I hate to say I told you so… but… I told you so.
This headline popped up in my news feed dashboard:
Now, I’m sure the storage industry will fight this, and they might even succeed—for now.
But make no mistake: this is probably just the beginning of a wave of states addressing this issue, thanks to the growing number of consumer complaints landing on the desks of state Attorneys General.
And don’t assume this will only happen in “blue” states.
Sure, those are likely to lead the charge, but once the door opens, the trend will spread. I’ve developed in Florida—a state redder than a fire truck—and they’ve never met a tree they didn’t love. In some counties, you can barely scratch the dirt without a tree survey, mitigation plan, and hefty fees. So, don’t underestimate how regulation can creep in—no matter the state’s politics.
Now look—I’m not saying dynamic pricing is wrong. (Okay, maybe I’ve said that before.) What I am saying is this: as an industry, we’ve abused it.
Let me ask you: What other monthly subscription do you pay that is based on a dynamic pricing model?
Because that’s exactly what self-storage is—a subscription model in disguise.
We’ve done this before. We enjoy the freedom of an unregulated industry… until we push too far and regulations show up.
Let me give you a few examples:
Late Fees
When I first got into the storage business, there was no real definition of a “late fee.” I could own 20 facilities in the same state and charge 20 different late fees, lien fees, or any other fee I dreamed up.
I once bought a facility that had daily late fees kicking in after the 3rd of the month. The “fee income” was impressive. I let it ride.
Not long after, the state came in—after complaints—and defined what a late fee is, how much it could be, and when it could be applied.
Why?
Because the industry abused it, fees like the ones I allowed were seen as usury by the courts. So now, nearly every state defines and limits late fees.
Overbuilding
I cringe when I look back at episodes I wrote 7 or 8 years ago. I was talking about “soft landings,” and how, with all the data, we’d never have to allow overbuilding to happen again.
I actually said that. A lot.
I believed that with so much data at our fingertips, there was no reason to build more space in trade areas already at equilibrium. Why would we ever do that?
Boy, was I wrong.
I didn’t factor in human greed.
With the explosion of storage funds and large blind-pool syndications that had to deploy capital fast—and managers who made fees just for doing deals—overbuilding became someone else’s problem down the road.
I’ve spoken to fund managers planning to build in markets where I already operate, where they knew supply was high. They told me so themselves they knew the market was oversupplied, but they were going to do the project anyway.
So what happened?
You’ve seen the headlines:
“Municipality Places Moratorium on Self-Storage Projects.”
Final Thoughts and Further Predictions
So, it is not a surprise, at least to me, that states are starting to address these tremendous price hikes many customers are complaining about to their Attorney general’s office.
In five years, I predict virtually every state will have regulations on this issue, just like we now have on late fees.
It would also not surprise me if, slowly, self-storage went from being classified as “warehousing,” where our tenants are now classified as “customers,” and what is stored in the units as “chattel” we can auction in the event of non-payment; to owners being classified as
Landlords, customers as tenants, and they rent space like apartment tenants do with all the rights lease right grant people.
The status as tenants would certainly reduce Owner’s rights, burden owners, and change the industry in a big way.
As industries evolve, consumer rights generally follow.
So, where does this leave us?
Unless we get a handle on how we utilize dynamic pricing as an industry, and I have nothing from my history in this business to indicate we will, regulations on rent increases are coming state by state.
We do just fine with late fee regulations and moratoriums on self-storage in certain towns and cities. So perhaps regulations on rent increases will be the same.
I will now get off my soap box and quit preaching.
However, I am human like everyone else. And what person doesn’t just love to say, “I told you so?”
