Paladin U.S. Research – California Residential Rental Regulations
Regulations affecting residential rental properties in California are varied and complex. Several current and proposed statewide and local ordinances will affect Paladin’s apartment investments in Southern California and, like the regulations themselves, the results will be varied and complex. On the one hand, Paladin believes these regulatory requirements and risks create additional stress on smaller “mom and pop” owners of apartments who may be ill-prepared to deal with these rules. As a result, many of these owners may decide to exit the market, providing investment opportunities for sophisticated investors who have more expertise underwriting and navigating such regulatory complexities. On the other hand, such regulations may reduce the potential returns from existing investments. Paladin believes that careful underwriting of the risks, along with the solid execution of value-added business plans to mitigate the effects, will continue to generate attractive risk-adjusted returns for our investors. Additionally, asset pricing will eventually adjust to reflect the realities and limitations of any such regulations.