Moratorium on Pandemic Related Evictions Made PermanentJune 10, 2020
The temporary moratorium on the eviction of tenants in San Francisco for the non-payment of rent from April through July, if formally documented as being due to the COVID-19 pandemic, has effectively been made permanent by San Francisco’s Board of Supervisors.
While the ordinance does not forgive any past due rents, nor prohibit a landlord from seeking to collect once the moratorium period has ended, it does remove the threat of eviction due to unpaid rents accumulated during the pandemic and prohibits the charging of any associated late fees and/or interest.
At the same time, the legislation establishes the framework for a relief fund to compensate (qualified) landlords who are unable to collect.
Comments from Plugged-In Readers
If landlords will be made whole by the city from the relief fund, this seems like an even-handed way to approach the pandemic and the emergency at hand. We don’t want masses of people evicted, but its unfair to expect a subset of the economy to provide free services during shelter-in-place.
[But] it’s not clear from the link how the relief fund works.
“(e) The Board of Supervisors intends to create a COVID-19 Rent Resolution and Relief Fund by separate legislation to provide support to eligible landlords whose tenants are unable to pay rent due to the financial impacts of the COVID-19.” So – they _intend_ to create a relief fund.
Gets tricky quickly here – if the government will come in and backstop anyone who can provide a written letter stating Covid has affected their income, that will quickly give many marginal cases a reason to stop paying rent.
Why do I suspect a landlord will have to demonstrate ‘financial hardship’ and be subject a purity test by the rent board to receive compensation? I can only imagine how good this will look to progressive optics – the city paying landlords.
For those optics the best path would be a specific rent-payment voucher issued to individual tenants, which could be provided to landlords and redeemed by landlords for cash, but would nonetheless be issued to tenants. Then supes could claim progressive victory (helping the little man) and avoid looking like they paying evil landlords.
This is a good thing for them to explore. When Prop 13 no longer covers commercial properties, rent control will need to be modified to compensate. Direct payments might be able to accomplish the same goal as rent control but with less market distortion.
Since when is there rent control on commercial property?.
The building is a commercial property. The apartments within it are rent controlled.
Rent control is a response to Prop 13 and needs to be adjusted accordingly. If the property taxes on the building are raised and the owner can’t pass it through, the owner will need direct payments. Alternately, increased costs could be passed through and long term tenants would receive rent relief in lieu of rent control.
I’m pretty sure the ballot measure in November 2020 specifically exempts residential, including multi family. “Commercial” would encompass retail and office. Also, owners with less than 50 employees would be exempt.
Would be a good SS article though.
If my memory is correct I remember voting on rent control in SF (it lost a the polls) well before Prop 13 was put on the ballot. I remember the real estate industry here went nuts sending out mailer after mailer telling us if we voted for rent control SF would turn into the South Bronx. It was enacted legislatively by the BOS in 1979 but there were several years of build up even before it went on the ballot. What got it on the ballot was rent increases in the 100’s of % that was being acutely felt by older renters. After it failed at the ballot box the complaints to the BOS of huge rent increases continued leading to passage of the rent control ordinance.
Rent control was passed by a ballot initiative, not the BOS. It authorized the rent control ordinance to be drafted.
The history was that the landlords asked their tenants to vote for prop 13 in 1978, and told their tenants that the rent increases were almost solely due to the property tax increases and that if prop 13 passed, rent increases would be limited to cost of living increases.
Prop 13 passed and then rents were again raised. The tenants, having felt they had been duped by empty promises, passed rent control in 1979 to put into law the promises the landlords themselves had made to get the tenants to support prop 13, which the tenants did.
tipster re: Rent Control – Maybe you are confusing the 1994 ballot initiative which barely passed that brought the smaller 4 unit or less buildings into the 1979 rent control ordinance?
In 1979 Prop R failed at the ballot box. Dianne Feinstein signed the BOS passed legislation (I believe it was authored by John Molinari) that was SF’s first rent control ordinance.
“Weeks before the 1979 vote on Prop R, the San Francisco Board of Supervisors, along with Mayor Feinstein, passed a weaker, 60-day rent freeze, which allowed them to placate some of the concerns about out-of-control rents. Although this doomed Prop R, San Francisco now had rent control.”
The other elephant in the room in the 1970’s was the condo conversion craze of flats and apartments. Suddenly the available stock of rental housing was drastically reduced.
Landlords have made a ton of extra money due to city policies (recruiting the tech industry but not allowing housing to be built), so I don’t feel bad if this city policy means they make less. Being a landlord is a business, and with that comes risks.
Right, and part of the business is being able to evict tenants who don’t pay, an ability being taken away by the supervisors.
The risk of political changes to your ability to do that when your industry acts so much like bloodthirsty leeches that they inspire the populus to elect a board of sups that will do away with your abilities to evict people is also part of the business.
Legislation risk is a thing, I’ll give you that. But broadly painting landlords as ‘Bloodthirsty Leeches’ only makes sense if you are also willing to call the guy who runs the sandwich shop the same thing for charging a price that meets the market.
Except Prop 13 was written by a landlord’s lobbying group.
Charging a market price is one thing, regulatory capture is much shadier.
I think it’s difficult to argue that California’s proposition system represents anything like “regulatory capture.” A majority of voters, -an exercise of direct democracy- passed the original Proposition 13. Voters wanted to have their property taxes be treated that way.
Regulatory capture is what occurs when an industry winds up controlling the regulators of itself. This has happen in banking, and energy services, either through monetary influence or the convergence of the populations of the regulators and the regulated. There’s no reason some [colorful noun] from Goldman Sachs has to run Treasury, but it sure seems to work out that way.
So again, landlords are neither bloodthirsty leeches, nor charities. If the government wants to remove private property rights, there should be compensation. We can call it “temporary eminent domain,” or a “supportive housing measure” but, as others have noted, unless landlords get compensated, there’s little to no chance that a court would allow such a negation of property rights.
LOL – ‘Bloodthirstyleeches’ …. You might want to comment on the inept city gov’t, corrupt building and planning and the zoning that pretty much precludes getting almost anything done. not enough gets built because every single project gets politicized to death. Demand drives up prices. most landlords (like me) are small time operators paying bills month to month like everyone else. Property ownership and capital markets meeting incompetent city management are 90% of the problem here.
These tenants aren’t deadbeats. Their ability to work and have an income is also being taken away by the same supervisors as well as other branches of government.
Great, then we agree that the supervisors should come up with a way to help tenants with their financial obligations, such as a functional rent relief fund. Because the landlords are neither deadbeats nor charities.
It’s a Catch 22 situation isn’t it. I think It comes down to, who is in a better position to weather the storm, until things get sorted out.
I think you’re exactly right, but how to come up with a law/regulation/program – all of which by nature deal in generalities – that targets a class of people.
And we have the situation of how people come to be “in need”: take two people of the same income, one who saves and one who spends a lot on having ‘ubereats’ deliver avocado toast; guess who’s going to be most “in need” (and then decide if they’re more “deserving”). I’m not of course suggesting that everyone who ran out of money did so by choice, but a foregiveness program is going to turn up a lot of people who claim to have given everything to their sick Aunt Em.
It’s not a catch 22 because a bank can still foreclose on a borrower and take away a property owner’s value under current emergency rules.
Asking landlords to “weather the financial storm” isn’t any more fair than asking Grocery Outlet to let people grab food off the shelf and walk out without paying (“I mean I lost my job and Grocery Outlet can weather the storm.”)
Should restaurants be serving free food? Should the gas be free at the pumps?
If the city thinks those things should be available to people in need, the city should pay for them.
There is no one size fits all answer here. If for instance, you own three flats and one of your tenants stops paying rent due to CV19 unemployment, then yes, that could be very unfair to ask the owner to weather the storm. If though, you own a 20 unit apartment building and a few tenants have stopped paying, you still should be able to pay the mortgage, if your not blowing all your profits on yourself. The same advice in ST’s comment below, regarding tenants, is good advice for owners too – have some reserve, because well, stuff happens.
I don’t mean to be uncaring, but reading some of the sob stories in the ordinance link, makes me wonder why people investing in real estate, feel entitled to not have uncertainties. What about the moms and pops who invested in PG&E stock – almost worthless and not paying dividends any more – should the Supervisors step in and make them whole again too? After all, they didn’t cause the fires, just as real estate investors didn’t cause the pandemic.
You’re in the “It’s okay to steal food from Grocery Outlet because they are a big company, and I’m hungry and they don’t deserver their profits” camp.
I’m in the, “Work hard and save your money and take risk and expect the government not to take away your stuff” camp.
Most of San Francisco is more like you, so you’ve got me there.
Won’t someone think of the corporate shareholders???
Lenders (as well as credit card companies and utilities) have been accommodating to their customers who cannot pay a portion or all of their mortgages or bills. The company that holds my mortgage (as well as PG&E, call carriers) has sent out numerous emails detailing the steps a property owner/customer can take if their situation is dire. Also, in the long run, can’t unpaid rent be deducted as a loss on a business tax form? I know none of this is going to suit everyone – it’s a new uncharted world for all of us.
There is a 0% chance this survives legal challenges. And the taxpayers will pay the landlords’ attorney fees in losing. But the supervisors will get to brag about how moral they are, with other people’s money. Interesting part will be whether it ever goes into effect at all or if a TRO shuts it down immediately.
How do you figure that?
Are the city taxes on property still due?
If the tenants don’t have to pay rent, let’s not pay taxes, or water which has gone up much, much faster than inflation.
There is no “relief fund.” It is predicated on a proposed tax increase ballot in November 2020 to double the transfer tax of all commercial and residential real estate properties $10M+ to pass to create a “rent relief fund.” I have lost track of how many tax increases are on the ballot this November. So in essence, no relief fund for rent payments to landlords unless you tax more business transactions. In other words, you want to save your sister from dying, kill your brother. Little does anyone know, both your sister and your brother will die anyway and you have just gone through the needless Sophie’s Choice exercise.
To mitigate the effects of this legislation, there is nothing to preclude landlords from filing a small claims actions claiming breach of contract for rental amounts owed by tenants. Then go through the collection agencies to collect on the debt owed. Landlords may recover a percentage of the total amount owed. The bigger picture is a public records of debts owed. Currently, CA does not allow the records/names of tenants who are in eviction to be made public. Arguably this allows bad apple tenants to go from one landlord to another landlord playing the non-payment of rent game. Some landlords are prohibited from giving negative references because the stipulated judgment to move out includes a gag order. Filing a small claims action does not offer the same anonymity protections to the tenants (or landlords.)
Finally, as many have already known, if you have a vacant small building currently due to tenants leaving from the pandemic, it may be a good time to assess whether selling and cashing out is suitable for your long term goals in the next 10, 15, 20 yrs. i.e. TICs, condo conversions, outright sale of the building. Decide for yourself whether this city still aligns with your business and personal values, quality of life, etc.
An interesting side note is SF entering into a partial settlement from a lawsuit to refund Square $7M due to the city’s miscategorizing Square as a financial services firm, as opposed to an information firm. I suspect this permanent eviction ordinance will be tied up in litigation as well.
“There is no ‘relief fund.’ It is predicated on a proposed tax increase ballot in November 2020 to double the transfer tax of all commercial and residential real estate properties $10M+ to pass to create a ‘rent relief fund.’”
So, ironically, the landlords will be funding their own relief fund by reimbursing themselves for their tenants debts using their own money, while the tenants get off scott-free. This is somehow supposed to make everything “fair”. Genius.
moral hazard. whats to stop people from purposely getting infected to evade an eviction?
I’m greatly concerned about a moral philosophy that assumes the financially vulnerable would intentionally contract a highly contagious and deadly disease to “stick it to landlords”. Maybe the financially vulnerable are simply financially vulnerable and not actually parasitic on the wealth you clearly worked so hard for?
this could happen on the margins. i wasnt asserting a lot of people would do this. But desperation makes people do desperate things
Who decides if the affected tenant is actually ‘sick’? Seems the reqs for qualification have been left intentionally vague – almost as vague as the Rent Relief Fund funding.
I see a massive incentive to fib.
And of course, it is highly illegal. But won’t be anyone around but the Hedge funds to pick up the pieces when it all comes due.
It’s completely unnecessary to ‘become sick’ or ‘catch Covid’ to enjoy the legal protections being offered.
All one needs is a letter from an employer stating that a reason for a furlough etc. is Covid.
Nobody is getting sick on purpose.
Easy, only rent to people with AT LEAST 3x of income, and $80K sitting in bank account…If you rent to someone who does not have any savings, you are looking for trouble, pandemic or not….
Life is too short to deal with tenants who are always on the lookout for ways to not pay….
So if I’m a housing provider in San Francisco and my tenants don’t pay their rent due to [the pandemic] and the city is giving my tenant eviction protection for non payment of rent, then I should be able to forward my mortgage and property tax bills to the city treasure for payment. I will tell my lender know that the city is now my bill/rent collector and I’m sorry I can’t pay my property tax and mortgage payment this month because my bill collector has cut off my income. I will direct my lender seek payment for my mortgage and property tax from the city treasure because the city now controls my property.
Let’s see how that flys with my lender and the tax collector. I’m sure they will be totally understanding about my situation….y’a think.
**Correction I will tell my lender now that the city is my bill/rent collector and I’m sorry I can’t pay my property tax and mortgage payment this month because my bill collector has cut off my income.
what this law does is treat rent debt accrued during and because of the pandemic the same as any other unsecured debt. IE you can sue the person garnish wages after judgement to recover etc. You just cannot evict them. I would expect the recovery rate will be near 100%. I would be glad to buy the debt at .80 on the dollar.
True. And currently eviction proceedings are not public in most cases since the settle – future landlords cannot see that the tenant was evicted for nonpayment. But debt collection actions are public, so future landlords will be able to search for and discovery the nonpayment history.
I will happily sell you my tenant debt at 80¢ on the dollar. You’ll lose about 75% of your investment, but my income would rise significantly.
You very much overestimate the eased expense of collecting old rent debt. In particular, you have to get a judge to go along with your wage garnishment, etc., and I think that’ll be nearly impossible in SF. These poor tenants are struggling, after all, and you’re the big bad debt collector who seems to have lots of money and just wants more.
You might have a good business plan. Since going through the hassle of small claims court, wage garnishment, tracking down tenants who move, etc. I and many would gladly sell you any of our unpaid rent for 80 cents on the dollar (heck, I’ll do it for 70%). If you have enough who sell it to you, via economies of scale (scheduling dozens of court cases on the same day, having one good skip tracer, etc) you might make a profit! Please provide your contact info to everyone here. Your new business will be up and running the next day1
Govt is society’s way of making sure contractual laws are enforced. If Govt negates enforcement of current law then anarchy will follow.
Given the sentiment behind every post above, it’s time for a considered, well thought-out opinion from someone not arguing in their own pecuniary interest. From Landlords Shouldn’t Get Away Without a Hit This Time:
Emphasis mine. Go read the whole thing.
Obviously I am not a Mom and Pop, penny-ante landlord, but it seems to me that losses due to unpaid rent are ultimately deductible against taxes just like any other business expense, so all the bellyaching, moaning and fulminating in this thread mystifies me.
Perhaps you are mystified by the concerns of “penny-ante landlords” because you misunderstand the tax implications of unpaid rent. Losses are not deducted against taxes but against income. And if income is reduced such that a loss is incurred, then for many “penny-ante landlords”, the loss is not deductible whatsoever (subject to AGI limitations).
I concede that losses get deducted against income, I mistyped. In addition to not being a landlord I am not a tax attorney, but my understanding is that sure, in some circumstances the landlord won’t be able to deduct the resulting loss at all, but in other circumstances, the landlord will not only be able to deduct the loss, but can carry that loss forward in future years and reduce effective taxable income from other sources (yes, subject to AGI limitations). It depends on the circumstances of the landlord’s business.
And of course the total liability of any unpaid rent which accumulates during the moratorium period is still the responsibility of the tenant regardless of whether or not they avoid eviction, and that’s not deductible for the tenant in any circumstance.
The rationale for not allowing tenants to deduct rent is that a tenant receives something of value for the rent paid. Just as payments for groceries, utilities, etc. are not deductible to individual taxpayers.
Of course, we still allow some mortgage interest to be deducted by individual taxpayers, which IMO is one of the many distortions in the tax code that should be eliminated.
We’re through the looking glass here, pointing to an opinion piece that posits (sub-headline) “Real estate is as good an investment as stocks and with way less risk”. That real estate frequently proves to be a bad investment is essentially the reason-for-being for this web site right? Here is the National Bureau of Economic Research paper cited in the opinion piece.
And Brahma, you didn’t mis-type. You don’t understand how taxes work.
A truly wonderful part about our constitution is the fourteenth amendment. No matter how you rationalize the matter is forcing one class of citizen into business losses a fair and equal protection under the law? It’s might seem fair when you’re not the one on the receiving end.
When property rights are outlawed, only outlaws will own property.
UPDATE: Moratorium on Pandemic Related Evictions Extended
UPDATE: Industry Group Appeals Tenant Protection Ordinance Ruling
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