What can be done to stop absentee landlords?

Yesterday, Councilman Paul Canepa suggested that absentee landlords are the driving force behind deteriorating neighborhood conditions. And at first glance, he makes a good point.

“When you have people who don’t care about neighborhoods, they’re renting to people and they don’t see what’s going on, it’s the main root of the problem,” said Canepa, quoted by News 10.

Canepa brings up a troubling issue: if landlords don’t live in the area, they have no incentive to keep up their property or evict troublesome tenants. As a result, the surrounding neighborhood falls into disrepair, dragging already low home values down even farther. This cycle plays out all over the city as absentee owners are only interested in making money off of distressed properties, not in helping the larger community. Unfortunately, this is a very difficult issue to address, and understanding how we got to this point is the first step in devising a strategy to heal our neighborhoods.

It appears that the proliferation of absentee landlords is caused by speculators and investors from out of town paying cash for cheap homes, hoping to make a few bucks once the market rebounds. While I don’t have the resources to take a look at the data for Stockton, research in nearby Oakland found that about 42% of foreclosed homes are purchased by investors. Of the top 30 investors, only 10 are from Oakland. In Stockton, there is no reason to think that our statistics are any different, and they may even be worse.
Offhand accounts from local individuals involved with real estate that I have spoken to estimate that about 60% to 70% of foreclosed homes sold at auction are purchased by out of town investors. Further, while real estate sales have been picking up

, that does not necessarily mean more people are buying and living in homes. Stocktonians still face difficulty getting a good price on a house despite low prices as many local buyers are routinely undercut by investors making cash offers. In many instances, sellers may prefer to sell to locals, but simply can’t turn down the larger cash offers made by speculators.


But if speculators are the problem, how can Stockton combat them with almost no spare resources? Aggressive code enforcement is probably the only way to get these landlords more engaged with their property and tenants. Cleveland has a huge problem with properties in disrepair owned by out-of-towners, as illustrated by this account from the New York Times. As you can see, Cleveland faces an uphill battle trying to hold absentee property owners accountable through code enforcement. In Stockton, a similar strategy would require more resources than the city has at the moment, especially when hundreds of homes are being picked up each month.

There are other avenues available to try and keep homes in the hands of locals, such as funds from the Neighborhood Stabilization Program (NSP). But when there are thousands of homes in foreclosure, NSP money can only make a few ripples in the flood of investors picking up cheap houses.

While speculators and investors contribute to the deterioration of neighborhoods, they are largely a symptom of a greater issue: foreclosures. Instead of fighting absentee landlords, it might make more sense to tackle foreclosures head on as these homes are the ones being exploited in the first place. If foreclosures can be stemmed, then presumably there would be fewer absentee landlords.

Of course, the big question is, how can we stop foreclosures? Some cities are considering bold ideas, and as ground zero for the mortgage meltdown, Stockton should also be considering all available options.

One tactic which is gaining steam is the use of eminent domain to rescue homes before they are foreclosed upon, keeping speculators out of the picture altogether. As I have explained before, eminent domain is being considered by some cities to seize underwater homes from banks to give them back to the homeowners at much more reasonable rates, preempting the foreclosure process (see my prior article detailing how this process would work). Since my earlier post, even more cities are considering this approach. Berkeley and Sacramento are considering it while San Bernardino looks like they may be the first city to delve into this new territory next year.

The proposal is not without its critics. Legislation has been proposed to disincentivize this use of eminent domain and lawsuits are sure to follow soon after the first home is seized from the banks. However, with a crisis this big, this is the kind of strategy that needs to be explored because federal and state policies have clearly failed to stabilize the housing market and keep people in their homes.

Is eminent domain the right course of action? I don’t know. I do know the foreclosure epidemic is a major reason why Stockton is bankrupt. Entitlements and spending get all of the attention, but the housing market (and by extension, excessive sprawl) deserves the lionshare of the blame. Resolving this crisis will take big thinking, at least San Bernardino and other cities are actively examining ways to address foreclosures. The same kind of outside-the-box thinking needs to happen in Stockton.

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Categories: Community Commentary

Author:David A. Garcia

David A. Garcia created SCL in March of 2012. Garcia is a Stockton native with a background in urban policy and planning, holding a Bachelor's Degree from UCLA as well as a Master's Degree in Public Policy from the Johns Hopkins Institute for Policy Studies. He currently serves as the Policy Director at the UC Berkeley Terner Center for Housing Innovation. David was also COO at Ten Space, a real estate development firm focused exclusively on Downtown Stockton, and continues to advise on their projects. Prior to that, he worked three years as a researcher/analyst for a Congressional research agency in Washington, DC. The views expressed on this site are entirely of the author's

One Comment on “What can be done to stop absentee landlords?”

  1. December 4, 2012 at 1:19 pm #

    What you say is true. The great majority of foreclosed homes are bought by outside/non-local investors.

    This raises two issues:

    1. That the foreclosed homes, due to the artificially low acquisition bases, re-enter the housing stock as rentals sometimes below equivalent multi-family rents. This practice renders multi-family type projects needed for downtown revitalization (say, densities of 50 to the acre) much more difficult to execute because the potential occupant pool finds lesser priced alternatives elsewhere and mostly in urban sprawl.

    2. Owner absenteeism is of course endemic to all types of properties and not necessarily tied to a history of foreclosure. Landlords who do not see themselves as providers of service, meaning offering the best value to their clients(occupants of their real estate), are in effect absentee landlords, regardless of whether they are local or not. It’s the frame of mind/ownership philosophy that becomes the biggest determinant of absenteeism.

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