A whole lot of the housing stock in silicon valley (and it seems most of what is owned by this type of landlord) is essentially teardowns; stuff built more than 50 years ago to working-class standards. the structure itself represents the right to 'remodel' into something someone willing to pay a million bucks for a house might actually want to live in; and by 'remodel' I mean to leave the 'minimum legal structure' standing (I think paul graham made some joke about it on twitter some time ago, with a photo of a remodel that had one interior wall standing and the rest demolished. The joke was thought to be problematic, if I remember, for some reason I don't remember.)
I mean, sure, if the landlord wants to keep renting out a shack built in the '60s, the wrong tenant can make that quite expensive, but it would be difficult for the tenant to devalue the market value of the asset by 100K.
I suppose that might be another part of it; there certainly is some demand for these older units at market rates, but certainly for people willing to pay full freight, the nicer units go first.
A landlord is renting out a long lived expensive asset. Small time landlords I've talked to all mention that you make money on tenants that pay their rent and don't cause issues. Bad tenants easily cost you more than it would to just leave the unit empty. A tenet can easily do $100k worth of damage in less than a year.