University of Virginia Library

Landlords Charge Rising Costs, Taxes
Cause Increase In Housing Rents

By TIM WHEELER

Ed.

Photo by Bob Humphrey

An Example Of Off-grounds Housing

Realtors Contend That They Make Little Or No Profit

Rents are high in Charlottesville. The
validity of this claim is questioned by
neither hard-pressed students nor their
equally hard-pressed landlords.

As a matter of fact, the image of the
slumlord lining his pockets with his
tenant's money is false in at least one
example. Mrs. Charlotte Ramsey, a real
estate agent formerly connected with the
University's off-grounds housing program, said
that she no longer dealt with rentals, because
there "frankly isn't enough money in it."

The question remains: why are rents, as one
Legal Aid lawyer said, "approximately 10 per
cent higher" than other areas of comparable
population? Landlords and anyone with a
passing background in economics tell you it's a
sellers' market: when the supply is limited,
rents go up as demand creases.

The actual situation is more complex.
Building and managing apartments entails a
very complicated set of financial responsibilities
for landlords.

Property Costs

The first consideration in the problem of
high rents is the cost of land around
Charlottesville. James M. Marshall, one of the
more prominent landlords in dealings with
University students, offered the city's zoning
ordnance as a major factor in rising property
values.

According to Mr. Marshall, Charlottesville's
zoning ordnance, by restricting the areas for
apartment use, created a scarcity of land,
jacking up land prices. As an example, he
pointed out that two years ago, before zoning,
real estate went for about 65 ¢ per square foot.
Today, with zoning, the price is about $1.20
per square foot.

Another reason for high land prices, one
local lawyer suggested, is that, with the
increased desirability of living in Charlottesville,
several local speculators are snatching up land
here for "rich Yankee" interests.

Once the land is acquired, a building must be
constructed. By this time, the perspective
apartment owner must apply for the first, or
second mortgage on their properties, saying
that the cost of financing construction of
apartments is too high to be born by a single
landlord.

Rising Taxes

Interest rates on mortgages furnish another
indicator for high rents. Principal interest rates,
formerly about 6 per cent several years ago, are
now hovering around 9-10 per cent. Such an
increase, according to Mr. Marshall, makes a
difference of $10 to $15 in a month's rent.

After the apartments have been constructed,
operating expenses enter the picture. C. Stuart
Raynor, Jr., an associate of Alcova Realty,
outlined these major annual operating
expenses: property taxes, maintenance and
repair costs, and utilities.

The biggest of these expenses is property
taxes. "Ridiculously high" is how real estate
agent Richard DeButts described city taxes. Mr.
Marshall also noted taxes as a factor in
determination, pointing out that this is the first
year in the past four that city property taxes
have not risen.

The process by which the City of
Charlottesville assesses property taxes is very
complicated. To simplify it, after deductions
for interest rates, vacancy and credit losses,
property value depreciation, and operating
expenses, an apartment owner is taxed at the
rate of 30 per cent of the appraised value of the
and buildings.

Operating Expenditures

Next highest on the list of operating
expenses is utilities. Varying figures from 10-15
per cent of the total collected income (rents)
were offered as the cost of supplying utilities.
Under the heading of utilities come oil, gas, or
electric heat, electricity, and sewer operation.

Repairs and maintenance are another major
expense, occupying approximately 15 per cent
or less of Mr. Raynor's total collected income.
Repainting, done at from one to three year
intervals, is the biggest item in this category.
This figure will be higher varying with the
increasing age of the buildings being rented.
Major repairs, such as re-roofing, sewer and
plumbing repairs, by their extensive nature, are
another large-scale expense required every
several years.

Insurance Costs

Apartment owners incur a further expense if
they contract a management agency to manage
their apartments and collect income.

An added expense, required by finance
companies to protect their mortgages, is
payment on fire, theft, storm, and (in most
cases) extended liability insurance polices.
Estimates of this cost by landlords, depending
on the policy's coverage, range form $12-40 a
year per apartment.

As an illustration of what portion of rents
accounts for operating costs. These major
expenses, plus other minor operating costs,
accounts for 30-35 per cent of the collectible
income of Mr. Raynor's apartment projects.