A Santa Monica Apartment Owners' View of the COVID-19 Fallout
By Wes Wellman
My father was a Protestant minister. In our services we had a segment for testimonies. This was an opportunity for people to stand and discuss anything regarding their walk of faith.
My dad told the story of a woman who once said during her testimony, “Brother Wellman, sometimes I think . . . well . . . and then again I don’t know.”
I think we can all relate today to her ambivalence as we ponder where we are headed. I see us heading into four concurrent eras.
We are nearing the one-year anniversary of COVID-19 emergency declarations under which government at all levels assumed unfettered authoritarian control over virtually every aspects of our lives.
What is remarkable is how quickly and comprehensively this occurred amid only isolated pockets of resistance. Apartment owners’ rights, about which I will discuss more later, were a notable casualty.
What is most troubling is the addictive nature of emergency control. Government leaders love power and once in possession of it rarely surrender it willingly. So we can expect, not a reduction of emergency rules, but a continual extension of declared emergencies.
The COVID-19 emergency can be succeeded or be accompanied by a housing emergency, a climate change emergency, or other emergency du jure as needed to perpetuate the need for government control.
The beginning of confiscatory rent controls in California was centered in a few localities; Berkeley, Santa Monica, East Palo Alto and West Hollywood. In time more benign and custom versions gradually sprung up in most other metropolitan California cities.
Rent control measures were adopted in local communities subject to the unique political structure of each jurisdiction. But with the advent of one party, super-majority control in Sacramento, rental housing policy in California is now largely controlled at the state rather than the local level.
That being the case, it provides stake holders the convenience of one-stop political shopping at the state capital and focuses their money and power there. For the apartment industry, only the California Apartment Association has a regular seat at the table. All the local apartment associations are basically spectators.
Depending on the issue, the California Association of Realtors also has a voice. This concentration of political power is self-perpetuating. Since stakeholder money and influence have to be directed to Sacramento leadership, it strengthens their hand as, in addition to money from natural supporters even political opponents give them contributions as a prerequisite to having a voice.
When Sacramento can influence an industry throughout California, influence becomes a high stakes game where high stakes players have to be in a position to pay to play.
Economic Emancipation/Tenant Rights Era
The Civil War was a struggle for the emancipation of blacks from their status as property. America is currently experiencing a cold Civil War being fought with ballots instead of bullets. At stake is not the status of people as property but rather the property of people.
Specifically, the struggle is for the more of the wealth of the affluent. This struggle is being waged in battles involving tenants’ rights, tax policy, income redistribution and calls for reparations.
Using emergency powers, California has allowed tenants to stay in their units by paying as little as 25 percent of their rent without providing evidence of need, prohibited eviction in most cases, and limited owners’ options for collecting unpaid rent.
More pressure is being exerted to remove negative impacts on credit and eviction reports for unpaid rent and eviction history. Limiting the consequences for irresponsible financial performance will further erode an owner’s ability to operate profitably.
Big Tech Era
While political power is increasingly concentrated, so too is the power of Big Tech. Disruptive technologies increasingly control the economic, social and political lives of businesses and people around the globe. YouTube, Facebook, Twitter,Google and Apple are achieving a stranglehold on the dissemination of information.
In time they may actually become more powerful than governments, as they may be able to influence who can govern. Government leaders will prefer to have them as friends rather than enemies.
My opinion is that our best days as a country, state and industry are behind us. To me, the only questions are how bad will things get and how soon? Brother Wellman, I pray I am wrong.
Wes Wellman is a longtime Santa Monica Realtor and property manager