Renters who have no rights under Prop 218 and who are not direct water customers figure to get caught in the middle of the water debate. But it appears at least one landlord is putting them in the middle himself – John Simmons of Simmons Real Estate.
A February 12, 2013 letter to tenants that the Vanguard has acquired appears to be attempting to convince their tenants to vote no on Measure I.
In the letter, it states, “I am sure that tenants in Davis have heard there is a ballot coming up on March 5, 2013. It is a mail-in ballot. The issue in Measure I is a vote on whether to pursue developing water from the Sacramento River or continue with well water.”
The letter continues, “If you are a registered voter in Davis you have the right to either vote for or against Measure I.”
“One thing you should keep in mind is the cost of water with the new system will increase water cost tremendously and ultimately that cost will be passed on to the owners and the tenants of all properties in Davis.”
“We are now paying about $30 per month per single family dwelling for water and that cost could rise by as three times in the next several years,” the letter continues.
They add, “That means that you as a tenant could have an increase in rent of $60-$75 per month over the next few years and that would be in addition to raises that come every year because tax increases and other over head costs.”
He adds: “I’m sure there will be increases in costs even if you vote no on this issue, but it certainly will be less.”
The letter concludes: “If you have questions please give me a call. I urge you to think about how it will affect you before you vote.”
This view is markedly at odds with the view of the Chamber of Commerce, who argue, “Measure I is a long-term investment in the economic and environmental sustainability of our community, and possibly the most important Davis voters have ever been asked to make about our water supply.”
“The Woodland/Davis Clean Water Agency (WDCWA) Surface Water Project will be a valuable asset to Davis with multiple long-term benefits to our community. It will improve water quality by augmenting our deteriorating, environmentally unsound, and poor quality ground wells with river water.”
The Chamber adds, “The City of Davis needs a high-quality water supply of sufficient capacity to provide the community with a long-term reliable supply of clean water, as well as attract and retain the businesses Davis needs in order to be financially sustainable.”
But while the Chamber as a whole have taken the Yes position, individual businesses like Simmons Real Estate, who are members of the Chamber, are apparently taking an oppositional view.
From our view there is nothing inappropriate about landlords letting their tenants know what will happen to rent if a particular measure goes through.
A good many of their tenants are not registered voters in Davis, and many will not be impacted by the higher water rates, as the most steep of which are likely to occur after current students have graduated and moved on to other communities.
Whether rental companies actually follow through on the rent increases may depend as much on the market, and what other real estate companies do, than the cost of water.
The more interesting question is why a local real estate company has decided to try to convince their tenants to vote against the project.
—David M. Greenwald reporting
“That means that you as a tenant could have an increase in rent of $60-$75 per month over the next few years and that would be in addition to raises that come every year because tax increases and other over head costs.”
Hmmmm, the water costs will almost in all cases get passed down to the renters, even “tax increases” because it’s all overhead. The real estate company is well within their right to warn the renters (voters) of the consequences of the measure. What’s different from them recommending a no vote or the city council, Chamber of Commerce or any other entity recommending a yes vote? There’s nothing innapropiate about it at all.
David wrote
[quote]From our view there is nothing impropriate about a landlord letting their tenants know what will happen to rent if a particular measure goes through
[/quote]
Rusty wrote
[quote]The real estate company is well within their right to warn the renters (voters) of the consequences of the measure.[/quote]
So it would seem that you two are in agreement.
All that remains is the question of motivation, which I believe was David’s main point and does not appear to have been addressed.
One possible motivation might be to use water limitation as a means of preventing further construction thus making it possible to raise future rents due to inadequate housing supply. Note, I am not saying this is the motivation, just that it might be, and if it were the case, would be a somewhat biased and self serving provision of information.
Medwoman:
“One possible motivation might be to use water limitation as a means of preventing further construction thus making it possible to raise future rents due to inadequate housing supply. Note, I am not saying this is the motivation, just that it might be, and if it were the case, would be a somewhat biased and self serving provision of information.”
Okay Medwoman, got your point. But it’s only fair to look at that in the opposite direction too. I’m not saying this is the motivation either, just that it might be, but what’s to say that many on the Yes side are only looking to try and increase construction and Davis population because their businesses would benefit. Higher water costs are going to put residents more open to new construction in order to expand the number of ratepayers in order to hopefully keep their costs somewhat under control.
The claim that landlords can simply raise rents to cover their increasing costs flies in the face of the principals of supply and demand and the definition of “market rent”. Landlords are already receiving the highest rent that the market will rent. If the market would bear more, the landlords will charge more independent of the water rates. If the market won’t bear more, then the landlords can cry all they want about their operating cost increases.
The large rental property owners will see short-, maybe medium-term impacts to their cashflow and as a consequence to their property values. The same is true of many commercial property owners and of some business owners. Some of these owners are focusing on the short- and medium-term outlook. Many more are focusing longer term and on the bigger picture (i.e. what’s good for the community is generally good for my Davis investments).
-Michael Bisch
Rusty
[quote]Higher water costs are going to put residents more open to new construction in order to expand the number of ratepayers in order to hopefully keep their costs somewhat under control.[/quote]
Agreed that it may have this effect, although I remain an example of a very, very slow growther who favors the project. And we know that there will be higher water costs regardless of whether we approve this project or not. One thing a no vote on Measure I does is to ensure that we will have to take longer to arrive at an alternative plan. This may help decrease the overall costs to those of us who will likely not be around in 30 years, however, I cannot help but wonder what our failure to act now ( now including the 12 or so years that some of the opponents had to address this issue while on the city council) will cost our children over the next 30-40 years. I feel that we have an obligation, not only to those who are being impacted now, but also to those who follow us.
It’s ludricous to think that a major cost such as the tripling of water rates won’t eventually make its way to the renters in the form of direct water costs or higher rents.
Ironic… “pr-growth” and “slow/no growth” generally have one thing on their mind…. $$$$$$$$$$$$$$ the pro group generally own land that is undeveloped, often on the perimeter. The no/slow folks generally own property and don’t want its value diminished.
Neither side gives a damn about “community”.
Med writes
[quote]I feel that we have an obligation, not only to those who are being impacted now, but also to those who follow us.[/quote]
THen you should be appalled at the immense deficits that Obama is running up that will need to be serviced or repaid by those who follow us.
But somehow I feel you aren’t.
The campaign momemtum has strongly turned in support of a NO vote on Measure I. Watch for the last-few-weeks-of-the-campaign “mushroom cloud” scare-tactic public releases from an increasingly desperate Yes on I. The value of public elected officials endorsing the Yes on I vote has been very seriously eroded by then Supervisor Thomson’s letter to the voters,at the end of the Covell Village, Measure X campaign, describing how a developer Gidero? would massively build on our periphery without Davis’ control if Measure X failed(Measure X failed and it never happened). As I recollect, Councilperson(and Mayor) Lois Wolk’s public position as Mayor, just a few days before the balloting on the citizen-initiated referendum attempting to have the Wildhorse development agreement voided and redone, was that if the existing Wildhorse development agreement was voided by this referendum, the developers would have carte blanche to build WHATEVER THEY WANTED TO without the city’s control. My recollection is that this was found to be “inaccurate” almost immediately after the election took place, but after the referendum had failed.
[quote]The campaign momemtum has strongly turned in support of a NO vote on Measure I. [/quote]Yes… the no folks will definitely get more than 11% of the vote…. good work… rest on your laurels…
“.. however, I cannot help but wonder what our failure to act now ( now including the 12 or so years that some of the opponents had to address this issue while on the city council)”
….not only an attempt at an irrelevant distraction, but without historical accuracy. The Council for the past 10 years has been controlled by a Council Majority that supported the agenda laid out by Don Saylor. In following Council meetings for more than 20 years now, my recollection is that the surface water project, while talked about in terms of future plans and concept, was never really brought before the Council until well into what can be described as the Don Saylor Council era and even then, “stonewalling and cutting of the probing questioning of Sue Greenwald was the consistent pattern.
“Watch for the last-few-weeks-of-the-campaign “mushroom cloud” scare-tactic public releases from an increasingly desperate Yes on I.”
Have you no sense of irony davisite2?
-Michael Bisch
“It’s ludricous to think that a major cost such as the tripling of water rates won’t eventually make its way to the renters in the form of direct water costs or higher rents.”
So Rusty, now you’re going to lecture me on what I do for a living? The market will bear whatever it will bear, not a penny more. If the market will swallow a rent increase, landlords most certainly will increase rents independent of the surface water project. The difference will be found in the profit margin (or in the vacancy rate if they misjudge what the market will bear). The same is true of any business. And here I thought you were a proponent of free market capitalism.
-Michael Bisch
“Have you no sense of irony davisite2?
What irony? I do not believe that we will see a last-minute attempt to “terrorize” the Davis voter into a No on I vote. IMO, this is not the case for the Yes on I campaign.
Well, I have my answer. The irony is you made an over-the-top “mushroom cloud” statement smearing project proponents with your prediction of pending over-the-top “mushroom cloud” statements.
-Michael Bisch
DT Business, even if unfavorable market conditions in our town actually cause rents to go lower those rents will still be higher than they had to be because higher water rates will be factored in . That’s just basic business priciples.
No, no, no. Basic business principle is that landlords will generally charge as much as they can without appreciably increasing vacancy rates. What you’re implying is that landlords for some weird reason are currently charging less than what renters are willing/able to pay. Landlords, like all investors, generally seek to maximize their profits. If landlords have the ability to increase rents $50/month to pass on water rate increases, why don’t these landlords increase the rent right now and pocket the difference? Charity? Stupidity? Laziness? Some basic business principle that I have yet to learn?
-Michael Bisch
Local referendum political campaign history suggests that voters bring a healthy degree of skepticism to “mushroom cloud” attempts to get their votes right before the balloting. While both sides can attempt this tactic, IMO, we will not see it from the NO on I side. With regard to the Yes on I campaign, we will see what campaign “road” they will take in these closing days. If this is irony, then I guess I am guilty.
Landlords will raise rents if they think the market will bear it, and will just absorb the cost if the vacancy rate is high.
I have had employees and adult children who are renters in Davis who have had their rents raised for no apparent reason that they could discern. That was generally when vacancy rates in Davis were low. I have heard from one landlord of a larger property that he was concerned about the impact of West Village on rents. There are ‘macro’ factors that are bigger than the relatively low cost of water when it comes to setting rents.
hpierce
[quote]Neither side gives a damn about “community”.[/quote]
I think you paint with too broad a brush. I suspect there are many motivations other than personal profit for individual preferences. Mine is the only one I can share, so I will.
When I bought my first house here ( I have since downsized) 22 years ago, I bought it not for the market value,
but for the amenities of the town at that time. I perceived Davis as having a safe, small town atmosphere in which to raise my children. It is preservation of this atmosphere that drives my social, local political decision making. I am fortunate not to have to need to maximize the value of my home. My own children are now off exploring the more exciting opportunities of the Bay Area. I do not know if they will ever choose to return.
But if they did, I would prefer that there be a least one community in this part of the valley that combines a safe, relatively small town ambience with the presence of a quality university.
This is not about money, but about lifestyle choice, and yes, about community. I don’t know, but I suspect I am not alone.
davisite2, I appreciate your tongue-in-cheek humor in addition to the irony of your previous posting. You write as if we haven’t already had a steady stream of “mushroom clould” statements from the NOE side these past 2 years beginning with the criminal blocking charges. What a hoot!
-Michael Bisch
Rusty: you are forgetting that this isn’t a closed system. If you drive up the rents enough, it becomes easier for the tenant to live out of the city and commute.
“Landlords will raise rents if they think the market will bear it, and will just absorb the cost if the vacancy rate is high.”
Which explains the Simmons letter. If Simmons is going to simply pass the cost increase on to his tenants, why even bother writing the letter? Simmons’s argument is contracictory.
-Michael Bisch
“Rusty: you are forgetting that this isn’t a closed system. If you drive up the rents enough, it becomes easier for the tenant to live out of the city and commute.”
Not to mention simply moving to West Village.
-Michael Bisch
J.R.
[quote]THen you should be appalled at the immense deficits that Obama is running up that will need to be serviced or repaid by those who follow us.
But somehow I feel you aren’t.[/quote]
And I suspect that your feelings have no correspondence to what does or does not appall me. Where in the world do you get the arrogance to pretend that you know anything about my personal views on an issue on which I have never posted ?
However, arrogance aside, I will respond to the substance of what could easily have been posed as a question instead of an ill founded assumption.
Yes, I am appalled by our deficits. I am equally as appalled by those run up by Obama as I am by those run up by the policies of the presidents Bush. Most particularly as a pacifist, I am appalled by the foreign wars put on a national “credit card” by Bush the younger. However, I am equally appalled by the prolonged withdrawal from
these wars and the maintenance of what I perceive as an unnecessary and ineffective “homeland defense” policy. I am appalled by the ongoing existence of Guantanamo. I am very likely as appalled as you seem to be by our deficits. Where I suspect we might differ is in our values, such that items you feel are worthy of preservation, I would eliminate, and vice versa. I would also like to see a smaller, less costly government.
The devil is in the details of how to get there.
David: maybe you should ask Simmons why he wrote those letters to the tenants?
I believe that what the market will bear is the largest factor in determining rents, and landlords who have owned their properties for a long time are absolutely cleaning up right now. I think Simmons therefore will raise rent with increased water rates to the extent that the latter will allow, but may have to absorb some of the cost for the same reason, resulting in less total profit.
It doesn’t matter that tenants living in apartments use the very lowest levels of water (under 8 CCF) and will actually not see that much of an increase over the next 5 years – maybe $3-5 per month increase each year. Compare this to the $20.00 increase in taxes per unit for schools. I didn’t hear of any threat to increase rents and encouragement to vote No by landlords. I think that they just quietly raised rents. We already have rents that are sky high. Landlords will charge as much as they can, plus charge for parking, laundry access, utilities. I’ve even heard of landlords commonly charging a “lime away deposit” to pay for cleaning off the mineral deposits in bathrooms when students move out.
So I think mr. Simmons is out of line. It is just another example of unethical political strategy by the No on I crowd.
I am a landlord. I have two rental properties. As such I will absolutely defend Mr. Simmons right to communicate what he feels will be the implication of public policy on future rents.
I would also have a preference for Mr. Simmons communicating the truth to his renters. The truth is that it is not the enactment or lack thereof of Measure I that will cause a rise in future rents. It is 100% the individual choice of the landlord whether or not to raise the rent, and whether or not to disclose the real reason for the increase. How do I know this ? Because I have chosen to rent my two properties for well under market value for personal reasons. One set of renters, close to me personally know the reason, the other set, not personally close, do not know the reason as I have chosen not to share the reason which is based on my personal philosophy.
So my plea to landlords, it is fine to communicate with renters about your political preferences. It would be better still if you were to just tell the truth that you will raise the rent if and when you feel it is in your own best financial interest and that you will not do so if it is not. To blame some third party or policy for your decision to make more money is disingenuous at best.
[quote]“David: maybe you should ask Simmons why he wrote those letters to the tenants?”[/quote]Finally, I find something Michael says about this campaign with which I agree. Probably for different reasons–I can’t see the rationale for writing this story without even trying to figure out the “why” of it (esp. since Simmons offers to talk). [quote] “Measure I is a long-term investment in the economic and environmental sustainability of our community, and possibly the most important Davis voters have ever been asked to make about our water supply. The Woodland/Davis Clean Water Agency (WDCWA) Surface Water Project will be a valuable asset….”[/quote]Have we read this in the [i]Vanguard[/i] before we find it buried in this story about a landowner’s letter to his tenants? Maybe this story should have featured the “Yes” view of the Chamber with the landlord letter as the counterpoint instead.[quote]“But while the Chamber as a whole have taken the Yes position, individual businesses like Simmons Real Estate, who are members of the Chamber, are apparently taking an oppositional view.”[/quote]David, please list the member businesses that have announced opposition to their organization’s “Yes” stand. This wouldn’t be unusual for such a diverse group, of course, but it’s been difficult to determine who endorses the “No” side of this election. How significant are the numbers which have announced a “No” stand?
medwoman wrote:
> One possible motivation might be to use water
> limitation as a means of preventing further
> construction thus making it possible to raise
> future rents due to inadequate housing supply.
I met John Simmons a couple years ago and he looked like he was in his 80’s (and could not hear very well even with his hearing aid). I don’t think John is really worried about “future construction” since odds are he won’t be around for many years in the “future”. It sounds like he is just trying to let his tenants know that reality of rents always going up when expenses go up for every landlord.
Then Michael wrote:
> The claim that landlords can simply raise rents to cover
> their increasing costs flies in the face of the principals
> of supply and demand and the definition of “market rent”.
> Landlords are already receiving the highest rent that the
> market will rent.
Then Rusty wrote:
> It’s ludicrous to think that a major cost such
> as the tripling of water rates won’t eventually
> make its way to the renters in the form of direct
> water costs or higher rents.
Michael responded:
> So Rusty, now you’re going to lecture me on what
> I do for a living? The market will bear whatever
> it will bear, not a penny more.
Driving around town I have only seen Michael’s signs on commercial property and I don’t need to tell Michael that the “commercial” vacancy in town is higher than the “residential” vacancy (the supply and demand for residential space is not the same as the supply and demand for commercial space in Davis).
I think that Michael and Rusty are both right in that Simmons will probably be able to raise rents, but Michael (especially for funky space like “Cort ‘N Cedar”).
It sounds like Michael is forgetting that the “market” changes when water rates go up and residential landlords will probably be able to charge more, but unfortunately since the commercial market is different than the residential market commercial landlords will not be able to charge more (and landlords with high water using tenants in long term FSG leases will be screwed)…
P.S. It water rates to triple (or more than triple for people pushed in to higher water use “tiers”) many people in town that rent rooms to grad students may decide to just get rid of the grad student as the “profit” for renting the room gets lower as they pay more for water (way more if they are pushed in to a higher “tier”) changing the rental “market” even more and allowing residential landlords to raise rents even more…
Don Shor:
“I suspect some landlords may already be factoring higher water costs into their rent for the 2013-14 school year.”
Thanks Don for backing my point.
Question, does UCDavis use the city’s waste water treatment plant for their discharge of campus and West Village water?
Michael wrote:
> What’s good for the community is generally
> good for my Davis investments).
Something to keep in mind:
“less” residential development in an area is good for “residential investments”.
“more residenial development in an area is good for “commercial investments”.
e.g. If old Hunt’s plant site (where friends had summer jobs in the 80’s) is built out with 100% residential it will be bad for Davis residential rents/values but good for Davis commercial rents/values…
Davis wrote:
> Rusty: you are forgetting that this isn’t a closed
> system. If you drive up the rents enough, it becomes
> easier for the tenant to live out of the city and commute.
I think that David is forgetting that gas is hitting $4/gallon again and a ~25 mile/day round trip from Dixon/Woodland/West Sac five days a week will cost over $300 a month (using the AAA average cost per mile number)…
“Question, does UCDavis use the city’s waste water treatment plant for their discharge of campus and West Village water?”
No. UCD has its own facility. http://facilities.ucdavis.edu/util/wandw/sewerdisposal/overview/
SOD:
“I think that David is forgetting that gas is hitting $4/gallon again and a ~25 mile/day round trip from Dixon/Woodland/West Sac five days a week will cost over $300 a month (using the AAA average cost per mile number)…”
So right SOD. My kids who work in Davis and Dixon just moved to Davis from Woodland. They paid $900/month in Woodland and found a place in Davis for $1200/month. They always wanted to live in Davis and realized that with the savings of commute gas they’re actually coming out ahead by living here. I doubt college students or people who work here will find it worth moving eleswhere over a few hundred dollars rent difference.
“You write as if we haven’t already had a steady stream of “mushroom clould” statements from the NOE side these past 2 years”
DT Businessman:Putting aside the rate issue which the NO side concludes will be a serious burden on Davis residents and which each voter can come to their own opinion about if actually given the numbers(which are not part of the measure I ballot measure), I challenge you to enumerate what campaign positions NO on I has been using that would be considered by most to be attempts to scare the voter into supporting your position. In addition, as I have described in a local political context, these “mushroom cloud” claims have always come out right before balloting so that there is no time for the opposition to challenge their veracity.
“
….into supporting your position.” wrong pronoun. It should read….into supporting their position.
davisite: “[i] I challenge you to enumerate what campaign positions NO on I has been using that would be considered by most to be attempts to scare the voter into supporting your position.”[/i]
Of course, you have argued for some time that the water project will somehow lead to growth.
And this from Sue Greenwald:
“I strongly believe that approving the Woodland-Davis water project is [b]the most risky and potentially harmful decision that has been made[/b] by a City Council during the 12 years that I served as a council member.
… the [b]consequences of proceeding with it are likely to be devastating.[/b]
…
If you want to use scare tactics about West Sacramento’s perfectly safe water, let’s talk about [b]the risk that the state Department of Public Health is actually concerned about,[/b] i.e., the fact that the Woodland wastewater treatment plant with its airborne pathogens is too close to the planned Woodland drinking water treatment plant.
…
[b]Costs to the homeowner of the Woodland/Davis project will be far, far higher[/b] than council and staff have acknowledged. [b]We will have among the very highest sewer/water/garbage costs in the state[/b] when rates are ramped up to reflect full project costs in seven or eight years.
…
I would like to focus briefly on a few of the aspects of [b]the inevitable cascade of deleterious consequences[/b] that likely will follow if the Woodland/Davis project proceeds.
The [b]city of Davis cannot afford to pay its municipal irrigation bills[/b] if this project goes through.
Additionally, I expect that aspiring large subdivision developers in the county, such as Angelo Tsakopoulos, who owns a huge tract of land between Davis and the Yolo Bypass, will not only use their own shallow/intermediate well irrigation systems, but could even push to join West Sacramento’s system instead of ours, since it is so much less [etc.]…
As a result of our extraordinarily high water costs, our customer base that must pay for the new project will contract rather than grow, and new development on the periphery and in the county will be lush and green with affordable water for irrigation while existing [b]Davis will become exorbitantly expensive, brown and dry.[/b]”
Med Woman, I had no idea you were a small time real estate speculator. What is it about this town that we have all these anti-growth small time landlords?
My landlord didn’t raise the rent for eight years and there are others as well who will leave good tenants alone, especially if they have a lot of equity. I know the late great Jerry Kaneko was also slow to raise rents so there are many things that go into deciding rents besides the cost of carrying real estate. What the market will bear is not the only consideration nor are water rates.
davisite: [i]” I challenge you to enumerate what campaign positions NO on I has been using that would be considered by most to be attempts to scare the voter into supporting your position.” [/i]
And, of course, these nuggets from Mike Harrington:
•”The surface water plant is one of the cleverest strategies I have ever seen: soak the rate payers so the potable water is available for the elitist dream town of 150,000 and for the upzoning of the land around Davis and Woodland.”
•”I am sure there was a discussion amongst a few elites about 15 years ago, and the surface water system was the chosen way to make sure that Davis had the water for a much larger population while enriching the border land owners.”
•”My take on it is the water interests are alrady spending to oppose the referendum via various hidden channels using community members.”
•”Tskapolous will have his hand on the spigot that controls the amount of water flowing through the surface water pipeline.”
Mr. Toad,
[quote]I had no idea you were a small time real estate speculator. [/quote]
Neither did I !
Since one of my two houses is in Washington state, I think my prospects for making a killing on local real estate speculation are relatively small ! ; )
[quote]I challenge you to enumerate what campaign positions NO on I has been using that would be considered by most to be attempts to scare the voter into supporting your position.” [/quote]
Let’s not forget the line used by the folks at the “No on I ” table that the Sacramento River water is dangerous to people’s health because of the pharmaceuticals in it. Repeated despite the fact that I provided evidence to the contrary and the fact that Sue Greenwald had stated from the dias that this is a safe water source.
Rusty49
[quote]Don Shor:
“I suspect some landlords may already be factoring higher water costs into their rent for the 2013-14 school year.”
Thanks Don for backing my point.[/quote]
So Rusty, do you believe that if Measure I is defeated, these magnanimous landlords will rescind their rate increases that they put into place as a hedge against higher water rates….if this is indeed happening ?
[quote]So right SOD. My kids who work in Davis and Dixon just moved to Davis from Woodland. They paid $900/month in Woodland and found a place in Davis for $1200/month. They always wanted to live in Davis and realized that with the savings of commute gas they’re actually coming out ahead by living here. I doubt college students or people who work here will find it worth moving eleswhere over a few hundred dollars rent difference.[/quote]
So it sounds like you are making the case that your kids will find living in Davis more affordable than commuting. Will this be true with increased water rates with the project ? Will it be true with increased water rates without the project ? To really know whether the project is worth its cost, one has to consider both contingencies, not just now, but 5 – 50 years from now. The answer may not be the same for each time period considered. If a few hundred dollars won’t make or break your kids decision on where to live now, maybe the water project wouldn’t be such a bad future investment after all.
Toad, Toad, I purposefully used the word “generally” to prevent you from citing the exception(s) to the rule. Sheesh!
SOD, my comments here today were mostly aimed at large residential rental properties although the same principals “generally” apply to commercial real estate. As for Court ‘N Cedar, don’t give up on me yet. CNC is on its way to being the greatest artist colony in downtown Davis, you just wait and see! 🙂
-Michael Bisch
Medwoman
“Will this be true with increased water rates with the project ?”
Ummm, they used to live in Woodland? Hmmm, somewhere I’ve heard that Woodland’s water rates are going way up too.
“If a few hundred dollars won’t make or break your kids decision on where to live now, maybe the water project wouldn’t be such a bad future investment after all.”
As I stated, their costs are actually less living here than Woodland because they’re saving on gas.
M. BISCH: [I]”The market will bear whatever it will bear, not a penny more. If the market will swallow a rent increase, landlords most certainly will increase rents independent of the surface water project.”[/i]
Sorry to jump in to this aspect of the discussion so late, and I further apologize if someone else has already made the counter-point I will attempt here.
I think Michael is largely right. However, I don’t think it is quite as clear as he implies with regard to how higher costs affect tenants.
It is true that with a given supply and a given demand, landlords will normally charge all the market will bear. If demand holds equal steady while a new cost (like water inflation) arises, that cost will be borne by the landlords, because they are already (figuratively) squeezing every last penny they can out of their tenants.
Yet there is a dynamic that Michael Bisch does not address which changes the equation some. Higher costs to landlords will depress profits and that in turn will depress the supply of rental housing. That takes time. Maybe a few years. Maybe even more.
Keep in mind that good profits are the reason people choose to invest in rental housing and hence choose to become landlords. If higher water prices (or higher parcel taxes, etc.) depress profits, then marginal investors who might have added new rental housing to the supply chain will not do so. Further, some who own rentals, if they become less profitable, will choose to sell their properties to owner-occupiers, and that reduces total rental housing supply.
Thus, it’s possible that, over time, higher costs to landlords will depress the supply of rental housing; and if demand for rentals holds steady or grows, then in that situation rents will go up, indirectly as a result of water rate inflation.
It’s hard to really know what will happen on the supply side over time for a number of reasons, one of which is that even with the higher water rates, the cost of water per apartment unit in relation to total rents is not all that high. If the cost of water took away 20% of a landlord’s rental income, then, clearly, supply of rental housing would shrink.
Another complicating factor in Davis is that very often we have a very tight rental housing market (no or low vacancy), because of political (as opposed to market) decisions which greatly restrict housing supply and as a result benefit landlords and harm tenants. To the extent that the rental housing supply is politically restricted, landlords (especially those who have owned their properties for many years) are achieving rents that are much higher than they would in a free market. And insofar as that is the case, then an increase in their costs will entirely be borne by the landlords, until the point is reached where the water costs drive marginal investors out of the market and the rental housing supply shrinks.
The group which stands to lose the most from the higher water costs are property owners who choose to sell. Just like the rental market, single family homes are sold for the highest amount the market will bear. With a given demand curve, higher costs of home ownership (including higher interest rates, water rate inflation, parcel taxes and other municipal fees assigned to homeowners in Davis) [i]reduce[/i] the amount you will be able to sell your home for, ceteris paribus.
Perhaps the costs of not doing this project are even higher. That is what the Yes proponents contend. But it’s quite clear to me that higher water rates mean lower sales prices for houses, but not a lower cost of housing to buyers.
So… Rich… Haven’t see you out here “slumming” in the water wars very much… Good to see you. So, where DO you stand on this whole “Measure I” thing? Hmmm? Inquiring minds want to know Rich… I mean, your opinion might sway my vote
(Okay, not really, I already voted–but STILL, I am damn curious where you come down on this whole thing). 😉
I’m not going to weigh in in the water issue because it doesn’t matter to me. What I will point out is the difference in editorials when a hot button item falls inline with the Vanguard’s agenda. Here the Vanguard supports John Simmons in letting tenants know what will be coming their way. Now look at the opinion from November 25th [url]http://davisvanguard.org/index.php?option=com_content&view=article&id=5887:sunday-commentary-davis-ace-puts-downtown-in-a-tough-position&catid=84:elections&Itemid=106 25[/url] about Jennifer Anderson. I have a feeling if Anderson had been blowing Obamas horn there wouldn’t have been a story.
Robb, I have mixed views on the water project, and don’t feel anyone should follow my lead on this topic. I am not an expert on water.
My advice is to listen to those (pro and con) who have invested a lot of time and energy on the subject, but have no conflict of interest. Some of them make excellent comments on the Vanguard. Also, I have appreciated the Ask The Expert ([url]http://www.davisenterprise.com/local-news/city/ask-the-expert-well-we-be-ok/[/url]) series in The Enterprise.
This week I was asked by a reader (who recognized me at Peet’s) why I had not recently written a column on the topic everyone was writing about and talking about: My answer is because everyone else is doing that job quite well. My hope is to address areas others don’t know as well or have overlooked.
Rich. Though I was razzing you a bit, I do value your opinions so thought I would ask. It has been great to benefit from the views of knowledgeable Davis residents (many of them top experts in their fields). We have many great resources here.
Rich wrote:
> My advice is to listen to those (pro and con) who have
> invested a lot of time and energy on the subject, but
> have no conflict of interest.
It is sad to say but in recent years I have seen less and less people “spending a lot of time and energy” on things without having some kind of (often hidden) conflict of interest (some way where they or a friend or family member are going to get more money down the road)…
SOD
[quote]It is sad to say but in recent years I have seen less and less people “spending a lot of time and energy” on things without having some kind of (often hidden) conflict of interest (some way where they or a friend or family member are going to get more money down the road)…[/quote]
I am truly curious about what makes you say this.
What I have seen are many, many people putting in much time and effort into enhancing our schools, both in terms of electing school board members favoring their preferred policies, but also by volunteering directly in the schools, serving on local and county boards and commissions involving many aspects of service to the community, participating in forums covering a number of topics, none of which are likely to provide financial advantage to the participants.
Have you actually talked to the people you are referencing about their motivations, or are you just assuming that if they care enough to act, it must be about money ?