Rent Control: Home Improvement?

Video Transcription

Hey, Travis Daggett, Cornerstone Properties. I’m in Eugene. This is the fourth video, I think, in response to Tina Kotek, Oregon state legislature, and her proposed rent control. We talked about how it effects the vacancy rates and supplies. We talked about how rent control changes tenant behavior, and the last major point in response to her rent control proposal is what it does to properties themselves.

Home Improvement? Nope

So if you’re a landlord, and you’ve taken the risk, usually borrowed money to purchase property, to improve it. If you’re going to take that risk, then you need to have the profit potential to justify that risk. Rent control takes that away. It takes away that margin where landlords are able to improve property, and are they improving property to be able to increase the rent? Well, of course they are. Are they improving the property to be able to attract higher quality tenants? I don’t mean higher quality people, I just mean higher quality in the tenant sense. Yes, they are because they’re a business, they’re in business to make profit.

So now, if you cap their rent, what are they going to do as far as improvements? Well, doesn’t common sense tell you they’re going to stop making improvements? They just don’t have the margin, they don’t have the profit to be able to make those improvements any more, and at some point, they’re not going to be able to make any improvements. They’re not even going to be able to make repairs. It’s just not going to be worth it. They’re going to go into a different business. They may go into commercial real estate, or even a whole different business all together.

If You Can Make It There . . .

There are many examples of this all across the country where rent control has been used and is even still in effect. One great example is New York, that bastion of rent control. In New York, during the Great Depression, there was more building than there was in the 1990s, okay? So think about that. And that’s because there was no rent control in the Great Depression, there was in the ’90s. Another example, again in New York, there are four times more abandoned units, abandoned places someone could be living than there are homeless people. Why is that? Well, again, at some point because of rent control, it just didn’t make sense anymore for these landlords to hold onto this place and keep it improved, keep fixing it because they can’t charge more rent to cover that cost. So they just leave it, it’s a ghost town, they leave places empty. Another effect of rent control.

So I hope that summarized and gives you just some ideas on rent control. I hope it gets you to think, and hopefully you respond. Go ahead and comment, of course, wherever you see this video. Like it, share it, and if you have any questions, of course, just ask. We talked about how rent control effects supply and demand, how it effects tenant behavior today. How it effects landlords and improvements specifically. I’m Travis Daggett with Cornerstone Properties, and I’ll see you next time. Thanks.

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