Board Report

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written by Dave Wasserman

As we begin 2020, think about how we, as an industry, present our product and treat our customers.

This piece will not make me popular with many of you. Regardless, the message must be delivered and is long overdue. During my twenty-five years as a member of the multifamily housing industry, I have observed persistent and intensified negativity, on our end, toward the segment of the population that provides us with income and wealth: tenants.  This notion that all renters are conniving and free loading, fostered in large part by the local political landscape and the barrage of terrible legislation from both city and state politicians, seemingly persuades us to treat our clientele with contempt and disdain.

Yet the state of affairs has forced the industry to reflect on its core mission and, to a larger extent, the image that it portrays. As property owners, we strive to attract and maintain the highest quality of tenants. This is achieved not by soliciting substandard housing or becoming combative with the renters, but by promoting excellent customer service and care. We lose sight of this mission in large part because of rent control. A tenant is perceived as “bad” simply because the length of a tenancy has inevitably resulted in below market rent. This conclusion, unfortunately, makes for terrible and, indeed, unproductive business practices.

If you were operating a hotel or restaurant, would you act aggressively and negatively toward the patrons? Would you pursue ways to decrease customer services and fail to respond to reasonable requests? Of course, you wouldn’t, as to do so would mean no more customers. In essence, combating your clients, even if your prices were regulated by the government, would hasten the inevitable ruination of the business.

But because of rent ordinances and high demand, we feel justified in taking overly aggressive stances. My plea today is that we collectively re-examine that attitude. Besides common sense, here are some reasons why it pays to employ quality customer care:

The best tenants will inevitably rent those units and buildings that are maintained impeccably. They will also pay the highest prices. People who want to live in a dump probably have little respect for lease covenants and the well-being of their neighbors.

Tenants have substantial ability to cause you financial and emotional pain. If you pick a fight with your tenant, you may be spending an inordinate amount of time at Rent Board hearings, in court, and with attorneys. While the legal industry thrives, your bank account will diminish.

Most tenants have no knowledge about the universe of Rent Board petitions, tenant litigation, and the like. They gain this understanding only when confronted by adversity. Once they become attuned to the system, there’s no going back. Delene Wolf, the former Executive Director of the Rent Board, often touted this wise advice to members of our industry who cared to listen.

A failure to maintain the rental unit over time is far more expensive than paying for the every-so-often repair requests. Admittedly, unclogging a sink or replacing a broken window frame may draw ire, especially when you suspect that the tenant is to blame, but the alternative is worse. Deferred maintenance can balloon into out-of-control expense bills. Just ask anyone who has purchased a building where the prior owner did absolutely nothing.

Tenants are, believe it or not, human beings. They pay you money each month, and in return they deserve a level of respect. They also tend to take better care of their unit, and the building, when they know that you care.

Remember, a tenant who has low rent because of our more than 40-year-old rent law should not be blamed for the windfall received. By the same token, should you be penalized when you sell your building for a large profit, or enjoy consistently higher income from your investments? I tell owners who complain about rent control that nowhere else in this country, outside of perhaps Manhattan, would they enjoy the levels of yearly appreciation, high rents, and upside that are routinely handed to them by our market. Yes, they must work hard and pay attention to the rules, but at the end of the day they get paid handsomely. To this end, denying tenants services simply because they have “been there too long” is ridiculous and wrong, both morally and legally. Study after study confirms that rent control only drives up the prices of rent in the community and increases the building’s value over time because supply is quashed, so unless the owner is willing to part with some of this end-of-the-day profit, long term tenants deserve the same level of customer care as those paying market rates.

I am not suggesting that you overlook legitimate violations of lease covenants or a failure to pay rent. To the contrary, there are some misguided tenants out there, but I have found that many of the disputes that have come across my desk could have been prevented by common sense management and normal customer care. Attorneys oftentimes encourage aggressive stances, but most of them don’t write the checks to pay for these buildings. Rather, their approach may be to create adversarial situations because that is what they know and profit from.  Most importantly, making life difficult for your customers creates the fodder for bad legislation. We have seen how the irresponsible legislators respond to the bad actions of the few: a law affecting everyone is passed, enhanced over time, and made permanent for future generations to suffer by. Is this what we want?

Let’s examine recent history. In the late 1990's, real estate speculators came rushing into town to make their fortunes by converting apartment buildings into tenancy-in-common, or TIC, developments. For the next 10-plus years, renters were coaxed out of their units with buy-outs or displaced through Ellis Acts, owner move-ins, and other types of evictions. City Hall and the voters responded with unprecedented legislation that has now become a permanent fixture of the landscape. For no-fault evictions, tenants get paid at least $7,000 each. You can only do one owner move-in per building. Tenants over 60 or suffering from disabilities, have children, or work in education cannot be evicted under most circumstances. There are no more relative move-ins evictions unless the owner also lives in the same building. Ellis Acts are exceedingly complicated and expensive. Tenants can move in roommates without much regard to the lease. Condominium conversions are essentially off the table. There is a comprehensive tenant harassment law penalizing bad behavior. Buy-outs are heavily regulated.  Statewide rent control is now in effect and unit registration may become a reality. This list will continue to grow if we don’t get serious about the climate we have created. I can assure you that most of the developers made plenty of money and are now enjoying themselves in other places, while we are stuck here to suffer through the toxic malaise.

And this brings up another point: Most tenant legislation passes at the ballot box because the public perceives us as greedy, aggressive, rich, and wrong. Sure, much of the negativity is fake news, but there is some grain of truth in what “they” say about this industry. Imagine if we all took care of our property, treated tenants fairly, and actually competed amongst ourselves to offer the best product at the most economical price. What would they say then?

Many of you will retort that the building prices, taxes, insurance, and other costs of doing business do not afford owners the luxury of being anything but tough and unyielding. While I do not profess to speak for everyone’s financial situation, I know that enough of the community could afford to withstand some degree of self-reflection and modification in our practices. And for those on tight budgets, there is nothing worse than being stuck with huge legal bills because of some preventable war. (In many cases, victory is Pyrrhic, because the landlord spent so much to remove the tenant that the rental increase gained will take years to make up for the cost.)

So, as we begin 2020, think about how we, as an industry, present our product and treat our customers. The laws are simply reactive, and I submit that our past approach may not be producing the best results. Lawyers will find other avenues to make money. Politicians will lose interest with our business if there’s nothing to talk about. The legislatures will find some other industry to overly regulate if they can’t point to any abuses on our end. Think about this call to reform our image and the way we do business and have a Happy New Year.

Dave Wasserman is an SFAA Board Member and Rent Board Commissioner and may be reached at