No hous­ing cri­sis if you’re the land­lord

Los Angeles Times - - CALIFORNIA - STEVE LOPEZ

I write about the hous­ing mar­ket in Cal­i­for­nia, where high prices are forc­ing peo­ple into their cars, onto streets and far­ther from where they work, one thing is clear:

I’m not mak­ing any friends among land­lords.

They sniff at the sug­ges­tion that some of their ilk are greedy, and they es­pe­cially do not like hear­ing the two most dreaded words in their in­dus­try: Rent con­trol. Two of them vol­un­teered to straighten out my think­ing, so I took them up on the of­fer.

I chat­ted by phone with Michael Millman, and I paid a visit to Ger­ald Mar­cil, both of whom of­fered me crash cour­ses on the ba­sics of sup­ply and de­mand.

Both were ir­ri­tated by my re­cent col­umn in which I said the re­peal of a state law re­strict­ing rent con­trol would be one way to pre­vent huge rent in­creases that are crip­pling renters and driv­ing them out of neigh­bor­hoods they’ve lived in for years.

Millman, a lawyer, is the smaller op­er­a­tor of the two. He owns and man­ages 68 units in 10 build­ings on the West­side. He had two pri­mary points: First, that “I have no in­ter­est in fo­cus­ing on es­ca­lat­ing costs” faced by apart­ments.

I plead not guilty, your honor.

In June, I toured some West­side apart­ment build­ings with own­ers Henry and Loretta Selinger. They ar­gued that it’s un­fair for them to be re­quired to charge less than they can get in the free mar­ket, even though they have to keep putting out more money for build­ing main­te­nance and re­quired seis­mic safety up­grades.

Millman added the folAs

low­ing to the list of es­ca­lat­ing costs for land­lords: “Trash re­trieval, wa­ter, sewage, prop­erty taxes, par­cel taxes, bonds, in­surance, mu­nic­i­pal fees,” etc., etc. And he said there are ten­ants cur­rently liv­ing in rent-con­trolled units who are “prob­a­bly mak­ing $300,000 or more.”

The Selingers — and Mar­cil — made the same ar­gu­ment about rent con­trol. It’s ap­plied across the board, they said, whether ten­ants are wealthy or nearly broke. Fair point. But when land­lords rail against rent con­trol, they’re talk­ing about an­nual lim­its of 3-5%.

But most renters do not live in rent-con­trolled units, and they’re get­ting hit with in­creases as high as 30-40%. If 3-5% doesn’t cover the in­creased cost of do­ing busi­ness for land­lords, what about some­thing a lit­tle higher, like 5-7%, so land­lords get a re­turn on their in­vest­ment but renters don’t have to start sell­ing their plasma?

Millman didn’t dis­miss the idea, but he said he’s not goug­ing any­body as it is. And his fix for those who can’t keep up with the rent is what he calls a rental emer­gency voucher. If you prove you’ve hit hard times, you ap­ply for help, and it gets you through an­other month.

When I vis­ited Mar­cil at his ocean-view Malaga Cove of­fice in Pa­los Verdes Es­tates, he sug­gested a vari­a­tion of Millman’s idea. If 80% of renters are do­ing just fine, he said, and 20% are strug­gling, why not pro­vide more fed­eral Sec­tion 8 fund­ing to the 20% in­stead of re­quir­ing land­lords to give the same break to all renters?

Good ar­gu­ment there. But when I wrote about a High­land Park cou­ple — he’s an 85-year-old mu­si­cian and she’s a 76-year-old ac­tress — who are be­ing priced out of their rented home, renters were not sym­pa­thetic when I said they had man­aged to qual­ify for Sec­tion 8 hous­ing some­where else.

Why should they have to sub­si­dize hous­ing, read­ers griped, for peo­ple who made their ca­reer choices and didn’t plan well enough for re­tire­ment?

OK, if we’re talk­ing about hand­outs, how about this:

If you’ve owned a house in Cal­i­for­nia for a while and have a mort­gage, why should any­one have to sub­si­dize your mort­gage de­duc­tion and your Propo­si­tion 13 prop­erty tax break, which is made pos­si­ble by higher taxes for neigh­bors who moved in af­ter you did?

But let’s get back to Millman and Mar­cil, both of whom — de­spite their crit­i­cism of my col­umn on good times for own­ers of rental prop­er­ties — are cash­ing in nicely at the mo­ment.

“I would say I’m do­ing well, but I worked hard to get here,” said Millman.

Mar­cil, whose renters are pay­ing be­tween $1,400 and about $2,800, de­pend­ing on apart­ment size and location, said he’s do­ing al­most as well now as he was do­ing be­fore the hous­ing crash. That’s not be­cause of greed, he ar­gued, but be­cause of hard work and mar­ket forces.

There isn’t enough new con­struc­tion to keep prices down, said Mar­cil, ham­mer­ing a point I’ve made be­fore. He said lots of com­mu­ni­ties op­pose new con­struc­tion any­where near their neigh­bor­hoods. That, along with ris­ing con­struc­tion costs, has pumped up rents, es­pe­cially in job cen­ters where there are more peo­ple mak­ing good money.

Mar­cil said he thinks the state’s large pop­u­la­tion of im­mi­grants in the coun­try il­le­gally is a fac­tor, too. He said they’re good for his busi­ness be­cause they in­crease the hous­ing de­mand, but that drives rents higher for ev­ery­one.

He used to be a de­vel­oper and said the hous­ing mar­ket has been both cruel and gen­er­ous to him over the years. He said he’s been broke twice and that in­vestors “took a beat­ing” be­tween 2007 and 2012 be­cause rents were flat.

But Mar­cil’s com­pany is do­ing so well now, he flew his apart­ment man­agers, spouses and other em­ploy­ees — more than 80 peo­ple al­to­gether — to Maui last month and put them up for a week at a beach­front ho­tel in Kaana­pali.

“It was very nice,” said an ap­pre­cia­tive Tor­rance apart­ment man­ager and long­time Mar­cil em­ployee.

Mar­cil said he’s mak­ing about $5.5 mil­lion a year run­ning his com­pany and goes div­ing on Santa Mon­ica Bay off his 68-foot Sun­seeker. He lives in an ocean­front home he bought many years ago — a home now es­ti­mated to be worth more than $6 mil­lion. Not bad, right? But Mar­cil’s gen­eros­ity ex­tends be­yond fly­ing his em­ploy­ees to Maui. The for­mer high school wrestler is a mod­er­ate Repub­li­can and chair­man of the fis­cally con­ser­va­tive New Ma­jor­ity of Los An­ge­les, and he do­nated $127,150 to con­ser­va­tive can­di­dates and causes be­tween 2015 and 2017.

He told me he donates more than $1 mil­lion a year to lo­cal char­i­ties be­cause he thinks they do a bet­ter job pro­vid­ing ser­vices than the gov­ern­ment does. A 2014 an­nual re­port lists Mar­cil and his wife among the top donors to the YMCA of Metropoli­tan Los An­ge­les, with more than $1 mil­lion in do­na­tions. He said he in­tends to leave 20% of his wealth to his fam­ily and 80% to his fa­vorite char­i­ties.

Yes, busi­ness is very good th­ese days for some Cal­i­for­nia land­lords. But I’ve be­come con­vinced they’re not the big­gest win­ners in this crazy mar­ket.

Any idea who’s mak­ing even more of a killing?

Stay tuned.

Steve Lopez Los An­ge­les Times

GER­ALD MAR­CIL ac­knowl­edges that man­ag­ing over 3,000 apart­ments has been good busi­ness lately, but says it’s due to hard work and mar­ket forces — not greed.

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