Integrity in Real Estate: Spinning the Story on Rent Control
Rent control laws are taking effect in multiple markets across the United States in an effort to resolve the current housing crisis. To date, forty-five of the fifty states now have some form of rent control at either the state, city or municipality level. Using sensationalistic and misleading strategies to garner support, some regions will put a spin on these laws calling them something other than “rent control,” despite the fact that the rules that fall under them are the same. Additionally, many brokers will use unethical tactics to woo investors to purchase buildings in these areas, without disclosing the risks involved.
GOVERNMENT SPIN
One of the recent cities to adopt new rent control laws is Long Beach, California, where the Long Beach City Council recently voted 6-3 to begin what they are calling the “Tenant Relocation Assistance Ordinance,” slated to take effect in January of 2020. The rule states that tenants who choose to move out when their rent is raised by more than 10% will get as much as $4,500 from the landlord in moving expenses. Call it something fancy or call it rent control.
To explore our blog on the effectivity of rent control in California click here
BROKER’S SPIN
Many prominent commercial real estate brokers are using deceitful tactics to close transactions in areas where rent control is in or is about to go into effect.
Let’s take this recent ad from a broker in the greater Long Beach, California area:
“JUST CLOSED!
A 7-unit multifamily property located in the Park Estates area of Long Beach, CA. The subject property consists of (4) 1-bedroom / 1-bathroom units, (2) 2-bedroom / 1-bathroom units and (1) 2-bedroom / 2-bathroom unit. The building was built in 1955 and contains 5 single car garages with access from the alley.
This property has great potential to add value by making improvements and raising rents. Investors benefit from the high demand for rentals in a coastal city of Southern California. Tenants enjoy living a short distance to local beaches, California State University of Long Beach, transportation, as well as shopping, restaurants and nightlife in Downtown Long Beach and Belmont Shore.”
This sales tactic is part of a recent email blast sent to investors and potential investors from a Long Beach-area commercial real estate broker. Those investors who are not paying attention to upcoming changes in local laws could potentially fall prey. This deceitful sales tactic mentions nothing of rent control, because the broker is simply looking out for their own best interests in closing the deal and making a commission.
Everyone seems to have an agenda. The broker is looking to make a commission. The lender is taking their cut and trying to stay in good graces with their real estate partners, your attorney will be looking at things from a simple legal perspective. The inspector is looking to cover his back and may be trying to stay in the good graces of the brokers.
Get an unbiased, informed opinion before you make a decision. Experience counts. Build your team then take control of any transactions or potential transactions and analyze the data by taking in to considering all the various factors, growth areas, potential risks. Look beyond what your team is providing to you by pulling your own data and comparing notes. Go beyond the basics to look at the cultural trends, the geography, local, state and regional laws, and more, so that you’re able to make an informed decision.