The recent conversation surrounding the 2% (plus the Consumer Price Index) rent cap in Santa Barbara has alarmed many small-time landlords who are concerned they will be effectively forced to sell their rental properties.
If there is an overly severe rent cap, landlords will not be able to generate consistent “passive” income. And if the properties then cease to be profitable, they will need to liquidate their assets and re-invest their wealth in other income-generating assets.
Some have suggested that forcing small-time landlords out of the market will make even more room for much bigger landlord firms such as Blackrock and Zillow. This outcome can be avoided if we implement a Santa Barbara Tenants’ Right to Buy.
Such a policy would give Santa Barbara tenants the opportunity to convert their leases to mortgages (with monthly payments matching their current monthly rents) in the event that their landlords chose to sell.
Landlords would be able to list a particular rental property in the public marketplace only if that property’s particular tenant waived this right. If a tenant chose not to waive the right to buy, the retiring landlord would instead receive the fair market value for their property in a lump sum, while Santa Barbara, independently or in collaboration with a bank, would facilitate the once-tenant-now-property-owner’s mortgage.
Retiring landlords would enjoy nearly guaranteed buyers at the fair market rate, so they would be able to sell their properties without renovating, advertising, or hiring a real estate agent.
This policy would increase the number of Santa Barbarians holding real equity in Santa Barbara. And thus it would promote a spirit of stewardship and responsibility in the community.