“Ask Kari!”

Written by Landlord Property Management Magazine on . Posted in Blog

I’m Talking Trash and More!  Government Continually Antagonizes “Us” by Charging Higher Fees and Providing Subpar Services!

By Kari Negri, Chief Executive Officer, Sky Properties, Inc.

Dear Kari: Sometimes I feel as though our local government has something against property owners and continues antagonizing us through our trash companies – what do you think?

Well, I can see why you think that the “powers that be” are trying to screw us over – it is because they are.  Only cruel people would kick someone when they are down, and our government is kicking us as hard as they can in the ribs while we are literally begging for help while being down on the ground. 

Likely every landlord in the city has been struggling with rent collections since early 2020 and being locked into lower rents with no way to bring them back up to market because of the freeze on rent increases.  Even “if and when” rent increases are eventually allowed, allowable increases are far too low to bring a unit’s going rental rate to market rate in any reasonable amount of time.  Add to this unpaid rent because of COVID-19 eviction moratoriums put in place as well as rapidly rising costs due to inflationary pressures of about 7%-8%.  Accordingly, it will be a miracle if the housing industry can survive all of this. 

Nearly 80% of landlords in the Greater Los Angeles Area are small business, “moms and pops.”  The sad, unintended consequences of all the overbearing government regulations and one-sided, knee-jerk responses to a pandemic will ultimately result in government-owned housing which we already know is how you ultimately end up with often crime-ridden and poorly maintained structures known as “the Projects.”

One of my clients owns an 8-unit apartment building in Beverly Hills.  Coincidently, in 2020 between March 1st and March 15th my client had three units that became vacant completely unrelated to COVID-19.  Unfortunately, those units sat vacant for months because no one went anywhere or did anything for several months.  After the initial shock of the pandemic settled, it was surprising that these gorgeous units were still not renting, but more than likely, this occurred because of uncertain economic times and reluctance among renters to run to and “shop” the most expensive area to rent a new apartment.  Accordingly, to get the units rented, we reluctantly responded to the lack of demand by lowering the price when everyone else did, knowing that it would be very difficult to get the rents back up to true market rental rates under Beverly Hills’ local rent stabilization ordinance.  With no rent increases permitted for the past 2 years and reduced rent at the same time the owner is experiencing increasing expenses, the owner of this once very stable building is now struggling to make ends meet.  This building is the only income of a small, independent owner who retired following many years of owning a small printing business.

Getting back to local and the maniacally dumb plan to remove small, independent building owners from competing with large building owners by financially crippling them, we must ask ourselves – why?   It is not like government entities have ever done a good job or even a decent job managing public housing. They are making it so that, eventually, only the very large, institutional companies control the entire market which will result in higher rents overall and rental housing product that all look the same.  Maybe our city mayors, county supervisors and Governor are buying small, financially crippled properties for themselves as Mike Bonin had suggested. They seemingly just keep on kicking us while we are down, and then try stealing our properties in a fire sale or eminent domain.

There are many ways rental housing providers are being adversely impacted today.  Let me count some of the ways for you:

  • First, during the pandemic, while already dealing with a labor shortage and lack of employees, it has become a separate, full-time job just to “jump through all the hoops” necessary to collect money to cover unpaid rent.  In its infinite wisdom, our government told tenants they were not required to pay their rent and at the same time, that “we” could not evict them.  Some of those tenants did not even qualify for the protections offered by our government, and merely took advantage of a difficult situation for the owners of their buildings.  Many tenants knew they did not qualify for free rent during government’s “rent holiday,” but also knew they did not have to pay rent because we could never evict them.   Non-paying tenants who were NOT OR NEVER COVID-19 impacted merely took advantage of us, said they were COVID-19 impacted, government prohibited us from verifying their impacts, and tenants merely stopped paying us.  These unscrupulous tenants were literally “gaming the system” created by our government.  And, so why not – why shouldn’t they have done this?  Our government owes us an explanation for that.  Under market tenants not affected by COVID-19 – no rent increase.  Why is that?  That’s just not fair – none of this is fair.
  • Second, cities across the region have been increasing fees.  In the City of Los Angeles, they “hit” us with a supplemental Systematic Code Enforcement Program (SCEP) bill and then increased the annual fees exponentially even though most of their employees were not even working and inspecting our properties.  Then when the City’s inspectors did finally decide to return to work, they seemingly targeted buildings where they knew they could write-up ridiculous and unbelievable things to address such as imaginary walls that needed permits or scratches on sinks and so on, so that they could keep hitting property owners with bills and threatening to keep our rent collections in a City controlled trust account that we would likely never get back.
  • Third, trash hauling bills have gone “through the roof” and in many instances, service levels have gotten worse.  The trash companies now just laugh when we call to complain because several cities have created local waste hauling monopolies, and now, they do not need to provide good service to get paid.  In many instances, poor service levels have led to trash piling-up and stinking-up our streets, and now many of our streets have become terribly unsightly.  In the City of Los Angeles, you can call the Department of Sanitation and you will be put on hold indefinitely, transferred around and deal with dismissive attitudes. Make sure to take notes of who you spoke to and be sure they take notes about you or you will be lost in the shuffle and be forced to constantly start the process all over again.  Calls to elected officials have helped, but it has not completely resolved my team’s issues.  Wait until we add the mandatory composting of organic matter which is coming sometime soon to a building near you.  I am looking forward to seeing rats the size of Volkswagen Bugs navigating the piles of uncollected trash – I truly hope there’s no truth to my joking here, but I am certain the possibility exists.
  • Fourth, the government shifted several months of past due tenant rent to civil debt so it now must be collected in civil court where attempts to collect amounts owned will more than likely die a slow and expensive death – they’ve made property owners a giant collection agency. This is in addition to all the forms and notices they required we serve our tenants with strict deadlines, and at multiple times since the pandemic started, which only made things very confusing for tenants and landlords alike.  The help that had been provided by the state and city governments is very one-sided and beneficial only to our tenants.  This is so unfair to most owners who are small business landlords and who still must pay for maintenance expenses, utilities, mortgages, insurance and property taxes with a compromised cash flow in comparison to the amount of income their property would normally generate and should generate if not for government intervention.

While the state’s moratorium has finally ended, those of us in Los Angeles County, and the City of Los Angeles in particular, continue to deal with purported “COVID-19 impacted” renters who, in some instances, have not paid rent in more than two years and live at our properties like squatters.  Independent, small business landlords are undoubtedly paying the price today and will continue doing so in the future, one way or another and in my humble opinion, it feels like we have all been kicked when we are already down.

Kari Negri is the Chief Executive Officer of Sky Property Management and is a member of the Board of Directors of the Apartment Association of Greater Los Angeles.  Do you have a question for me?  Please send your questions and comments to me at Kari@SKYprop.LA.

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