Amid housing crisis, Silicon Valley landlords say they’re struggling too

Why is housing expensive?  Why is rent controlled housing becoming slums?  The same reason—government.

“In one of the hottest housing markets in the country, frustrated landlords like Hotop say they’re being penalized by City Hall with a slew of regulations and beefed up rent control and eviction laws that make it more difficult for them to run a business.

Hotop said that rent control used to be straightforward, easy to understand and “not so onerous,” but added that layers of red tape have led to an increase in fines, penalties and lawsuits. Hotop said it’s increasingly difficult for small-time landlords like himself to understand and self-manage their properties without inadvertently violating a new regulation.

“Everything that can, will go wrong, and it will happen at the worst possible time,” he added. “A new investor has so many more perils in the current environment than when I started just 20 years ago.”

Investors are smart—they stay away from rent control cities—or get exempted for twenty years. We don’t need bonds or tax money to fix the housing crisis—we need to get government out of the way.

Amid housing crisis, Silicon Valley landlords say they’re struggling too

by Nadia Lopez, San Jose Spotlight,  7/19/19

a city that makes daily headlines for its out-of-control housing market and astronomical rents, one group often emerges as the villain — landlords.

But landlords and property owners in San Jose say they’re just as much a victim of the extraordinary housing crisis.

“Being a first-time investor is on-the-job training and akin to drinking from the fire hose — with your own money on the line,” said Dean Hotop, 50, a San Jose property investor of more than 20 years. “It turns out landlords are not a cloned, sub-species of aliens. We’ve all had unique life experiences, which shaped us into who we are, just like ‘regular’ people.”

In one of the hottest housing markets in the country, frustrated landlords like Hotop say they’re being penalized by City Hall with a slew of regulations and beefed up rent control and eviction laws that make it more difficult for them to run a business.

Hotop said that rent control used to be straightforward, easy to understand and “not so onerous,” but added that layers of red tape have led to an increase in fines, penalties and lawsuits. Hotop said it’s increasingly difficult for small-time landlords like himself to understand and self-manage their properties without inadvertently violating a new regulation.

“Everything that can, will go wrong, and it will happen at the worst possible time,” he added. “A new investor has so many more perils in the current environment than when I started just 20 years ago.”

According to Hotop, landlords are upset because the rules — meant to provide stability and protection for renters — keep changing. While Hotop acknowledged that regulations “do benefit some renters for some relatively short period of time,” San Jose only has 39,000 rent controlled units and that number is slowly decreasing.

“I can’t see how anyone can make the argument that rent control has been good for San Jose renters,” said Hotop. “Quite the opposite as evidenced by the all-time high rents.”

And rent control — aimed at keeping rent costs affordable — doesn’t benefit the people that need it most, some say.

“I can have a Google engineer making more than I do getting a very discounted price on rent just because he lives in a property that’s older than 1979,” said Gustavo Gonzalez, a longtime property owner and president of the Santa Clara County Association of Realtors. “How does that help those less fortunate in our community?”

According to Gonzalez, rent control laws also create a lower property value and disincentivize investors from developing in those areas.

“When you lower property value, you get less property taxes. Less property taxes, less money for schools, for kids, and for other services that we need to spend on,” added Gonzalez. “It also affects development. Who wants to develop in an area where there’s a bunch of rent control — they know they’re going to take their development dollars and go somewhere else.”

And while “99 percent of tenants are amazingly awesome people,” Gonzalez said, sometimes an outlier can pose a threat to others in a building. In one instance, Gonzalez said a violent boyfriend of one of his tenants stabbed another tenant in the building.

Evicting that individual was difficult because of the city regulations, but in addition that person caused significant damage to the building by “throwing cement down pipes.”

But it’s more than just rent control, said Joshua Howard, senior vice president of the California Apartment Association, who added that the problems the region faces stem from a lack of housing. Instead of placing more regulations on landlords, Howard said city leaders need to find a way to increase the housing stock.

“Rent control does not provide any guarantees that the low-income families who need affordable housing will receive the housing,” Howard said.

Instead of rent control and just cause eviction laws, Howard said measures such as a 12-month lease ordinance and mediation services can help get both renters and landlords what they want. The city already had a mediation process for tenants facing evictions.

“If a tenant feels that they receive a rent increase that’s excessive or a notice from their landlord that they disagree with, there’s a neutral, safe space to discuss those issues to try to come up with a solution with the landlord without any fear of retaliation,” said Howard.

But some local housing advocates argue that regulations are necessary, as many landlords have unlawfully evicted tenants hitting disadvantaged communities the hardest. Advocates say tenant protections, such as just-cause eviction laws, give renters “a fighting chance” and prevent displacement from occurring at a higher rate.

“Just cause eviction protections ensure hundreds of thousands of San Joseans who depend on rental housing are protected from abusive landlords,” said Jeffrey Buchanan, director of public policy at Working Partnerships USA. “It’s so important for the city to protect and strengthen its tenant protections — hopefully the city’s efforts to develop further anti-displacement policy presents an opportunity to protect tenants from extreme rent increases.” 

But those depictions described by advocates and the media aren’t always fair to the majority of landlords, Hotop said.

“There are absolutely bad landlords who do bad things to their renters,” he added. “But there are far more good landlords who treat their renters well.”

About Stephen Frank

Stephen Frank is the publisher and editor of California Political News and Views. He speaks all over California and appears as a guest on several radio shows each week. He has also served as a guest host on radio talk shows. He is a fulltime political consultant.