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 back. 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 Zahs 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 Renbrger 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- STEPHEN HERSH 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 .. w ER' ME MOT OF Ei i rjoice! Your hold is getting shallower!'