill has already been passed by the State’s Committee on Housing & Community Development…STOP IT from going any further.

Assembly Bill 854, proposed by Democratic, Northern California Assembly Member, Alex Lee, seeks to strip rental property owners of their rights to leave the rental housing business, even when YOU may be losing money!  Assembly Bill 854 is another re-treaded attack on California’s Ellis Act, and if passed and eventually signed by the Governor, it could become State Law compelling YOU to continue offering housing for rent or lease.

Millennials Blame Boomers and Older Generations for Affordability, Access Issues

Just as the younger generation of home buyers is reaching the point in their lives when they want to buy a starter home, they are entering a market where, simultaneously, Baby Boomers are deciding to downsize, putting a strain on available housing stock. With longer life expectancies and better overall health than any generation in history, Boomers are not quite ready to give up on private home ownership—and with the horror stories about retirement homes and care facilities during the pandemic, this attitude becomes understandable.  One survey respondent noted: “[Baby] Boomers need to stop buying starter homes as their retirement homes. It’s driving the cost up to where first-time home buyers can’t afford it.”

To further exasperate the problem for millennials trying to buy a home in this under-supplied market is that Baby Boomers are not their only competition. Baby Boomers are just the tip of the iceberg.  While millennials pin the blame on the older generations, a far less visible factor is the contingent of well financed institutional buyers who have collectively taken a lot of stock off the market. Private Equity investors and buyers have, in fact, contributed to the shortage of housing by doing what businesses in free market economies do best: identifying rising assets and acquiring them in bulk.

Public policies often mistakenly treat people that are unlike in crucial ways as if they are alike.

By Gary M. Galles, Professor, Pepperdine University

In The Common Sense of Science, the Polish-British mathematician Jacob Bronowski wrote that, “at the basis of human thought lies the judgment of what is like and what is unlike.”  Unfortunately, public policies often mistakenly treat people that are unlike in crucial ways as if they are alike, or those who are alike in crucial ways as if they were unlike.

Housing policy illustrates this point well. In discussions of rent control, attention focuses on how it will treat tenants, but fails to make the critical distinction between present tenants and future tenants, who will be very differently affected. It would provide a massive windfall for current tenants at the expense of landlords, forcing or keeping rents far below market value, with tenancy protections guaranteeing the windfall into the future.

Los Angeles Mayor Eric Garcetti called it “like winning the lottery.” But it would harm the far larger group of people who seek rental housing after rent control is imposed. The slowed growth or shrinkage in the quantity and quality of the housing stock over time that results will increasingly lead to “no vacancy” signs rather than available or affordable units.

By Daniel Yukelson, Executive Director

I thought I would address the subject of smoking from the perspective of a rental housing provider.  No offense!  If you are a smoker and enjoy it, more power to you.  Merely keep your smoking self away from our properties…as in way far away.

The “bottom line” on smoking from the perspective of rental housing providers is we just don’t want smoking anywhere in or at our rental properties because of the damage it causes to our rental units, the increased turnover costs, and also because of the many complaints we will surely get from non-smoking renters, particularly renters that have young children or health issues making them extra sensitive to second-hand smoke.  Face it, we don’t want the “stink” around bothering other people and harming our otherwise healthy and quiet existence. 

However, at the same time we do not want smoking at our rental properties, there are those rental housing providers that are sometimes reluctant about no-smoking policies being imposed because of concerns about being responsible for enforcement.  I get that.

By Jason Salmon, Senior Vice President, Kay Properties & Investments

Key Takeaways:

• What are the Four Stages of a Real Estate Cycle?
• What are some Current Macro Real Estate Trends Impacting Investment Real Estate?
• Why Should Delaware Statutory Trust Investors Be Aware of Current Real Estate Trends?

One of the common topics that frequently pops up in investment conversations these days involves questions about what stage of the “real estate cycle” is the market currently in, and how does the current real estate market cycle impact the world of Delaware Statutory Trust 1031 exchanges? 

The first caveat that must be iterated here is that nobody can predict the future of any market, and there are always material risks associated with investing in real estate, which investors should carefully consider with their own tax and legal advisors. However, by taking a closer look at typical real estate cycles and why these cycles are important to understand, investors can be better prepared for the future, and maybe recognize why more and more real estate owners are selling their properties and moving into DST 1031 exchanges.

By David Crown, Los Angeles Property Management Group

When I was a child playing little league baseball, a coach once told me, “your team is only as good as its weakest player.” That truth has stuck with me, and it can be applied to any industry, but I’ve found it especially true of property management. Great property management requires a combination of professionals with vastly different skillsets all working toward the same goal: maximizing the quality and profitability of their clients’ investments. In other words, it’s a team sport. And, just as in sports, some organizations are better than others at assembling a championship team that stays great.

For evidence of that, look no further than Los Angeles’ two baseball teams. The Dodgers were 2020 World Series champions playing for a repeat win in 2021, and they had made the playoffs for nine straight years, whereas the Angels have only made the playoffs once (2014) in that time span, and haven’t won a ring in almost 20 years. My point is that building a successful team is a skill all its own, and if you’re a property manager, it’s a skill you can’t afford to go without. In this article, I’ll lay out the best ways to improve your hiring practices and field a contender.

By Jon Coupal, Howard Jarvis Taxpayers Association

If ever voters needed a reason to vote no on every single bond measure that appears on the ballot, here it is: The Court of Appeal for Third Appellate District just ruled that, despite all the lies voters were told about California’s infamous High-Speed Rail project, taxpayers have no remedy, even though the project as it exists today bears no relation to what voters were told when they approved the $9.9 billion bond in 2008.

Californians were promised a super-fast train that would travel between Los Angeles and San Francisco in about two and a half hours; the ticket price would be about $50; the total cost of the high-speed rail would be about $40 billion; and there would be significant private-sector support –money from investors — to build the project.

By Ted Kimball, Esq., Partner, Kimball, Tirey & St. John LLP

• Question.  What is the code section pertaining to the tenant’s obligation to pay rent subsequent to a thirty (30)-day notice?

• Answer.  California Civil Code 1946 requires the tenant to serve a thirty-day notice or a landlord to serve either a thirty-day or a sixty-day notice to terminate the tenancy.  The rent is owed until the lease terminates.

• Question.  Several prospective tenants have inquired about renting an apartment for a month or two.  The high turnovers could be detrimental to my rental units and will create a lot of work for us in terms of doing paperwork and cleaning.  Are there any rules that require a tenant to rent a minimum amount of time?

• Answer.  There are no laws requiring you to rent month-to-month or a minimum or maximum amount of time.  Many landlords require six-month or one-year leases.

By Jack Humphreville, L.A. Watchdog for CityWatch

The Los Angeles Times recommended that the City Council be enlarged to 31 members, an increase from the current level of 15 elected representatives.  This follows the Redistricting Commission’s suggestion to create 22 Council Districts.   

By increasing the size of the City Council, Angelenos will have more responsive elected officials because the number of constituents for each district would shrink from 260,000 to 126,000 residents. More council districts will also mean less gerrymandering and allow the districts to better accommodate the “diverse geographic, demographic and social landscapes” of our City’s 3.9 million residents, its 99 neighborhood councils, and 114 distinct neighborhoods that are spread over 460 square miles.