WELCOME

A LETTER FROM EBRHA CEO DEREK BARNES

The beginning of another new year is here, and 2022 is in our rearview mirror. A key question is on the minds of many rental property owners and managers entering 2023. Will owning and managing rental property in the Bay Area continue to be a perilous adventure, or does it continue to offer the exciting promise of both financial freedom and being of service to the community?

In late fall, I had an opportunity to be on a panel at UC Berkeley to discuss housing policy. It was clear that pro-tenant activist and tenant’s rights attorney, Leah Simon-Weisberg firmly believes that small rental property owners cause many of the housing problems and poor housing conditions in the East Bay. Ms. Simon-Weisberg indicated that creating more housing and stimulating new development was not necessary to solve the area’s housing crisis. She also condemned big outside investment companies that are well-resourced, entering our local markets, buying up properties, and wreaking havoc in their own way. Which is it? Are small or larger owners/operators at the center of this crisis, creating the impending tsunami of evictions and causing all the homelessness we see on our streets?

There’s one constant when analyzing our current housing crisis — policy-making. There have been lots of unvetted and reactionary housing policies that municipalities have adopted over the years, and our housing and the homeless problem has only gotten worse. With impact evidence staring them in the face (cause and effect), legislators continue to crank out more damaging policies that are actually anti-housing, hinder housing providers, and hurt renters in the long run. With little to no impact or regression analysis, our policymakers and elected officials aren’t held accountable for their poor and misguided decisions that may take decades to reveal long-term housing outcomes.

There’s a steady drum beat of “landlords” are the problem.

Tenant groups are quick to bang that over the heads of legislators and elected officials who quite often know little about housing and what it takes to operate a rental business. They desperately look for someone to blame for a crisis of their creation and continue to pile on more draconian restrictions and housing enforcement. When you’re hemorrhaging blood, you don’t hobble your doctor. A new effort is underway to blame small, local housing providers for the increased homelessness and poor housing conditions exacerbated by a global pandemic. The response to the pandemic was to enact a three-year eviction moratorium where many owners weren’t being paid rent and are still holding tens of thousands of dollars in rental debt Derek Barnes – on top of rent increase caps of 3% in cities like Oakland. Tenant rights groups know it’s a very effective plan to target smaller owner (typically Black, Brown, immigrant communities, and the elderly) properties for acquisition and force them to sell at a below-market price. As I’ve said before, it’s a newer form of blockbusting (2.0). This time, there’s no imaginary or engineered panic that drives an exodus of property owners and deflates property value. These policies cancel rent payments, increase renter protections, and cap rent increases needed to offset higher operating costs. All these things distort the market — generating owner distress and defaults all on their own. In a December 6 meeting, the Alameda County Board of Supervisors had several key housing policies on their agenda — Fair Chance, Just Cause, and a Rental Registry. Despite the moments of theater, Supervisor Haubert made a really great point after the staff’s presentation, outlining areas in each of the ordinances where there were perceived problems that renters and property owners surfaced in past stakeholder meetings. The HCD Director described these differences as unreconcilable impasses. Supervisor Haubert asked, “Why is there such an impasse?” Why do the sides take the positions that they do? Who benefits from the division? Context is everything, and if policymakers don’t really understand the issues or can’t empathize, resolving differences and developing good policy can’t happen. The Fair Chance Ordinance was of great interest to many meeting attendees, despite cramming two other complex housing policies into the agenda – Just Cause and Rental Registry. Speakers at the supervisor meeting brought

unique real-world perspectives to the Fair Chance conversation. Here are some of the key points I heard at the meeting: · Property owners/managers keep communities safe, and applicant screening tools and background checks help do that. · Ultimately, rental owners/managers are responsible for ensuring safe and habitable environments and are accountable for minimizing risks for all our renters. It’s tough providing both housing and social sservices — which is what many housing providers do that is grossly undervalued. · While many owners/managers believe in giving previous offenders a second chance, all offenses are NOT equal. Sex offenses, crimes against children, and murder are in a different category than drug-related crimes and petty theft.

Sentencing for similar offenses can be wildly different, especially across racial lines. Allowing housing providers to use screening techniques and tools is critical in maintaining safe shelter for all our renters. Associations like

EBRHA provide education for our members, so they don’t engage in discriminatory practices. · Governments should reform their public and subsidized housing programs first to support Fair Chance. Current exemptions put households that want to help family members (formerly incarcerated with criminal records) in extremely difficult situations. The decision to help someone successfully transition back into society can potentially jeopardize their access to financial aid and other vital resources. · Municipalities should devote more resources to transitional housing programs for people who have been incarcerated for more extended periods and more serious past offenses.

The role of small local property owners in keeping rental communities safe is clear. As revealed in a Just Cities Institute survey, small property owners (usually people of color and immigrants) support a balanced approach to Fair Chance Housing. Small owners/operators uniquely understand the challenges of the formerly incarcerated and will make accommodations and exceptions when no one else will do that. Owners, especially owner-occupants of rental units, are responsible for providing safe environments for residents. They must have the screening tools and access to different background checks to ensure they provide safe housing for everyone in the community.

With newly installed elected officials, we’ll undoubtedly see more policies and legislation aimed at solving the “housing crisis.” At face value, these pieces of legislation appear to favor advancing a pro-housing agenda. However, without prior vetting and proper impact analysis, more unintended consequences may continue to harm owners and damage the housing industry.

Even under the current circumstances, there’s great promise in the East Bay rental housing market as renter demand remains high. More than 30% of EBRHA members indicated they are interested in increasing their portfolios. However, we know many owners have elected to exit the rental housing business in the Bay Area or exit the rental business completely.

If you’re thinking about selling because of the unpredictable or hostile legislative environment, keep in mind that this might be the time to hold or even add to your investment portfolio if you can – provided the economics work for you and you can weather the current cycle of anti-housing mandates and policies aimed at property owners. Higher interest rates, greater defaults, more inventory, and slower buyer demand will generate lower even more competitive pricing. Savvy buyers in the market, with cash, can look forward to some significant discounting on multiunit properties that are for sale in the East Bay.

So, whether you’re considering selling rental property, holding steady, or growing your portfolio, EBRHA is here to be your trusted partner as an essential resource in the rental housing community. You’ll find practical ideas and useful information, within the pages of this issue of Rental Housing, to help you remain competitive in our challenging market.

Finally, we thank you for your continued support of the association and our work to support the community of housing providers. On behalf of EBRHA’s Board of Directors and staff, we wish all our members a safe and prosperous year.