Government Owned Apartments
Government owned apartments should decrease rent by around 30-40%. The two main ways government owned apartments decrease rent, is by cutting out the landlords and cutting out the banks.
Landlords currently have net profit margins of around 25%,1 net profit margins refers to profits after taxes and interest payments, meaning pure profits are even higher. Margins may differ by apartment for various reasons. With government ownership landlords are cutout and the government becomes the owner, this by itself should decrease rent by 20% or more due to the profit being eliminated.
The second way of decreasing rent is by cutting out the banks. With private ownership landlords generally have to take out loans to build a new property, and then have to pay the debt back plus interest. Landlords have to raise rent to cover this debt. Every so often ownership of an apartment may change. New owners often have to take out a loan to buy the apartment and the debt cycle begins again as the new owners have to pay off their debt. With government ownership tax revenue can be used to build initial properties, which eliminates the debt and unnecessary interest payments. With government ownership, ownership is perpetual, which eliminates the debt cycle that comes with ownership changing hands in the private.
Another way of decreasing rent is by using computerized management systems. Most management systems use archaic methods, where potential renters have to contact a manager, meet in person and do paperwork before beginning to rent. Whether government owned or private owned, efficiency of management could be increased by using computerized management. How this could be done is by having all available apartments on a website, where potential renters can just create an account and pick an apartment and begin to pay online. All locks could be key codes that could be created online by the renter after the renter makes their first payment. Possibly an app could be created that allows your phone to be used as a key fob. Possibly fingerprints could be used as well. This type of system could decrease the workload of management, allowing a single manager to manage a larger amount of total units. A system to filter out hackers who are pretending to rent apartments should probably be put in place. This could be done by having renters upload social security numbers and Oregon id numbers into accounts, also they could send a few pictures of the inside of their apartment after a week of use and everything is set up.
Another possible way of decreasing rent is to have renters pay for maintenance of their unit directly. If renters pay these costs they can deal directly with maintenance and cut out the manager as a go between. This will decrease rent as renters will pay for these costs out of pocket instead. This will also decrease management costs as managers are freed up from this responsibility. Management will still deal with macro maintenance if there is a system wide issue with the property.
Other ways to lower rent include building smaller units, specifically studio apartments. Adding heavy duty shelving near the ceilings of apartments, so renters can have more storage space without taking up floor space. Other amenities to increase standard of living for renters include adding larger mail boxes for packages.
The process of bringing apartments under government ownership will mainly be through government purchases initially, although government built apartments may occur as well. This process will start slowly in order to ensure management is being run properly and rent is decreased to its fullest extent. After positive results have been shown, further purchases will be made. Before making purchases, the government will analyze the apartments of Portland and calculate average income level by apartment in order to focus initial government purchases on apartments with low-income residents. The government will analyze the value of apartments, to ensure landlords receive just compensation. Value can be determined using various methods including using the original cost of construction adjusted for increase in GDP per capita, current construction costs for similar styled apartments, as well as the current market value of the apartment. As long as the government manages the apartments strictly, paying employees equivalent to what the private is paying, and not hiring unnecessary employees, there should be a significant decrease in rent by bringing apartments under government ownership.
Government Owned Mobile Home Parks
Similar to private owned apartments, private owned mobile home parks put unnecessary expenses on renters in the form of HOA fees. With government ownership these fees will be waived, renters will pay for water, electricity and property taxes directly. Other small reforms may be made as well, possibly adding mailboxes to homes, possibly safes for packages. I will work with owners to see what their preference is. This could potentially be done with apartments as well. Similar to the process of bringing apartments under government ownership, mobile home parks will be purchased by the government.
Affordable Houses
I will work to create guidelines to ensure there are affordable homes. Guidelines will revolve around size of home, and following efficient construction methods. I will also work to lower property taxes.
References
1a Macrotrends. Apartment Investment And Management Profit Margin 2010-2024. Retrieved
from https://www.macrotrends.net/stocks/charts/AIV/apartment-investment-and-management/profit-margins
1b Otun Martins. Exploring Net Profit Margin in Commercial Real Estate. Retrieved from ttps://www.lev.co/blog/net-profit-margin
1c RealPageBlog. An Inside View on Real Estate Profit Margins. Retrieved from https://www.realpage.com/blog/an-inside-view-on-real-estate-profit-margins/
1d BiggerPockets. Apartment Complex Expenses. Retrieved from https://www.biggerpockets.com/forums/432/topics/457315-apartment-complex-expenses