Blame Rent Control for High Rents in Recession

For a property manager in West Los Angeles, Pamela Stevens is incredibly naive. Complaining that she cannot find an “affordable” place to live, she observes that apartment owners would rather have a vacancy than accept reduced rent. What she says is unfortunately true, but blame rent control, not the owners.

Before rent control, apartment buildings were sold for actual value, i.e., based on free market rents. Now the value is tied directly to current controlled rents, with a typical West L.A. property selling for 11 times gross annual rental income.

Say I have an apartment worth $1,000 per month. If I must leave it vacant while looking for the right tenant I lose $1,000 per month--not a happy thought. However, if I reduce the rent to $900 in order to rent it immediately to a “tenant who takes good care of the property, pays rent on time, etc.,” that $100 rent reduction actually costs me $13,200 (100 x 12 x 11) in decreased property value. Under rent control I can keep it empty for over a year and still come out ahead.

I suggest that Stevens buy her own apartment building and write to us again in a year or so.

MERRILL E. SARTY

Los Angeles