Greedy Landlords Must Be Stopped From Profiting From Their Real Estate

Michael Hausam
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Posted: Mar 24, 2015 12:01 AM
Greedy Landlords Must Be Stopped From Profiting From Their Real Estate

This injustice just happened: a tenant is having their rent raised by their landlord in San Francisco. (Gasp!)

According to an article in SFGate, landlord Nadia Lama just notified occupant Deb Follingstad that her rent would be substantially increasing, from $2,145 to $8,900 per month. Follingstad has been living in the property, which until now has been subject to the city’s rent control housing laws, for the last decade.

So what changed?

According to the story, the lower floor of the home had an illegal in-law unit when Follingstad moved in, but the landlord recently removed it. Doing so freed the property from the restrictions that the Rent Ordinance of 1979 prescribed. So the landlord almost immediately raised the rent. In other words, following the law, they were able to charge more for someone to rent their house from them.

According to the law, properties with multiple living spaces are subject to rent control and extremely specific guidelines, even if they’re zoned single-family and the additional units are illegal. Removing the illegal living space does not require rezoning, as officially the property is already zoned as a single residence, it only requires the much simpler process of obtaining a construction permit.

By the way, referencing the real estate site Zillow, the property is officially a one-unit residence and has an estimated market value of $1.55 million.

So what is the problem?

It is absurd and wrong that a property owner would take steps in order to maximize the return on their asset. In today’s day and age, one where equality and fairness and economic justice are the highest and best aims, this is plainly wrong. A property has meaningful and important claims upon it that extend beyond those historically conveyed by mere legal ownership. Those claims should have as much import as anything else.

A city supervisor, commenting on the situation, said this:

“I don’t know whether what has happened here is legal. I do know that this goes against the spirit of what rent control is supposed to be about.”

The spirit of the law, indeed. Residences are for people to live in them and not for owners to profit from them.

Follingstad, who has posted about this on Facebook in order to try to find another place to live, said this:

“The rental situation in San Francisco has been so crazy that you assume something bad could happen, like maybe the building gets sold. But I never expected this. When I received the legal notice, I felt sick to my stomach. It’s so outrageous and I never imagined anything like this could be legal.”

Outrageous, indeed. After a decade of tenancy, something like this should not be legal.

So what should be done?

Firstly, the rent control laws should be changed. As well intended as they were, they clearly were neither written broadly nor specific enough. Rents should rarely, if ever, be allowed to increase. It’s just too hard for the tenants, otherwise. If there were no loopholes of any kind, the letter of the law would match the spirit of the law. And economic justice would prevail.

Furthermore, limits should be placed on how much real estate values can increase. This obviously is part of the problem in this case. According to Zillow, the property has increased about 2/3rds since the tenant moved in. If that amount had been limited to just 1 or 2% over that time, the owner would have been less greedy.

While there may be circumstances where values could be allowed to rise, obviously only in a common sense, measured, and non-greedy manner, keeping things flat accrues benefit to everyone. Some might object that this would be difficult, but a simple decree from the city council shouldn’t be too hard. And then increases in value would no longer occur.

Lastly, the landlord and owner should be prosecuted. Whether or not their actions were strictly illegal is far beside the point. The core importance of a law is its spirit and as the city supervisor correctly pointed out above, this was a clear violation. In effect, they are stealing a home from someone. And stealing is illegal and so they should pay the price. This will also send an effective message to other landlords, as well.

Some may object to these three prescriptions, on the basis of tired, worn-out, and disproven economic theories and notions of the past, like freedom, liberty, and free-market capitalism. But it’s time to get with the program. In days of old the newspaper story headline would have been “Property Owner Finally Escapes Rent Control and Can Adjust To Catch Up With The Market.” But those days are over. Now the headline this story gets is “San Francisco tenant outraged by landlord raising rent fourfold.”