GlobeSt.com: What can owners do moving forward to maximize value in their properties?

Harrington: An owner needs to implement a business plan to focus on those tenants who are currently below market rents. For many long-term owners, their long-term tenants are typically far below market rents. In order to maximize value in a rent-control environment, it is critical to implement vigilant management of a property. This means lawfully evicting tenants when rent is not paid on time or if there are blatant violations of the lease terms. Long-term owners have often given lower paying units a break on the date rent is paid or other lease violations. This tolerant approach has typically been enacted in order to keep unit turnover to a minimum, which is exactly what has led to tenants with rents significantly below today's market rates. Additionally, an owner must consistently increase rents by the maximum allowable increase on an annual basis. Finally, as units turn, owners should take the necessary steps to upgrade unit interiors that will allow them to capture a top of the market rent.

GlobeSt.com: Are you seeing owners move their capital out of California and if so, what are some of the most popular alternatives for real estate investments?

Harrington: Absolutely. We are seeing apartment owners relocate capital to less regulated states as well as other investment product types. Investors are inclined to move their money to urban markets with growing populations that are less likely to have rent controls in the near future. Phoenix and Las Vegas have been popular destinations lately and rightfully so, as these two metros have seen the highest rent growth in the country over the last 12 months. Additionally, markets such as Dallas and Atlanta are receiving continued interest due to the population growth and strong employment fundamentals over a sustained period of time. We are also seeing investors exchange into single tenant net-leased properties which offer owners less hands-on management and are not subject to the same state regulations.

GlobeSt.com: Does rent control cause more harm than good to the renters these laws are drafted to protect?

Harrington: Ultimately yes, because we frequently hear from landlords who were not regularly raising rents that they will now be increasing rents every year and for the maximum allowable amount. We also have heard that owners have less incentive to consider upgrades to their assets now that rents are restricted, and they have a reduced ability to recoup the costs of capital improvements.