Investors shouldn’t shy away from properties that fall under the RSO jurisdiction. They should simply consider the limitations on rental increases in the pro forma cash flows. Tenants often don’t care about rent control, because most are not in a unit long enough for the rental increase limit to benefit them. If you are a renter and plan on living in a unit for 10 or more years, then it may benefit you to look for a rent controlled unit, but if you are like most people and you move a 3-5 years, then rent control likely will not provide any benefit in limiting future rent increases.
The limited amount of housing inventory in the San Fernando Valley, and in many places, is artificial and is causing a shortage of homes. Demand hasn’t tripled and the economy isn’t much better. The latest HUD Scorecard has the following chart which helps to show why prices are rising and why everyone is fighting over scraps of homes.
Until banks do the right thing and start releasing these homes, as well as work with people to stay in their homes or short sale, we will have an unhealthy housing market. This means that we can’t move forward and have an economic recovery for a long time.
Unfortunately, this is not a sign of a recovering housing market. It is simply a sign that banks are not releasing foreclosed homes as fast as they should be. The banks should also be helping people to short sale or modify their homes so that the housing market can return to a normal state sooner.