To the proposition of what’s become a trend in California – the increase in the number of Mom and Pop landlords – I can speak from experience. I’ve been one – for more than 10 years – and I can say it both humbled and frightened me.
I owned two rental properties here in Sacramento – both single-family homes, With one, my wife and I re-landscaped the front and backyard; installed two new exterior doors; put up a new fence; replaced the old windows with new, energy-efficient ones; installed roof gutters; replaced a toilet; and allowed the tenant to install the Internet and television system of their choice. With the other one, we replaced the air conditioning; enclosed a screened-in porch; installed a new dishwasher; painted the interior; and re-plumbed the sewer lines emanating from the property.
We found a lot of fellow landlords – also owners of single-family homes – to be doing the same as us. They too performed major improvements to their homes. And, with rents going up in the area, they didn’t jump at the chance of gouging. They, like us, kept any rent increases that were requested to remain at inflation rates or area-wide increases. Never did the increases exceed 10 percent.
A trend? Yes, you might say. A recent study lauded Mom and Pop landlords in California for caring for their tenants more than the corporate counterparts.
Why were we careful to keep things in order around the houses we owned and keep rents concomitant with area-wide averages? Because we were profoundly interested in keeping our tenants happy. Period.
First, we knew some families were down on their luck. Indeed, one fellow landlord of ours kept as renters the same elderly couple from whom they bought the house. Later, after three years, the elderly couple bought the house back.
Second, some of these families were just entering the rental market. Lacking that rental history, many households wouldn’t qualify at all. That is until an accommodating landlord accepted as a co-signor on the lease the parents of one of the elder children seeking to rent the home.
Lastly, we saw owning houses for rent as a privilege of sorts – wanting to profit off of market forces but sensitive to the needs of our tenants. And, treating tenants well – as Mom and Pops do – seemed to have benefits, as well.
Now, in many markets around the state, we’re learning there are a growing number of landlords like us. In the Southland, for example, detached, single-family rentals owned by Mom and Pops increased 29 percent over the last decade – more than twice that of regular apartment units for rent. Meanwhile, rents were held at or below the rate of inflation. As of March, 78 percent of rental houses and condo landlords owned just one or two properties, figures show.
The universe of Mom and Pops is growing with likely benefits inuring to tenants. “Indeed, the vast majority are smaller Mom and Pops,” said a spokesman for Attom Data Solutions, a real estate research firm.
Admittedly, California’s housing markets have drawn the attention of big, institutional investors who began snatching up foreclosures as early as 2008 and turning them into vast portfolios of rental houses. Companies like Blackstone Group’s Invitation Homes and Agoura Hills-based American Homes 4 Rent, essentially created a new asset from scratch, developing techniques for managing and maintaining rentals scattered across a metro area.
Clearly, the big guys can better absorb shifts in markets. At the same time, they tend to be governed by a strict, narrow set of rules – which is not normally good for tenants. To that extent, we Mom and Pops are more flexible.
Yet, when government gets “involved” – and it always does when it senses markets are changing and things are being done differently – look out. For sure, over the past several decades, government has more and more gotten itself involved in real estate markets – whether it is its profound influence on local land use or defining what’s acceptable rental housing behavior, especially if you are an owner of property.
Trouble is, when government writes its rules, it’s the Mom and Pops who suffer while the big guys don’t. You’d think the advocates would be wise to this now. But, they continue to urge lawmakers to adopt the “one size fits all” remedies.
And, that has consequences. A state Senator recently confessed to me that he no longer invests his money in residential real estate in California because the rules have just gotten too prohibitive. Smoking here but not there; signs saying this but not that are all that’s permitted; changing definitions of pets you have to accept; mandatory vegetable gardens; pesticide spraying only under certain conditions; and hang your laundry anywhere you want. On top of that, now California landlords are facing statewide rent control.
Those are just a very few and potential new rules – not to mention those pertaining to evictions and what you can and can’t do with your rental property. But, they’ve been enough to drive at least one Mom and Pop – a voting, policy-setting state Senator – elsewhere.
Us too. Like my fellow elected-official Californian, my wife and I got out, as well. Government for us – true Mom and Pop’s – just got too involved in our business. It issued too many rules, and became awfully intrusive. I guess we just figured if the state of California wants that badly to manage private rental housing, we’ll let it. We’ll simply get out of the way. And, we did.