AnonymousBy William Smithers
In a recently-published article describing a conference of business owners, citizens and local government officials brainstorming ideas as to how to improve the economic outlook for Santa Barbara’s State Street, where currently there are 34 vacancies, one idea in particular struck me as innovative and interesting.
It’s well-known that skyrocketing rentals along the city’s main thoroughfare are causing increasing business closures and/or business flight from that scene.
The latest UCSB Economic Forecast Project reports retail sales increased everywhere in the county except in the cities of Santa Barbara and Carpinteria, where they dropped 1.1 and 3.5 percent, respectively.
Landlord explanations for large rental increases are always that they are simply market-driven: if you want a desirable location for your organization or business, you have to pay up for it.
What about rent control?
As far as housing is concerned, it seems that the California Local Rent Control Initiative (#17-0041) may appear on the November 5, 2018 ballot, since it has received 565,000 supporting signatures when only 365,880 are required.
“The measure would allow local governments to adopt amendments, ordinances, or regulations to govern how much landlords can charge tenants for renting apartments and houses. The measure would also repeal the Costa-Hawkins Rental Housing Act, a law designed to prohibit local governments from enacting rent control on buildings first occupied after 1995.” (sfgate.com)
But as to businesses, under current California law:
“Rent control, or the capping of rents in a specific area at a certain amount by a public entity, is prohibited by California law with regard to commercial property. … Under Section 1954.27 of the California Civil Code, no public entity is allowed to enact or enforce any type of commercial rent control in the state. However, commercial landlords are allowed to voluntarily enter into a capped rent agreement with public agencies. “(op.cit.)
This creates the possibility for bringing into existence one suggestion from the brainstorming session described above:
Create a municipal “Economic Czar,” as other communities have done. Under this aegis, permit an Association of Business Owners that could negotiate rental prices with landlords.
I think this an extremely interesting idea. No landlord would be compelled to enter into such negotiations, but if some do and arrive at an agreed sum, a process might be underway that could persuade non-signers to get on board to be competitive.
Everyone that lives here pays all their income into rent/mortgage, so those in lower cost of living areas are the only ones who can afford to buy local real estate for investments.
Completely agree and I keep scratching my head why any comment board wouldn’t utilize Discuss. Among improvements, Discuss doesn’t allow anonymous replies and will also notify commenters that someone else has replied to their post. The only reason it makes sense to use the Edhat scheme is that it forces Users to click again to check for updates. Clinks count…
I would venture to guess that with the new Starbuck’s policy, that fewer “street” folks will be on the street. God bless Starbuck’s for taking the lead to help these people. I believe there are no fewer than a dozen Starbuck’s in SB/Goleta/Carp. If each Starbuck’s can sponsor four or five individuals, that’s 50-60 folks off the streets who now officially have a place where they can use the bathroom without fear of being arrested.
Actually, Starbucks just clarified their policy. They’re not a drug use or homeless haven. https://www.wsj.com/articles/starbucks-says-drug-use-sleeping-unacceptable-as-it-clarifies-guest-policy-1526918854
I strongly encourage you to take a couple night courses at SBCC in the area of economics. Rents fluctuate with market demand and supply. Either these shops will be rented out at this price or soon at a lower price. The current owners of these buildings probably paid way too much for the properties based upon the PAST expectations of the economy and rent growth. The last one left standing when the music stops, is in trouble. IF government is asked to do anything, it would be to clean up the downtown cesspool of vagrants, human waste and trash lining lower State Street. Lower State Street is quickly becoming just another run of the mill tourist town with no soul, boring bars and t-shirt shops, same as every other town that the cruise ships pull into. It will evolve on its own with time.
I totally concur with YETI. Clean up State Street!! Who would like to open a new store/business with the homeless greeting their customers?! Landlords who ask these so called ‘high’ rents have made an investment of capital, and have the right to try and get a good return on their money. What do you own, William, that gives you the feeling it isn’t worth a good return on your investment? Rent control requests are just another example of how this town’s people are leaning towards, and seeking a ‘communist’ state.
An owner of a large property portfolio can withstand many, many months of vacancies for a single property. The loss on one property simply reduces the overall net income of the portfolio. And most of these properties are leased for at least 5 years, sometimes 7 years. So letting one property sit vacate for a year is not really that painful. But renting it at a low price for a term of 7 years would be very painful. It also sets a very bad precedent/comparable which harms the entire portfolio’s value. So yeah, some day the commercial rents will drop if market rates reflect that reality…but it will take many years.
Why not impose a vacancy tax on properties left unoccupied longer than … say… 6 months (exempted if owner can show they are asking desirable and competitive rates). After all leaving properties empty while seeking stratospheric rents only depresses the desirability of the property and economic viability of the area as a whole. It’s not the “human waste” that’s depressing the economic viability of State St. as there are fewest vacancies in areas with the most vagrant traffic. Rather it’s the monopoly run by a few very large property owners/managers that are artificially dictating market rates.
SBCC night course classes in economics may not be the best place to learn things about democracy and human rights. In a non-existent land of pure free enterprise without cartels, accumulated capital, corrupted political systems (i.e., huge contributions to the election campaigns by big money people), distorted tax laws that benefit certain economic interests and cost others, we might have some sort of movement on the price of goods. This is not our place. Defenders of the landlords actually have the gall to explain how they can ignore the community simply because the have so much property! Rent control or other ways to force capital to accommodate people is perfectly legitimate exercise of citizen rights. Otherwise money would be all that counts and we fought a revolution to stop that sort of thing.
Building sales prices and rents; for domiciles and commercial or retail buildings, are a function of supply and demand-PERIOD! The rents are too high on State and it isn’t the fault of the homeless that retailers can’t make it there. The high rents make it even tougher for marginal retailers (T-shirt shops and tourist traps) to survive longer than their business eating up their capital. The only stores that can survive existing rents are stores that have high mark-ups or are part of a chain, but Macy’s and Saks have proven that there are exceptions to even chain stores to survive on State St.
All the vacancies on state and the store closings, including Macy’s and Saks, etc. came because their overhead exceeded their profit and there will be more.
Vacancies will continue to a point in time where landlords will eventually lower rents and merchants will be able to return as rents come down. Those owners who don’t lower rents and who didn’t buy for cash, will suffer losing their asses and in some cases eventually their property!
In the meantime, if a business cannot survive in any location, anywhere, they have to shut down. No different than the thousands who cannot afford to live here who must commute.
Smithers: There is only one major flaw in your argument for any type of rent control: While rent controls hold down rents, they also hold down the construction of buildings that fall under rent control, thus resulting in less rentals to control. If someone cannot afford to rent in a particular area, they must move to a location,
near or far, that they can afford! Rent controls are a great answer to stopping the construction business, but they do not solve the demand for people seeking a place to live in Coastal California, n or do they provide additional housing-they prevent it from being built!
SB’s Economic Czar is the Parking Sup. Pretty sure he knows nothing about economic development. If the guy needed a promotion the City should have put him somewhere else. Santa Barbara needs a real expect. Someone who doesn’t need to be taught economic development from the ground up. Someone managing the city parking structures and permit program should not even be interviewed. The whole city is a disgrace. From an incompetent mayor to our new Economic Czar, formally the head of parking attendants. The city is beyond clueless.
Rent control mandates in California, overall to do not increase affordability. A good example is comparing East Palo Alto (has rent control) with Palo Alto which doesn’t. Given the desirability factor between the 2, the difference is a negligible. Lower and mid income people are still being priced out.
As far as commercial property on State Street there are other factors that are driving retail. First is the overall decline of sales in brick and mortar, second changes in consumer preferences of how they spend their disposable income, especially the targeted millennial population.
If one thinks that our city government can be the solution, a look at their contribution to the problem is in order and it is multi focal. The city’s primary goal is to increase tax revenue and is doing to business what they are doing to housing. We understand the state mandate to add units, but exchanging old stock housing and commercially zoned properties for higher numbers of higher cost rentals has not increased affordability, they are still going up. Goleta too and look how many they have added. The distribution dollars has just shifted to a higher income demographic.
The city has also prioritized the development of the funk zone for high end lodging and hospitality, housing and entertainment at the expense of commercial businesses which what it was primarily zoned for. Non essential commerce has just moved down the street at the expense of local craftsman, mechanical, artists, fabricators etc…again the working and middle class have been priced out. This is not sustainable.
Giving the city more control is not the answer. Be it food trucks, vendors, marijuana RVs (and those tourists who are no loner welcome here) or common sense vacation rental policies they cannot find a balance that both benefits the community and creates a more interesting and vibrant place to be. Santa Barbara has become just another beautiful cookie cutter high priced California beach town that is sacrificing it’s identity for tax revenue. These are the same people who are changing the Boat House restaurant, the last causal and affordable beachside restaurant into a fine dining establishment. They don’t get it.
I come in contact with a lot of tourists and I tell them to go to Ventura, they get it. Local businesses dominate down town, they still have a art community, more diversity of people and businesses, great small music venues and prices are cheaper. The other issue it that is becoming more often that people have to go to Ventura for industrial or building products or services that are no longer available here.
I guess it’s true that “we get the government we deserve”
Why discuss this when the people that would shop there can’t afford to do so.
we can talk about “reviving” state street, but honestly locals don’t shop there. This wont save santa barbara from the fact that cost of living is too high for anyone locally to survive. Wonder why all the business’s on state are owned by “large property holding companies”…… why are all apartments and housing now large developments owned by companies that have headquarters outside santa barbara?
its because we sold ourselves
Any Starbucks baristas on here? What are your thoughts? I personally would hate to work there now with a policy like that. I never let people (homeless or wealthy) just sit in my place of business, use the Internet and bathroom all day without buying anything.