Management chided b andlord
My lanird t!i, :imed Joe 0'-
Donnell. II di , operate out
of a fa:y atfi e im n Ann Ar-
bor sk i'p, r r reign over
enough apartm to keep him-
se. in a big tax bracket. In
fact, he ow's it one b ilding,
a hous near 'amnus in which
lIn himself ]ives along with a
few other enants and me.
Even 'ho1 J).l"e's housing
empire is :, .he's learned
uomett r 'ba>' the rental buai-
ness. lie's pored over landlord-
tenant laws, he's become con-
versant in the language of cash
income and outflow, and he's
familiar with the tax burdens
landlords have to bear and the
tax shelters they can use to pad
their ban accounts.
"The management companies
are in business to earn as much
money as they car.," he says.
"And they earn their money by
gistuging their tenants on rents."
The Michigan Daily
Edotd and managed by Students at the
University of Michigan
Friday, August 12, 1977
News Phone: 764-0552
Panama for Panamanians
or so the treaty's written
THE AGREEMENT REACHED yesterday by U.S. and
Panamanian negotiators turning full control of the
Panama Canal over to the Panamanians by 1999 is an
important acknowledgement by the U.S. that it must
give up control over the Canal Zone, one of our last
colonies (we still control Guam, Puerto Rico, the Virgin
Islands, Samoa, and the District of Columbia).
Unlike most other U.S. possessions, which were loot-
ed from the dying Spanish Empire at the end of the.
last century, the Canal Zone has the distinction of hav-
ing been looted directly from the natives. In 1903 the
U.S. was feeling its oats under Theodore Roosevelt, the
prevailing philosophy being that if we could run an
area of the world better thin the natives, it was al-
most our duty to take it over.
The feeling of being hoodwinked in the 1903 canal
treaty, which gave the U.S. control of a ten-mile wide
zone "in perpetuity," has never completely left the
Panamanians. Nor has the colonial feeling that sur-
rendering control of the Zone would be "giving away
the canal" left many Americans, notably California
governor Ronald Reagan and the 40,000 American resi-
dents of the Zone.
IN FACT, AMERICANS in the Canal Zone live an ex-
istence much like that of the colonial British in the
last years of that Empire - aloof, well-to-do, ethnocen-
tric, and rather isolated from the Panamanian inhabi-
tants of the isthmus.
.Is it any wonder the Spanish-speaking natives feel
oppressed when they can look up from their own squalor
to see the American "city on the hill"?
In an age of intercontinental missiles, the canal has
also became much less important as a military installa-
tion. Some of our larger carriers cannot even fit through
the sixty-year-old locks.
Panama will clearly benefit from yesterday's agree-
ment. Its sluggish economy needs the boost the canal
revenues can provide, and Panama's development as a
proud nation can only be helped by removing what Pana-
manian strongman Hector Torrijos called "the humilia-
tion of a foreign flag piercing its own heart."
Still, when the treaty faces a ratification fight in
the Senate there will be cries that the U.S. is "abandon-
ing its own citizens" or "giving up the canal."
We are not giving up the canal, We are giving it
The Daily Summer Staff:
News: Lori Carruthers, M. Eileen Daley, Ron DeKett, Lisa
Fisher, Denise Fox, Lani Jordan, Gregg Krupa, Stu
McConnell, Ken Parsigian, Keith Richburg, Sue War-
ner, Linda Willcox, Tim Yagle, Mike Yelinl, Barb
Editorial: Stu McConnell, Ken Parsigian, Jeff Ristine, Sue
Warner, Linda Willcox, Mike Yellin
Photo: Alan Bilinsky, Christina Schneider
Sports: Tom Cameron, Paul Campbell, Kathy Hennaghan,
GaryeKicinski, Scott Lewis, Don. McLaughlin, Dave1
IT'S THE PROFIT motive pickings. But to landlords, Joe
pure and simple that brings Ann points out, housing represents an
Arbor management companies opportunity to make a variety
into the market, according to of types of profits.
Joe. They're primarily interest- "First, there's the income ver-
ed in earning profits, and they sis outgo profit," he says. "If
consider providing good housing you take in more than you spend
a low priority. Consequently, in a month, you're making mon-
very few tenants in town get
good housing at fair prices.
"Charging too high rents is one
of the side effects of these peo-
ple having ta make money for
their investors," Joe notes.
"The housing in Ann Arbor- A a"
generally, if it's not too expen-
sive it's just too crummy. Land- By
lords don't need a good reputa-
tion in this town. They've got a
ready market. I suppose they ey.
feel that if people come to "Also, you get a lot of federal
school here, they knoWv what tax advantages as a business.
they're getting into in the hous- All your expenses in maintain-
ing market. So they don't think ing the place, including your
they have to feel bad about the property tax, your utility bills,
rents they charge," Joe says. and any repairs you make-any
He adds, "I've seen an awful expenses at all-can be written
lot of the housing in this town, off against the profits.
and most of it I wouldn't live in "AND," he continues, "there's
myself. I've done a lot of elec- a thing called depreciation,
tion politicking, so I've knocked which alows you to write off a
on a lot of doors-in town, and certain percentage of the total
walked into a lot of places. Be- property value every year
lug in the business myself, I against the profits, when you're
kind of have a weather eye for computing your income tax. De-
housing conditions; when I go preciation is based on the idea
into somebody's place, I look at that something you use in a
it, and I look at it pretty criti- business gets used up, gets worn
cally. I've seen people living in out over the years, and so it's1
places that couldn't possibly be worth less asa the years go on.
up to code-six foot ceilings, But in the housing business, de-
electrical wires strung along the because property is always wort
ground. There's an awful lot preciation is a kind of a myth
that landlords get away with. because property is always
There's an awful lot of incredi- worth more."
bly sub-standard housing. There Then there's what's called
are places-some of them right equity build-up, as the landlord
on my block-that should have uses a portion of the rent he
been bulldozed ten years ago. If collects to make his mortgage
people are going to live in these payments on his property.
plaes, it's only because they "Equity in a house is the
have to Some wou d chese o amount of the house that you
live in." own, as against the amount of
live in."the house that the bank owns,"
"I GUESS F do see how the Joe explains. "Over the years,
landlords get away with it," he as you pay your mortgage pay-
says. "Code enforcement is pret- ments, you own more and more
ty lax in Ann Arbor. The code of the house. So much each
enforcement department is very, mofth goes toward the principal,
very small, and very overwork- and that principal a m o u n t '
ed." mouts up each month and that's
For local tenants, the city's , called equity - you own that
housing situation spells slim much more of the house. The
equity is like an enforced sav-
ings program. Owning a house
and making principal payments
every month is money that I'm
going to see again. And that
comes into another tax advan-
tage: the interest that you pay
on a mortgage is also tax de-
ductible every year, because
it's a business expense."
Yet another source of income
to the Tandlord is the money he
can .make by selling a piece of
property after holding on to it
for a number of years. "It's a
good business to be in," Joe
says, "because at the end of
the line you've got the property
and you can always sell it at a
profit. The property in always
worth more down the road, It's
an almost automatic profit."
This type of profit is called a
capital gain. And Joe notes, ca-
pital gains are taxed at half
the rate of normal income. "One
think that works against you,"
he says, "is that when you sell
the property, all the amounts
you've deducted for depreciation
get tacked on to the sale price
to come up with the total capi-
tal gains, when you're figuring
how much tax you owe."
The overall problem in the lo-
cal houseing market, in Joe O'-
Donnell's view, is that while
tenants gre unable to exert
much poster as consumers, the
property management compan-
ies which lease most of the ren-
tal housing in town are in busi-
ness not to provide good value
for money, but to earn as much
money as they can. "There's no
human aspect taken into ac-
count." he says.
St/phen Hersh is community
educatton director for the MSA
ilousing Law Reform Project.L
rjoice! Your hold is getting shallower!'