I'm working today on preparing my seminar (March 12) on Rent Control dynamics. My research service sent their 2019 Multifamily Investment Research Report and they point out some interesting characteristics of rental markets.

" Over the past five years, more than 40,000 apartments were delivered in Los Angeles County, yet robust absorption held the metro’s vacancy rate below 4 percent throughout this period. "

The interesting part is that, when planning an investment in rental RE, there is more to consider than just the present state of how many rental units and what size the market is. The market situation is a DYNAMIC one, not a static one. While Los Angeles added a huge number of units, that figure is worthless without considering the absorption rate. Thus, efforts by the City (more than the County) to control rental price increases by building has failed to stay above the demand created by immigration (legal, illegal and interstate). As a result, rental price growth continues at its abnormally high rate (6.3% last year) , despite efforts by the City to affect the dynamics.

Thats good for landlords (thats me), bad for tenants, bad for the City, good for developers, and GREAT for those who want to impose rent control for political reasons even more than economic reasons..

One conclusion to draw is that in planning to invest in a rental property, one must consider not only what rent the property brings today. In estimating future rent potential, the market area can tolerate large amount of new construction IF the absorption rate will moderate the effect cause by increased supply. Thus, immigration becomes a positive effect on increased rents, but that increases the danger of government wanting to use price controls as the solution of choice for the problem of unaffordable rents.

P.S.,

Another interesting fact in this report is

" the county’s vacancy rate remains below 4 percent, aided by consistent hiring within the tech, entertainment and defense sectors, which has encouraged the formation of 35,000 new households. "

Thus, prosperity means increased demand for housing, NOT ONLY BECAUSE OF IMMIGRATION. Prosperity causes marriages (or at least hooking up), which in turn produces housing demand (higher rents).

Hence, optimal planning for purchase of rental property includes studying housing availability, immigration pattern (population growth), outlook for new construction, and outlook for job development.

When analyzing any data, "as opposed to what?" is always a key question.

What would have been the effect on rents if there had been 30,000, 15,000, or no new units brought online.

HENCE haven't seen that word in years. Noticed in your post, without dissecting the whole post, you had capitalized "NOT ONLY BECAUSE OF IMMIGRATION"

Immigration is good-- the caps should have been DUE to ILLEGAL immigration.

I just have to ask and hope you will answer. How do you process an illegal? How do you fact check, if at all, these undocumented workers? Here illegally in our country?

I often say the fix for illegals is this simple: require a driver's license or work permit ( a real one) be presented to the party cashing the check. If you cash a check and it's not with proper doc -- owner of bodega/convenience store is issued a summons to appear.

Here in GA you need a SSI# to get a license-- you can only get a SSI# if you have a work permit/green card which means you entered legally.

myob, you assume people WANT to fix the illegal immigration problem. Some do, many don't.

Like most things in a free market economy, people demand X, so the market does it's best to supply X.

Land lords want quiet, rent-paying tenants who don't cause problems. Citizens have a slew of rights and will demand "their day in court": illegals have few rights and want to avoid trouble. So they pay and stay quiet.

Upper middle class people want cheap domestic servants. A US citizen nanny may demand upward of $300 USD per day, plus bennies. Juanita will watch your kids all day for $50 USD.

People want to eat cheap produce and build nice houses for low cost. Jose' will pick those crops and roof your house for 50% of the cost of someone who is here legally.

A lot of people publicly denounce illegal immigrants, but that's only in areas that don't impact their bottom line. The day it no longer makes economic sense, illegal immigration will disappear like the buggy whip. Your method would probably work, but my guess the reason it hasn't been put in place yet is most folks do not really want illegals to go away.

I don't know who you mean that argues that rent control fixes a market imbalance. While it is true that rent control fixes THE PRICE EFFECT OF market imbalance, I pointed out that there are forces that want to have rent control for political (philosophical) reasons even more than they do for the economic effect.

All of the undesirable legislation that see is the result of government reacting to problems that their constituents suffer from. Thus, affordably high rents cause government to look for remedies for their constituents. The remedy of controlling people (landlords) is more attractive to politicians than controlling the market place because it is easier and cheaper. Thus, we cannot escape the accusation that landlords bring about rent control by excessively raising rent.

40,000 new units in 5 years is a very ambitious project to organize and carry out, even for a city like Los Angeles. Of course, more units would bring an even more effective result, but easing of L.A.'s housing shortage might bring even more immigration which would dampen any advantage (to the city) from the building program. The calculations become very complex.

For now, I am enjoying the windfall from 6% rent increase. If I plan on that again for this fall (when my leases expire) thats more than another $150 per month each unit. While the statistics say that I won't have any problems to find new tenants at the increased prices, will (can) my present tenants tolerate such an increase? If not, where will they go? What will they find? and, At what price? The increased profit will likely cause me increased concern and effort (turnovers).

The planning gets more and more complex.

myob (and Sid):

I don't formally check for illegal residence (among my applicants). Actually, in CA, it is illegal to do so. But I have learned over the years very well how to attract and choose tenants, and thats not a problem for me any more. My most effective tool for choosing tenants is the apparent accomplishment of a B.A., but I don't check for credentials. I can tell a college graduate when I meet one.

Yes, in my area, we have lots of dreamers attending (or graduated from) college. I am close enough to UCLA to attract tenants who want to live within the Westside social area. I presently have 2 young ladies who got their PhD's last year and are working as Post-Docs at UCLA. I have had several others, including faculty members, administrative people and Medical Center employees. I don't check for green cards because I don't think that is important (to me as a landlord).

For the housing demand, it doesn't make any difference if an applicant is legal or illegal. What counts is who he (she, they) is (are) as a person and if he has the wherewithal to pay the rent.

But for my upcoming seminar, I am interested in showing what effect would there be by expelling illegal immigrants from the housing market. I am looking for data about how many illegal immigrates (if that is known, or published) we have in L.A., some assumptions about how the individual bodies are distributed among housing units to calculate how many housing units are tied up by illegal immigrants. The point of my seminar would be, if we didn't have illegal i

mmigration, then how would the housing market be different? Thus, when it comes to the accounting, what is the cost to the City of providing housing to illegal immigrants, at the expense of other dwelling-seekers? What would be the effect on L.A. rents?

I'm looking into that right now.

myob, we also have LEGAL immigration here.

Plenty of immigration from other countries legal, illegal, temporary, permanent, I'll stay if I like it (they never go home), refugees from wars, lesser prosperity, cold weather, unexciting home towns, and those who plan to become a star.

They all take up housing units, legal, illegal, etc. and thus the principal of illegal immigration is not a concern for landlords beyond the effective qualification of an individual applicant. Such matters may be important for society at large because of the cost to the rest of society.

the system for allowing immigration is totally broken. The process to apply is appalling and the time to do it is extensive, even for those just applying who have a clean bill. I have first hand knowledge of this from day one in the process to an exhaustive 365 day later and 1K out of pocket. The final straw and insult was after a year of paperwork we sent our man back over the border to enter "legally" and with all paperwork in order. Man checking our man in says this-- I don't think (I DON'T THINK) your paperwork is true. Denied!!!! the final insult was he says this and I'm making a note in your file so if you try to get back in illegally you'll never get in. This one agent denied everyone that day-- what the heck is with that.

Anyway my point is painless. you been here and we look you up and you have no criminal history, family here kids and a job-- your app is approved-- move on in (your welcome to stay). This along with vetting the new applicants will keep houses full and prices up. EVERYWHERE.

Yes, but that affects the landlord, how?

And it affects your local housing market, how?

For anyone who is interested, estimate is 1,000,000 illegal immigrants in Los Angeles (Pew Research Center). If I figure 4 persons per housing unit (average) then we get that 250,000 housing units would be freed up in Los Angeles if illegal immigration were not present.

If we compare that to 40,000 units completed in 5 years (2013-2018) as result of ambitions building program designed to relieve exorbitant housing rents, we see that the building program doesn't anywhere nearly replace the housing units taken up by illegal immigration.

I'm looking for better credentials for these data for my seminar.

My suspicion is that if anything, the US Census estimate of 12 million illegal immigrants in US is too small, because of difficulty to interview illegal aliens.

I think that estimates like 1.5 million or 2 million in US are far too small. I have results independent of US Census (Pew Research Center) of 2 million in CA, 1.2 million in Los Angeles County, 1 million in L.A. City.

But you are right that these figures are estimates, but based on best statistical methods possible, including interviews, informants, and mathematical methods of estimating missing values in partially-interviewed populations.

" Any major city that has rent control rents are considerably higher then in free market area "

Cities impose rent control when rents become too high because of housing shortage. Free markets areas are what they are because people who live there can find affordable housing, even if it means moving a little father away. When they can't find affordable housing then the city has a problem and will have to find some way to respond to a militant constituency.

I didn'y realize that was not designed to control rents. I should have known that the real reason was to bankrupt landlords so that the government can take over their housing.

Rent Control = Socialism at its finest.

Our City is in on the fix. They don't do anything out of the good of their hearts. Campaign contributions, 25% commission for passing money from the State to Section 8 housing. Making up codes and rules to burden and tax landlords. They take no responsibility for their mistakes. The City points their fingers at everyone except themselves.

A few things jump out right away. The LL is better able to check out an applicant. Keeps the coyote LL's from renting to any tom dick or Harry no matter what their back round is. Maybe, just maybe, these LL's will stop putting undocumented criminals in the property's right next to law abiding persons.

I for one would not want my kids being forced to live in these neighborhoods.

About 2 years ago -- when the law was being enforced here -- there where whole complexes that emptied out. Funny 2 years later there full again-- not sure whose been placed back into the units but there full.

It's what Robert J is saying.

I've been hearing "We need a comprehensive immigration reform" all my life. That will never happen.

I've been hearing "There are 11 million illegals in the USA" for decades. Sure, 11 million in CA.

Folks, it's all about votes. All about cheap labor. It's all about passing the buck (social cost) to the middle class. You won't find illegals and homeless near Pelosi's residence. Pelosi's cute grandkids don't go to public schools.

David...

"taxing the wealthy?" 70%, 99%? show me a place where communism has worked. I'm waiting.

Actually, the forces behind rent control are generally single college graduates who are not yet ready to buy their own homes and simply want cheap rent.

A true story from several years ago was a student from UCLA who found a rent-controlled apartment in Santa Monica, which has very strict rent control. He held on to the apartment while he was a student, stayed there while he went to law school, moved his girlfriend in, they stayed for a while after they got married, bought a home and subleased the rent-controlled apartment, paying the rent-controlled price while charging the sublessee market price, and continued this for about 20 years until the Costa-Hawkins legislation required the City of Santa Monica to allow the rent to be raised to market value upon subleasing. THATS who votes for rent control.

So many folks out there consider themselves environmentalist

What happens when you run out of water?

You can have lots of growth in people but if the environment can only support so many people, alternatives have to be created.

There is a good book on the politics of envy by Professor Amy Chua called "World on Fire".