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The residential rental housing industry is under assault. Politically. Economically. Morally. Socially. The wide-spread negative narrative juxtaposed with California's "housing crisis" has put residential rental property owners in the cross-hairs of complaint akin to the Robber Barons of the Old West. From city council chambers to the legislative halls of the Capitol the chorus of claimed avarice and greed follow in the wake of anecdotal examples of a few outlier's excessive rent increases. The aberrant actions of a few have unnecessarily tainted the entire rental housing community. It brings to mind a favorite Pogoism: "We have met the enemy and they are us."

A number of very significant legislative proposals have surfaced in the wake of this industry criticism. We will report on these from time to time as the session heats up with committee hearings and floor votes. And we will look to you for grass roots support through active response to appropriate Red Alerts. While important in and of themselves, they pale in comparison with the most significant challenge facing the industry in the last 20 years: a proposed ballot initiative coined the "Affordable Housing Act" that would gut the Costa-Hawkins Rental Housing Act, thereby paving the way for local enactment of strict forms of rent and price control on all rental properties.

The proponents organized under the banner "Coali­tion for Affordable Housing" have amassed over $1 million and collected the 25 percent signature threshold as of the end of February. It is expected that they will spend whatever it takes to get the ballot initiative qualified for the November 2018 statewide ballot. They have until June 25 to collect the 365,880 signatures needed to qualify for the November General Election.

It is past time for individual rental property owners to be complacent about the events and circum­stances surrounding this industry. Our Association is certainly not taking the important issues of the day lying down. We have and will continue to develop and implement a comprehensive action plan to actively oppose this proposed initiative. Every day we will be initiating or participating in worthwhile activities to inform our members and the public the actual and practical impact of the ballot initiative:

  • On single-family homeowners that could face rent and price control mandates including the neces­sity to argue before rent boards for fair return.
  • On renters who unquestionably will find it extremely difficult to find replacement housing.
  • On property owners and renters when 58 coun­ties and over 482 cities can define and implement a confusing array of rent control ordinances, charter provisions or regulations.
  • On businesses, including the financial markets, and government.

Notice to owners: Get involved. Support your Asso­ciation's political activities and educate yourself about the major issues of the day. Join MCSC's grass roots campaign against the proposed initiative. Talk to your friends and neighbors and local political representatives. Most importantly, talk to your residents. Let them know you are a faithful steward of your property and their well being. Look at their circumstances from their viewpoint. Many, if not most, tenants are there by choice, not circumstance. Also, but not last, contribute financially to MCSC's efforts to derail or defeat the proposed initiative.
Yes, the issue is one of the biggest we have faced in some time. Are you ready to step in with both feet and help us?

Housing Affordability

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White House Toolkit Points to Local Barriers to Affordability Crisis

In September the Obama Administration weighed in on one of the seminal issues impacting local communities and one with which our industry finds itself struggling again—housing afford ability.

What might surprise you is that the message from the White House was not directed at property owners. The Housing Development Toolkit (avail able on the whitehouse.gov website) opens with this: Over the past three decades, local barriers to housing development have intensified. The accumulation of such barriers—including zoning, other land use regulations, and lengthy development approval processes—has reduced the ability of many housing markets to respond to growing demand.

The toolkit discusses in specific detail the costs that these barriers impose on local households, the economies and even the environment as well as their role in exacerbating gentrification and income inequality. This is a welcome message from the Administration.

As many of you are experiencing firsthand, the issue of housing affordability increasingly dominates local news and policymaker debates. Beyond the statistics, low- and moderate-income families struggle to find housing that meets their needs at a price they can afford. This is an issue in the usual suspect markets on the coasts, but also in places like Austin, Texas; Nashville, Tennessee; and Colorado Springs, Colorado.

While this current crisis is not breaking news, the scale and scope of the problem seem greater than in previous cycles as does the intensity of the advocacy efforts by tenant-rights’ organizations.

Last month a few NAA affiliate offices and events were picketed by protesters and, in one case, an Association Executive was personally the target of an advocacy campaign. The White House efforts could not come at a better time.

What many advocates seem unwilling to acknowledge is that the seeds for our current crisis were sown long ago in local land development and use policies. As the Housing Development Toolkit notes, when the recovery from the 2008 recession began, many communities were not positioned to take advantage:

In a growing number of metropolitan areas, the returning health of the housing market and vibrant job growth haven’t led to resurgent construction industries and expanding housing options for working families, due to state and local rules inhibiting new housing development that have proliferated in recent decades.

There is also of course the added complicating factor of stagnant wages. No- or low-wage growth is hard enough in markets where demand is “normal.” It is downright dangerous in the growing list of markets where exorbitant development costs and red-hot demand accelerate rent increases.

The toolkit goes on to describe a number of excellent policy options available to local governments to streamline the development process and increase apartment housing supply. Nearly all are positioned as incentives to development and even mandatory inclusionary zoning is described in both mandatory and voluntary terms but the toolkit’s recommendation tilts more towards voluntary incentive for IZ like density bonuses or streamlined approval processes. Rent control is not on the list of policy recommendations.

While not on the list of policy recommendations, the toolkit does make a case of sorts for source-of income protection for Section 8 voucher holders, characterizing a property owner’s choice not to participate in the Section 8 program as “discrimination.” We will continue to respectfully disagree with the Administration on this and stand in support of the freedom of a private owner to take on the responsibilities, and burdens, that come with accepting Section 8 vouchers. NAA has been a vocal, aggressive champion of this program for decades, including its voluntary nature.

Also missing from the toolkit is a strategy for fighting NIMBYism (Not in My Back Yard) that pervades in so many jurisdictions. Truth-be-told, many of the hurdles put in the place of apartment development were put there by NIMBYists who would sacrifice anything to prevent more supply of apartments. More and more local governments, with help from private sector employers, non-profit organizations and others, are standing up to these forces. Those efforts must be replicated around the nation if we are ever to make a dent in this affordability challenge.

Nothing in the toolkit is earth-shattering; however, the focus and emphasis it places on local governments and their central role in the affordability crisis are extremely important. Our hope is that local governments listen and future Administrations make the same commitment.

Make sure to mark your calendars for the 2017 NAA Capitol Conference and Lobby Day on March 7-8, 2017. Our goal is to create another record-breaking event, bringing in more advocates to reach all 535 members of Congress. Registration opens in early November.

Greg can be reached at This e-mail address is being protected from spambots. You need JavaScript enabled to view it

 

 

 

 

April 2018

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Unless you live under a rock, and I highly doubt you could not have heard it there too, we have all heard about the Rent Control ordinance that is being circulated around Long Beach AND the Statewide Rent Control issue that continues to threaten the repeal of Costa­Hawkins. I want to thank all of you who have called to ask questions. Neither of these issues are good for our industry-this includes our tenants. As such, I encourage you to take time to get informed and educate yourself on what could be in store if this passes. NOW is the time to get involved. If you have not renewed or joined AACSC, I encourage you to do so TODAY.

Nevertheless, we want you to know that AACSC is fully engaged at all levels. We are working with Realtors, CAA, PacWest and SPOA and will continue to do so on your behalf. Your voices will be heard and AACSC is involved.

There is no more time to sit on the sidelines-the time in NOW and AACSC is the right Association that has the only local, statewide and national connec­tions as we fight to protect your property rights.

Now, let's move on to the 12th Annual AACSC Golf Tournament. If you have not already secured your spot, I would highly recommend that you contact us today. We are looking forward to another sell out and a great day on the links. Of course I want to thank our sponsors for their continuing support of this great event. This is a terrific way to thank your best customers, talk with potential new customers or use it as a way to thank your business partners, staff or just have a great day on the links. I am waiting for your call.
Finally, last year we held an Apartment Repair & Maintenance Series of classes that was extremely well-received and we are having another one this year (see page 40). You don't want to miss this series of four classes and the best part about it is that it is a "hands on" course. So if you have crew who like to hammer, bang, build or fix stuff-this is the series of classes for them and we guarantee they will all walk away with information they can use on your properties. Besides, it is a great way to relieve stress. The classes can also be taken individually.

Finally, April is time to talk about all the NEW laws that are being considered for 2018 so we look forward to making sure that you stay informed. To that end, we will be updating you each month as we find out more information. For now, we are encou­raging you to contribute to the PAC so that we can effectively fight the rent control ordinance here in Long Beach. Don't forget to read our weekly e­newsletter, The Beacon, to learn about all the educational classes we have scheduled and see you this month at Sea Cliff Country Club for a day of golf. Even if you don't golf, you can attend to bid on all the great auction items and end the day with a great din­ner with friends. Either way, we want you there!

All Hands on Deck

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The legislative attention to housing issues over the past year has given rise to an incredible surge in political advocacy of all stripes. If “the meek will inherit the earth,” as some say, one might speculate as to the planet’s condition in the aftermath of scorched-earth-style extremism in this Battle Royale. If there is one constant theme that emerges from all the rhetoric surrounding California’s newly recognized “housing crisis,” there is plenty of blame to be spread around lots of different players.

Tenant advocacy groups have mobilized an imposing force with a single message of hope for relief from spiraling costs of rent, and many point to the rental property owner as being the culprit who caused the condition. Their immediate solution: rent control, repeal the 1995 Costa-Hawkins Act that placed restrictions upon local government’s ability to enact the strictest forms of price controls on rental properties. That proposed solution was embodied in Assembly Bill 1506 (Bloom), which failed passage this past January in the Assembly Committee on Housing and Community Development. And the same effort is embodied in an initiative proposal cleared for circulation by the

Attorney General with the following description:

EXPANDS LOCAL GOVERNMENTS’ AUTHORITY TO ENACT RENT CONTROL ON RESIDENTIAL PROPERTY. INITIATIVE STATUTE.

Repeals state law that currently restricts the scope of rent-control policies that cities and other local jurisdictions may impose. Allows policies that would limit the rental rates that residential-property owners may charge for new tenants, new construction, and single family homes. In accordance with California law, provides that rent-control policies may not violate landlords’ right to a fair financial return on their rental property. Summary of estimate by Legislative Analyst and Director of Finance of fiscal impact on state and local government: Unknown, but potentially significant, changes in state and local government tax revenues. Net decrease more likely than net increase. Potential increase in local government costs of up to tens of millions of dollars per year in the long term, likely paid by fees on owners of rental housing. [Bold in original.]

The prospect of continuing legislative battles in the shadow of a looming ballot fight gives rise to determined groups of rental property owners to mobilize a resistance to the challenges ahead. This is an All Hands on Deck moment for owners everywhere to understand exactly what is at stake in the coming months as the dialogue heats up.

Years and years of inadequate housing supply has matched deficiencies in roads and highway maintenance, water and sewer needs, and a host of other infrastructure needs that have simply failed to match a burgeoning 21st Century society.

Moving away from the Number One priority on every rental owner’s list of issues that merit attention, we turn to tackle another leftover challenge that has gained traction this year. Senate Bill 721 (Hill) passed the Senate in late January, meeting the constitutional deadline for passage of bills in its house of origin. The bill would require property owners of three (3) units or more to hire a qualified inspector every six years to inspect 15 percent of all exterior wood supported or stabilized walking surfaces above six feet from the ground, including decks, balconies, porches, stairways, walkways, entry structures, and their supports and railings. There are a number of shortcomings in this proposal and they are cause for real concern. We outline here only a few of the many reasons why the measure requires additional attention to its detail.

Owners are already subject to rigorous inspection and maintenance standards. Existing statute, regulation, and case law provide a whole spectrum of inspection and maintenance requirements that developers and owners must abide by to properly construct and operate ownership and rental property. Additional inspections are redundant and unnecessarily costly. Instead of requiring regular state-mandated inspections, the Legislature should focus on strengthening inspections that are already in existence, and amending the building code to ensure better materials are used.

Balcony and deck tragedies are preventable without regular state-mandated inspections. One of the central culprits in the recent Berkeley and Folsom balcony and stairway collapses was dry rot. Experts agree that certain changes to the building code and to inspection standards during the construction and permitting process are necessary. Proposals include using better, stronger and more durable material, and better weatherproofing technologies and techniques. The State has since implemented new emergency building code regulations to address some of these issues. We support these approaches, because they provide concrete prevention tactics that can easily be incorporated into the building design and permitting process. SB 721, on the other hand, requiring regular and costly inspections is extreme, redundant and unwarranted.

Many local inspection programs already exist. Many cities and counties have already adopted residential rental inspection programs requiring regular inspections of rental property. To the extent these inspections include or are amended to include inspecting decks and balconies, they should be exempt.

Inconclusive inspection reports will be problematic and are not addressed in the bill. SB 721 requires owners to fix any decks or balconies that are in need of repair or replacement, hazardous, structurally deficient or noncompliant as determined by the inspector. In many cases, however, the need for repair will be inconclusive because the structure is hidden behind a wall. Inspectors will likely report their determinations as inconclusive followed by a statement indicating that further testing, including destructive testing, is required to make a determination. Destructive testing is incredibly expensive and intrusive because it literally requires destroying and tearing down walls. The bill does not address inconclusive inspections and reports. If owners will be required to conduct destructive testing every time a report is inconclusive, the time and expense will be extraordinary. We oppose such intrusive testing based on inconclusiveness.

Mandatory retention of records is unnecessary. SB 721 requires owners to keep records of all inspection reports indefinitely. Indefinite retention of records appears by all counts to be unprecedented. Property owners are required to make disclosures of material defects and repairs made within a reasonable amount of time, but records of such repairs do not need to be kept by the owner. Any significant repair that requires pulling a permit will be documented at the local recorder’s office. Similarly here, any major repair to a deck or balcony will likely require pulling a permit, and as such will be recorded. A mandate to keep all inspection reports for all eternity creates unnecessary liability, and is itself unnecessary to achieve the goal of the bill.

No appeal process. The bill is silent on how owners can object to, oppose, or appeal a decision of an inspector or local government about the need for a repair, and with regard to fines, penalties, and liens. Due process commands that owners have a fair process to contest determinations made by state and local governments.

Incentives. The bill creates new inspection mandates without providing any incentives or cost offsets to help owners manage the high cost of inspections and repairs. We urge the author to consider ways the state and local governments can help owners achieve structurally safe decks and balconies by offering incentives, rebates, tax writeoffs, and other cost offsets. One approach would be to ensure owners are protected from liability after going through the inspection process and making repairs to comply with the law. A process for indemnification, immunity or a liability shield would help incentivize owners to be proactive to make sure their decks and balconies are up to date and well maintained.

Spring Cleaning

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Spring Cleaning, Maintenance, and Organizational Tips Ahh! The wonderful smells and sights of Spring popping up are the things I really look forward to each March—well, here in Southern California anyway where we typically get better seasons all year ’round. We all know this is the precursor to Summer being here, which is what we can’t wait for — long days, late sunsets, kickbacks and campfires, more sun, and more fun. But, of course, we cannot relax for too long otherwise the metaphorical weeds of life will certainly take over and choke out the good in life we’ve been nurturing. The same is true for your properties... and landscaping, of course.

Spring cleaning isn’t just for your storage rooms and garages. My friend and CEO of Sky Properties, Kari Negri, brought to us not long ago a nicely detailed monthly “laundry list” and I am happy to revisit some of that here this month.

Hopefully you’ve already renewed business licenses and rent registrations for the City of L.A. and elsewhere as needed, and don’t forget to make sure PRHIP Registrations are up to date as well for Long Beach. Most of us are on top of the fact that this is an excellent time to make sure our lawns are reseeded and maybe a touch of some new flowers are added to our landscaping, but did we also make sure to get laundry providers or the maintenance team to get behind those dryers and clean? What about getting an approved vendor up on the roof to clear gutters and debris? Check out our 2018 Vendor Sourcebook for help with anything, and don’t get up on the roof yourself unless you are trained and qualified.

I know one of your favorite things to do is to make sure your business tax returns are filed by March 15th… or is it? Either way — that’s when they are due, so we need to hustle if we aren’t ready now. March is also a good time to get decks resealed (provided they are dry) as well as schedule annual Smoke and C/O Detector inspections. And, since we are not the only ones with Spring Cleaning to do, it would also be wise to check properties for fall/trip hazards in walkways; and to also make sure, if you still have timers on your exterior lights, that they are updated accordingly. We went to photo cells at all our properties and the benefits have been fantastic - the cost was inexpensive, nobody has to go back to or charge the property unnecessary fees to make the simple timer change, and then there are no complaints because the lights are always on and off when they should be. Win/win… and we have vendors for that, too!

Some other things to organize within your businesses are getting your Team’s vacation times in order for the summer as well as to make sure everyone is on track for any benefit open enrollments that need to happen.

Lastly, I want to remind everyone about Legislation (“Leg.”) Day in Sacramento. This is such a great experience and if you haven’t done it before, you need to add it to your bucket list. Just going through the halls of the Capitol Building with all the rich California history is one thing—and we have certainly come a long way from when the first Legislature convened in a two-story adobe hotel in San Jose—but getting to see the process, being a lobbyist for the day, and participating in real democracy within our Republic just gives you a healthy boost of pride in our State and Country. Please join the AACSC for this trip to NorCal; make your voice be heard directly by the ears of our great legislators and come and experience this impressive event on April 10th and 11th, 2018. Contact us right away for details and I cannot wait to see you there!

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Contact AACSC

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California Southern Cities
333 W. Broadway St., Suite 101
Long Beach, CA 90802
(562) 426-8341

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