Supply and Demand Economics Means Rents are Going Up

13-Jul-1997 Sunday
(Page H-13 )

Robert Griswold | Steven R. Kellman | Ted Smith
This column on issues confronting renters and landlords is written by Certified Property Manager Robert Griswold, host of KSDO Radio's "Real Estate Today!" (Saturdays, 2-3 p.m., AM 1130) and by attorneys Steven R. Kellman, director of the Tenants' Legal Center, and Ted Smith, principal in a law firm representing landlords.

Q: I rent a one-bedroom apartment in the University Towne Center area on a 12-month lease that expires soon. I was shocked when the manager offered to renew my lease for an additional 12 months with an increase of $100 in my monthly rent. This is outrageous. Is there a source that can provide the average rent for one-bedrooms in my neighborhood? Can you tell me if this is reasonable?

A: Griswold: There are a couple of sources of broad market rental rate and occupancy information. Market Profiles and the San Diego County Apartment Association (SDCAA) routinely conduct surveys that compile data on the occupancy (or vacancy rate) and the rent rates currently charged for different units (1-bedroom, 2-bedroom, etc.) throughout San Diego County.

For example, SDCAA has compiled occupancy data from its members in the spring and fall for more than 20 years and the average rental rate information for the last few years.

Market Profiles also contacts its list of regular contributors twice a year and publishes the results for its subscribers and the media in March and September. In both cases, the data is collected from those owners/property managers that choose to respond.

SDCAA compiles all of the responses and reports the information anonymously by ZIP code in its Rental Owner publication with summary information to the media. Detailed information by specific apartment community is compiled by Market Profiles. However, this information is compiled for clients and is generally too costly for an individual renter to purchase.

While this provides important and useful information for owners and property managers, it does give renters a little better understanding of the general direction of rents in a given area.

However, I would not recommend using these surveys to determine your personal response to the proposed rent increase on your lease renewal.

The best way for you to determine the equity of a proposed rental increase is to do your own personal market survey.

Select four to five comparable apartment communities with similar unit features and project amenities in an area you desire. Then shop each community to determine the cost of a rental while making rental rate adjustments for pros and cons of the proposed community vs. your current community.

You can then determine if you should accept the new lease rate or move to one of the other communities you visited.

Of course, do not forget to calculate the high cost and aggravation of moving before making your final decision.

While this may be a shock to many renters, the reality is that the rental market has shifted dramatically in the last year. From 1990 to 1995, effective rental rates (when you include rent concessions and other incentives) actually declined in most areas of San Diego County.

Beginning in late 1996 and especially the first half of 1997, the supply and demand for apartments has shifted, with rents going up steadily, particularly in the coastal areas.

According to the March 1997 survey compiled by Market Profiles, countywide rental rates increased by 3.6 percent compared with the March 1996 report.

Russ Valone, president of Market Profiles, indicates that the University Towne Center rental market increased by nearly 8 percent in the last 12 months. Also, rent increases are becoming a common topic in calls to my radio show. I have had more calls on rent increases in the last three months than in the previous five years since the program began.

Valone and other industry experts agree that the likelihood for further rental rate increases is very high as the continued demand for quality apartment communities is actually leading to the construction of several thousand new luxury apartment units in San Diego County after many years of virtually no new apartment construction.

The high cost of building these new units dictates that the rents charged will be significantly higher than the typical rent tenants have enjoyed in the past.

My advice is that renters should be very concerned about the potential for significant rent increases and should seek longer fixed-rate leases if they are able to make a commitment to minimize the prospects of sticker shock as you experienced.

Q: I rent a room at a local single room occupancy (SRO) property. The employees routinely enter our rooms and search through our personal possessions. Do I have any recourse? If I move out, can I hold the owner liable for anything missing? Are there criminal penalties for this kind of activity?

A: Smith: In this type of rental you share the kitchen and bathroom facilities with other residents. But, you are entitled to peace and quiet in your own room.

Management does have the right to enter your room to take care of emergencies, make repairs and so forth, but employees cannot just enter and snoop around.

If you believe they have stolen from you, you have the right to contact the police, or take the matter up in Small Claims court.

Kellman: Generally, it is not permitted for any landlord/employee to routinely search through your personal belongings whether you are in a single room occupancy situation, motel or apartment. It becomes a little difficult when you have daily housekeeping services involved since they have lawful access to your room. However, there is a difference between cleaning and searching.

Your recourse is to complain to the management and let them know you do not give your permission for such activity. The next step, if you get no results from the complaints, is to take legal action through the police or a filing in Small Claims court.

Such a case may include a claim for the value of any property wrongfully taken from you.

To protect yourself, keep a clear record of what you own, and store that record in a safe place.

Q: I have a property management company that manages a rental house in Northern California that is rented on a month-to-month basis. I am not happy with the company and want to make a change. Our written contract expired more than five months ago, and there is no language concerning termination requirements. Do I have to give them advance notice? Must I have a reason?

A: Griswold: Based on your representation that there is no termination language and the fact that the agreement has expired, you should be able to terminate the management agreement immediately.

However, be careful that there may be language that provides for an automatic extension or renewal based on the conduct of the parties.

For example, the continued collection of rents, payment of bills, and/or the maintenance of the rented premises on your behalf by the management agent may result in an extension or renewal. Also, certain industry-standard property management agreements may specify that certain conduct results in a month-to-month rollover of the management agreement, which may require a 30-day written notice to cancel.

Again, the language of your property management agreement will be the control. Typically, you do not have to state a reason for termination of the management agreement after the initial contract term has expired.

Contact your property manager and seek a reasonable transfer of management that will minimize the impact on you and your tenant.

If you're a tenant or landlord, the authors stand ready to answer your questions in this column, although letters cannot be answered individually. Write them at: Rental Roundtable, Homes Section, San Diego Union-Tribune, P.O. Box 191, San Diego, CA 92112. Or you may e-mail them at rgriswold@retodayradio.com

Back to 1997 Rental Roundtable Index

Robert Griswold and the Real Estate Today! radio show strongly support the intent and the letter of all federal and state fair housing laws. As a reminder to all owners and managers of real estate, note that all real estate advertised is subject to the Federal Fair Housing Act, which makes it illegal to advertise "any preference, limitation, discrimination because of race, color, national origin or ancestry, religion, sex, physical disability, or familial status, or intention to make any such preference, limitation or discrimination." Additional state and/or local fair housing laws may also apply. Be sure to inform all persons that all dwellings offered or advertised are on an equal opportunity basis.

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Revised and Updated - Wednesday, April 26, 2006

Robert S. Griswold, CRE, CPM, CCIM, PCAM, GRI, ARM
Griswold Corporate Center
Griswold Real Estate Management, Inc.
5703 Oberlin Drive, Suite 300
San Diego, CA 92121-1743
Phone: (858) 597-6100
Fax: (858) 597-6161
Email: rgriswold.ret@retodayradio.com