I accepted my friend’s invitation to a sunset kayak paddle and then dinner. Most of my kayaking is open ocean, and often for several days. You must take an array of safety equipment on a trip like that.  You take a head lamp, flares, first aid kit, warm clothing, and more, all snug and safe in dry bags.

I wouldn’t need all that for this trip. We’d only be on the water for two hours and never more than 500 feet from shore. I brought my personal floatation device and pump, nothing else.

As I got into my boat, I realized I had not brought a dry bag to hold wallet and keys. I quickly decided to tuck my keys and wallet in my loose-fitting pocketless kayaking pants. I didn’t want to inconvenience my friend and make him wait while I came up with a dry bag.

As we were landing for the celebratory post sunset dinner, an unexpected wave hit me just as I was exiting the kayak. Unbeknownst to me, my wallet had escaped my kayak pants and went swimming in the bay. Several minutes later, I realized in the dark, without a head lamp, that my wallet and I were separated.

I succeeded in my goals to enjoy a sunset paddle and dinner with my buddy and to not inconvenience my friend. Because of the way I did it, I lost about $1000 of cash and gift cards. I also lost several hours to replace credit cards, etc. Those were unintended consequences.

Unintended consequences, but not an un-imaginable outcome. The ocean has dunked me before. Exits are often wetter than the kayaker likes. There had been several ways mitigate the risk.

You and I have seen this movie before. We’ve made life choices to obtain something or to dodge something else, only to discover that the outcome was different from what we expected.

Hopefully we are wiser now than we used to be. We usually consider potential outcomes. Then we frequently try to mitigate or minimize the bad outcomes while increasing the chance of the favorable outcomes.

Sounds easy doesn’t it?

But it isn’t, is it?

I made my decision quickly. I didn’t want to inconvenience my friend. I didn’t correctly weight the likelihood and cost of bad outcomes. It seemed like a good idea at the time. Many government policies are like that.

State and local government policies affect the choices developers make. Over the last generation California built half as many apartments and condos as our population needed. In November 2018 Californians voted down rent control 58 to 42. On election night the governor-elect promised to sign a “rent stabilization” bill when the legislature delivered one.

Now California has statewide rent control. Effective January 2020 rents will be limited to 5% plus inflation each year for the next 10 years. Many politicians say their goal is to help renters.

The 1000 rental owners that I’ve talked to in the last six months foresee different results. Several owners who haven’t raised the rent for years will be raising the rents the maximum allowable rate for the next 10 years. Scores of property entrepreneurs won’t be building new rentals in California. They will shift building to other states. Our housing stock will gradually degrade. This law doesn’t offer incentives for new housing.

Previous California law had guaranteed that apartments built after 1995 would never be subject to rent control. The new law shreds that promise. A third of those “forever exempt” apartments will come under rent control. Do you remember Peanuts cartoon of Lucy offering to hold the football for Charley Brown?

For the last 30 years one of the wisest strategies for rental owners in California was simple. Buy a neglected property. Renovate it a little or a lot and then charge fair market rents based on its improved condition. That will change.

The new law includes some exemptions for “vacancy decontrol.” In tightly regulated conditions, a landlady can still empty a unit, do substantial renovations, and then raise the rents. Upgrades that need more than 30 days and requiring building permits can move rents to market. But these extra requirements may increase the cost $5,000 -$20,000 per unit. Moderate improvements and moderate increases will no longer be a sensible option.

The new law requires bigger and more costly improvements. With more regulation, the risk of delays in the building inspection process is higher. Fewer investors will attempt to upgrade property. The new law may slash upgrading units by more than half. That means fewer renters will have the option of moving into upgraded apartments.

After I got home from kayaking and after I had canceled all the credit cards, the police called. A 12-year girl had found and turned in the wallet. I was able to retrieve the cash, drivers’ license and now canceled credit cards. So, the result of my quick decision wasn’t as bad as it might have been.

I hope and pray is that we will become wiser about anticipating likely consequences. I hope and pray that we will do so in our private lives and in our communal political lives. Too often compromising with the folks on the other side of the political aisle is seen as treason instead of increasing the chance of lasting improvement.

Thinking well is hard. There are always unintended consequences. Often those consequences could have been imagined, and often the risk could have been reduced.

What do you think? How can we do better?


Terry Moore, CCIM, is the author of Building Legacy Wealth: How to Build Wealth and Live a Life Worth Imitating. Read his “Welcome to My Blog.