April 23, 2003

In This Issue

SO I GO out of town for just a few days, and when I get back, I learn that a group of landlords is suing the city because they don't want to have to pay interest on security deposits (see "Peaking Interest," page 15). Those same landlords are bitterly protesting a series of rent-control changes that are now before the Board of Supervisors, claiming that a whole lot of poor, working-class folks who just happen to own a bit of rental property can't make it on these horrible restricted rents. One person quoted in the San Francisco Examiner said she couldn't afford to move to "an old-age home" because of the burden of being a landlord under rent control.

OK, I'll be fair: I'm sure if you look hard enough, you can find a landlord or two in this city who is barely making ends meet while his or her tenants fly to Cancún thanks to their low rent.

But you won't find very many.

The truth is, rental property in this city is very, very valuable and has appreciated phenomenally, and consistently, in the past 20 years. The first question the supervisors (and all of the reporters who dutifully note the sad landlord tales) need to ask all these poor landlords is this: When did you buy the property – and for how much? What's it worth today? The next question: If you want to plead poverty, will you open your books?

I had a landlord in the mid 1980s who bought a six-unit place for less than $300,000 and got a mortgage easily because even with some long-term tenants who were paying rents below market rate, the income was more than adequate to cover operating costs and provide a nice profit. Then he managed to get rid of most of the long-term tenants, doubled the rents, and after two years sold the place for almost $600,000. All along he whined that my rent was too low. Now that building is worth at least a couple of million – and I bet the owner is whining about paying a few hundreds bucks a year in interest on security deposits.

Property taxes don't go up much in this state, which gives landlords a huge benefit. In many cases their mortgage interest is tax-deductible. It's a pretty good gig, owning rental property in San Francisco. I shed no tears for the landlords.