Here is a budget estimate for landlords to purchase a $600,000 three-unit building: $120,000 down payment. Mortgage: $3,000 a month. Rent: $4,500 a month. Property taxes: $750 a month. Net profit: $750 a month (excluding insurance, repairs, utilities, registration fees, stormwater fees, maintenance, plowing, yardwork). Many small-business property owners accept a small annual loss or a minimal profit for the short term. It is a long-term investment, not a “get rich quick” scheme. Being a landlord is a major commitment of both time and money, especially if we manage the property ourselves.
It is in the landlord’s interest to have reliable tenants. Many of us raise rent only when a tenant moves out. I have been willing to negotiate lower rent under certain circumstances. Currently in Portland, however, agreeing to a discount means committing to continuing that discount for the entire period of ownership of the property, regardless of tenant turnover. Landlords are disincentivized to be flexible because a one-time discount turns into a permanent loss of income for the property owner. For landlords to protect their property value, we must keep our rents as close to market rate as we are allowed – all the time, without exception – or we will lose the ability to bring a discounted unit up to market value at any point in the future. We are forced to increase rents annually, rather than waiting for a tenant to move out before bumping rent up to market rate.
Landlords cannot arbitrarily invent prices for their units. Landlords can charge only what people are willing to pay. Rents have skyrocketed because we have a nationwide shortage of housing. That is a major problem and needs to be addressed. However, landlords cannot be the only ones bearing the cost of poor housing policies. This causes problems: Property owners will not have funds to pay for maintenance, especially in a state like Maine with a large percentage of older buildings. Landlords who have increasing property taxes and a lower allowable increase on rent might sell their property or convert to condos (“Property taxes rose twice as fast last year than in 2021,” April 7, Page D6). Already, Portland’s rent control ordinance has decreased the allowable cost of living increase from 100%, which allows the landlord to break even on cost of living, to 70%, which guarantees the landlord is paying 30% higher costs out of pocket. That is unsustainable.
Small-scale property owners have additional concerns. Generally, we need a mortgage and usually have a tight budget. This year, I replaced both roofs, a gas range and a boiler. Those costs eliminated my savings. If I have a major issue at either building in the next two years, I will need a home equity loan. When new property appraisals went into effect, my tax bill doubled. My tenants know it takes me longer to find a contractor for problems; I don’t have a permanent maintenance person on staff like some property management companies, and I do some work myself to save money. There are advantages of renting from an individual versus a property management company, though. I do not require credit or background checks, or application fees. I do not collect last month’s rent up front. I offer flexibility regarding pets; number of tenants; dates of tenancy beginning and ending; method of payment; modifications to the unit; allotted parking spaces, etc.
Continuing to vilify all landlords, regardless of their business practices and policies, and ignoring the housing crisis found in almost every municipality in the country, is a disservice to landlords as well as tenants. Our current rent control system has some kinks to work out, and one partial solution is to allow landlords to increase rent to market value when a unit is voluntarily vacated. Instead of having landlords pitted against tenants or rent control advocates, it would be more effective to have the groups working together to find solutions to the larger problem: the ongoing housing shortage.
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