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Tuesday, Oct. 30, 2007 | Some landlords with homes for rent in North County wasted no time last week raising rents to take advantage of burned-out homeowners who’d lost everything in the fire, providing a marked contrast to a region still marveling at its outpouring of sympathy.
Hundreds of families there find themselves with piles of rubble in their driveways, their homes in Rancho Bernardo, Poway and Rancho Santa Fe burned to the ground. While they rebuild, they need places to stay. Those with kids want to stay in the same school district. Those with decades of memories in the area are reluctant to leave.
This is the intersection of San Diego’s roiling housing market and the effects of last week’s devastating wildfires for inland North County. In specific: A home at 7362 Rancho Catalina Trail, in the Mirasol gated neighborhood of Santaluz, near Rancho Santa Fe and Fairbanks Ranch.
Ghassan Kanafani, the owner of the 5,300-square foot estate with a chef’s kitchen, is desperate. So desperate that the home is listed as a short sale, where a seller takes less than is owed on the mortgage just to get out from under the loan. Since June, the listing price has dropped from $1.68 million to $1.49 million. Kanafani has $1.6 million in loans against the home, according to county tax records.
To help recoup some costs in the meantime, the owner listed his home for rent two months ago, asking $8,000 a month, less than the costs of the mortgage and other expenses, according to Julie Ruyle, the seller’s agent from Coldwell Banker Residential.
But on Friday, while fires had been raging for six days, he changed the lease price to $10,500 a month, an increase of 31 percent.
The home is one of 20 of the 118 rental listings on the MLS in the communities of Poway, Rancho Bernardo, 4S Ranch, Santaluz and Rancho Peñasquitos that have raised their rents since the fire started.
On Thursday, 7425 Rancho Cabrillo’s monthly lease price rose from $6,900 to $8,900. On the same day, 14664 Via Fiesta’s rose from $3,000 to $4,500. At 14360 Ciera, the owner raised the lease price from $12,000 a month to a $20-$25,000 range on Wednesday.
Back on Rancho Catalina Trail, Ruyle said the price increase had to happen anyway.
“Really, it wasn’t even in regards to the fire,” she said. “We had to raise the price to cover more of his expenses. It’s just weird how it happened right after the fires that he had to raise his price.”
But without the fires, she admitted the homeowner would have given up completely. The disaster opened a window for a last-ditch attempt to hold on to the home, to cover some of the costs of owning it.
With 1,588 homes destroyed by fires countywide by Sunday, and another 320 damaged, what had been a hibernating single-family home rental market in some of these neighborhoods is waking up — quickly.
“It’s not that we’re trying to be greedy,” she said. “If we don’t have it at this price, his costs won’t be covered.”
Such attempts to take advantage of displaced families’ urgent need for housing infuriate Libby Rogers, a Realtor with RB Haley Inc., who’s been working commission-free to help place tenants in temporary housing before she even unpacked her own bags from being evacuated last week.
“Everybody’s immediate concern is ‘Get a roof over my head,’” she said.
And of the listings she’s seen where rents are up, and up dramatically: “I think that’s horrible. Disgusting, actually,” she said. “I see a huge problem with it. Some people are trying to gouge. It’s just a shame. They’re saying, ‘Oh, the insurance company will pay.’”
But with all of the increased demand, rents will rise naturally in the area, said Bob Maes, a Realtor who remembers the impact of the Cedar and Paradise fires on the housing market in 2003.
“We pretty much had a sales boom,” he said. “Everything rented. The people that had the money and could afford it went and bought another house.”
Maes said he’s had a lot of interest this week in a rental listing in Rancho Santa Fe that has been tenantless for four months, 16779 Avenido Arroyo Pasajero. On Friday, the owner raised the lease price from $9,500 monthly to $10,000, and there’s been “huge interest.” But he claimed the increase is not just to take advantage of a warming market; it’s to cover pool cleaning and gardening services the owner had previously excluded from the rent.
“There’s always been a better house for $10,000, and now there isn’t,” he said. “I argued with the owner — I didn’t think it was fair to just all of a sudden pop the rate up $500 last week. But if we’re going to cover the services, it pretty much breaks even.”
Another of Maes’ listings is on Zumaque Street in Rancho Santa Fe, where seven homes burned down last week. The home is listed for sale in the $4 million range.
After losing their own home, the seller’s neighbors asked to rent his. Now, the home’s listed for a monthly lease amount of $24,500.
“That’s what his carrying costs are right now,” Maes said.
Explanations abound from some of the owners and sellers’ agents representing the properties that have raised prices. Some say they raised prices to be able to offer the homes full of furniture for tenants who lost everything.
Others had listed the homes for rent months ago while they tried to sell. Finding a dry tenant well, they lowered the lease amount. The fires — and their accompanying increased demand — are a chance to bring lease prices back up to a point where they’ll cover carrying costs, they say.
But morally, it’s not as simple as transferring the desperation of exploding mortgage payments and a sluggish sales environment to the backs of the people who lost their homes, critics of the price hikes say.
Steven Kelman of the Tenants Legal Center of San Diego said California’s penal code covers price gouging only in very specific applications when it comes to renting a home; there’s several ways around the offense. But that doesn’t excuse it, he said.
“Certainly, it’s morally offensive,” Kelman said. “I think certainly that that question is raised when the landlord takes an unfair advantage of a tragedy like a firestorm. You have to look at that from all angles. … It’s certainly not community-minded or community-spirited.”
So agreed Dave Benavides, broker and owner of Granite Bridge Homes, who compiled a list of available rental homes for displaced homeowners.
“It’s unfortunate for the people who don’t have insurance to cover the rent, and also unfortunate for the insurance companies,” Benavides said. “But I can’t tell you that real estate isn’t about supply and demand. … Who can blame them for trying?”
But Rogers, the Realtor who’s been searching for houses for her displaced friends and neighbors, said she knew someone who received a cold call from a real estate company last week, claiming they’d received her number from a friend.
It became apparent they’d found her by searching the list of homes that had burned. They were targeting her to become the tenant of a sparkling home in nearby 4S Ranch. When she asked how much, they said $10,000 a month.
“She said, ‘I just hung up, Libby,’” Rogers recounted. “And I said, ‘Those people deserved to be hung up on.’”
It’s a reminder of the desperation — and motivations — of some of the people on the other end of these transactions, she said.
“What I have to believe is that there’s mostly good people out there,” Rogers said. “But there’s going to be some out there that are not so good.”
Please contact Kelly Bennett directly with your thoughts, ideas, personal stories or tips. Or send a letter to the editor.