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Date archive for: September 2011

Real Cause of Economic Woes

Daily News 9/30/10

Re “Obama blasts GOP ‘Pledge’ as echo of ‘failed policy’” (Sept 26):

President Obama is rhetorically redundant about not extending the tax cuts for the rich and so-called failed policies of the previous administration. But he fails to recognize historical facts. The reduction of tax rates on capital gains and dividends in 2003 resulted in more than $780 billion of additional tax revenue from that source from 2003 through 2007.

The real failed policy, though, was his, Senator Dodd’s, and Congressman Barney Frank’s. They pressured lenders (particularly Fannie Mae and Freddie Mac) to make home loans that borrowers could not afford. That process was at the foundation of the economic collapse.

Rental Property Issues

September 12, 2011

Ms. Anna Ortega, Director

Rent Stabilization Division
Los Angeles Housing Department
1200 West 7th Street, 8th Floor
Los Angeles, CA 90017
Fax (213) 808-8818

Dear Ms. Ortega,

Thank you for responding to my article in the August Apartment Age magazine. There are certainly problems with the Rent Stabilization Ordinance, and the differences of opinion regarding those problems. Communicating about them is one of the best ways to help solve some of the problems.

While I can certainly understand the tenants’ dislike of permanent pass through of 100% of improvement costs, providing rental housing is a business. Owners of businesses, whether housing, restaurants, supermarkets, etc, business owners need to be able to more than cover 100% of their costs to stay in business, and attract other investors into their businesses, particularly for future housing needs. Although the permanent 100% increase may have been excessive, the changes made in 1989 were extreme in the opposite direction. Even though a sixth year was added to supposedly cover interest cost, the combined reimbursement to owners, over at least six years, represents a 40% loss on the investment. It’s difficult for me to understand how apartment owner representatives agreed to the grossness of the change. People in such positions need to understand the market effect of changes they make. Regardless of a relatively few people establishing a policy, investors and other members of the public are going to make their decisions based on their perception and experience of the effect of regulations. A comment of mine was about the complete and utter failure related to the relatively negligible number of applications filed by apartment owners, not the percent of applications that were approved. If you compare the number of applications filed annually with the number of rental properties, or particularly the number of rental units, it’s less than 5%. There may be a lot of smaller valued improvements made for which the owners do not even bother to increase rents, especially in today’s economy.

But the more expensive improvements require funding which is much more complex. Even if an owner has the resources, they consider whether the cost of the improvement is worth it to them. Immediately losing 40% of their investment weighs heavily on that decision.

My experience with capital improvement applications is that applications for smaller amounts do meet the 45 day guideline. But more complicated applications, with much higher improvement costs, took well over the 45 days (as I recall, over three months). But that was over five years ago.

One was originally rejected, but approved on appeal. I even had approvals for increases that, due to market rents on some of the units, I could not (and did not) take advantage of the whole increase allowed. In the current market, when improvements have to be made, it is not wise to increase rents on more recent tenants. That difficulty makes it even more necessary to have long term tenants at least pay for the cost of improvements on their own apartments.

Having simultaneously been an apartment owner and a Certified Public Accountant for over 43 years, I have had a great depth of experience in apartment ownership. With that amount of experience, I feel I could be quite helpful to the city in helping to establish workable policies, and would be glad to do it. As you know, I was one of the seven members of the Citizens Oversight Committee regarding the study of the Rent Stabilization Ordinance.

 

Tax Cut Will Financially Intoxicate

Re “Obama double down on payroll tax cutback” (Sept 9):

It appears that the reason President Obama wants to reduce the Social Security tax rate to 3.1% (supposedly try to create jobs) rather than reduce wage earners income tax, is that his (and prior) tax credits have already resulted in 51% of low income earners not paying any income tax. Many receive :”refundable credits” for more than any taxes they would otherwise owe. But his plan to financially intoxicate people by reducing the FICA tax for one year would further defund the already bankrupt Social Security program. The plan would make Bernie Madoff and Charles Ponzi jealous.
Repeal of the Obamacare program would provide the needed motivation to substantially reduce unemployment while reducing the deficit.