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Harsh realities 

When recognizing a problem, and proposing a solution to it, the liberal tends to focus on the human needs represented by the problem, while the conservative tends to focus on the pragmatic concerns in implementing a solution. The operation of these contrasting perspectives is on display in a sad drama currently being played out locally.

I am referring to the drama at the Grand View Apartments in Paso Robles, with the pending eviction of the low-income tenants of the housing development. To summarize, the complex consists of 54 units of low-cost housing in allegedly squalid condition. The tenants successfully sued to compel the owners, the Madadis, to make repairs. The owners, protesting that the $2.5 million repair costs ordered are unaffordable, have decided to instead leave the rental business, and they're evicting the tenants. The tenants, who had been paying a reported average of $1,500 per month rent, are reportedly having great difficulty in finding new housing in this area at a comparable rent. All in all, it sounds like a lose-lose situation all around.

A disclaimer: My knowledge of this situation is limited to what I have read in this paper and have seen on TV. I have never spoken with anyone involved, neither have I even seen the complex. But since the dynamic of this situation is far from unique, I will comment on it.

Some observations: I am guessing that the reason that the rents were so low in the first place was because the place was such a dump and that the tenants were unable to find a nicer place at that price. This place, as awful as it may be, was providing a home for those who are reportedly too poor to find another place they can afford. And in trying to force the improvement of the conditions, the tenants have ended up on the street, surely not their intended outcome.

Now, landlords are under a legal obligation to keep their properties in an inhabitable condition. This costs money, and sometimes BIG money. While I have no idea what the overhead at the Grand View Apartments is, the owners obviously feel that the $2.5 million repair costs eliminate the financial viability of their enterprise, and they have chosen to abandon it.

Despite the new fashionability of redistributionist economics, a landlord is entitled to attempt to make a profit on an investment, and failing that, has an absolute legal right to go out of business, even if others have grown fond of their money-losing endeavor. An undertaking that serves others, and does not attempt to generate a profit, is called a "charity."

The repairs ordered totally change the owners' financial calculus of the apartments. At the reported average rent per unit of $1,500 per month, it would take more than 2 1/2 years of using all of the rent to pay only the costs of the necessary repairs, leaving nothing for all the other expenses of the complex, like the existing mortgage, taxes, insurance, employee salaries, professional fees, etc. And since few of us have $2.5 million just lying around, it probably would be necessary to borrow the money. At an interest rate of 6 percent, for a 15-year term, this would result in an additional monthly payment of $21,096, or an extra $390 of expense per unit on top of the current overhead, just to pay for the repairs. Ouch!

Not surprisingly, some commenters are outraged that the owners are not being forced to make the repairs and keep the tenants in their homes at the same low rents. There is criticism of the judge for not somehow forcing them to stay in business. But landlords function under some pretty unforgiving financial realities themselves. They need to receive enough rent to cover their overhead, including rent losses from the occasional deadbeat tenant and vacancy. None of the landlords' creditors are likely to give them a break just because their rents fall short. The business world is littered with the "formerly rich" whose businesses have failed.

Many find it easy and satisfying to volunteer others to make a sacrifice, a sort of "vicarious generosity." Here, the idea is that the Madadis should be made to support their tenants, since they're rich and the tenants' financial condition is so dire. This is the sort of generosity often favored by politicians using taxpayers' money. And the "rich" are always a satisfying target, as we envy and resent their wealth, unless, of course, they happen to be our favorite celebrities and sports stars.

It is unfortunate that math has been de-emphasized in school, because under the "magical thinking" of liberals, "the rich" are assumed to have inexhaustible fortunes, and little thought is given to their actual ability to sustain losses.

The ugly reality is that shabby housing like the Grand View Apartments provides a necessary service in offering those on the lowest rungs of the economic ladder a place to live, which they would not otherwise have. While the law imposes an obligation on owners to only rent habitable housing, it doesn't provide a way to pay for it.

The tenants successfully enforced their legal rights to decent conditions, and they won a Pyrrhic victory. Δ

John Donegan is a retired attorney who lives in Pismo Beach, and who, upon reading the news every morning, is unable to keep himself from ranting and sputtering indignantly. Send comments through the editor at [email protected].

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