The emergency bill to extend eviction protections for residential tenants affected by COVID-19 throughout California, which were slated to expire on January 31, 2021, has been inked by Governor Newsom.
The amended COVID-19 Tenant Relief Act (SB-91) prohibits a landlord from evicting a residential tenant for non-payment of rent through the end of June, 2021, if said tenant has provided an official declaration of COVID-19 financial distress and continues to pay at least 25 percent of their contractual rent, either monthly or in a lump sum.
Once again, the bill does not forgive any past due rents, nor does it prohibit a landlord from seeking to collect any rental debt accumulated between April 1, 2020, and June 31, 2021, once the protections have expired (with a one month grace period through the end of July), but it does remove the threat of eviction due to said rental debt going forward and prohibits any landlords, tenant screening company or other entity from using a COVID-19 related rental debt as a negative factor “for the purpose of evaluating a prospective housing application or as the basis for refusing to rent a dwelling unit to an otherwise qualified prospective tenant.”
The bill also extends the legal “Pay or Quit” period for nonpayment of rent from 3 to 15 days and protects tenants from being evicted for a claimed “just cause” if the landlord is shown to be surreptitiously attempting to evicting a tenant for a qualified nonpayment of rent.
In addition, the bill establishes a roughly $1.5 billion Rental Assistance Program which will provide direct rental assistance to low-income households and from which landlords will be able to recover up to 80 percent of a tenant’s unpaid rental debt accumulated between April 1, 2020, and June 31, 2021, “conditioned upon the landlord’s agreement to forgive the remaining rental debt owed.” And if a landlord is unwilling to forgive any portion of a tenant’s past due rent, which can not be sold or assigned to a third-party for collection, tenants can apply for a relief grant valued at 25 percent of their qualified rental debt to offset any collections.
As a landlord myself, I think it is an exceptionally generous bill to the landlord group. I don’t have any unpaid rent, but if I do, I would be very happy with the 80%.
This is likely the only time, that I can recall, that state/local government is trying to be fair with landlords. Landlords are usually viewed as criminals in CA, even thought they are providing a service for a profit, much like Safeway and Shell.
I agree that the first time local governments have thought about landlords from the day pandemic started. But this blanket ban is still not fair for landlords, I have a tenant who didn’t pay a single penny from the day he moved in Jan 2020 till the date. He is a criminal and the district has issued a warrant against him and we still can not evict him though his non payment of rent is not Covid related.
There are always bad actors but we should legislate and act quickly to cover the majority of cases, and then refine over time, rather than get stuck seeking perfection and fail to act because of the exceptions that might arise.
I think this is all going to end poorly. Assuming an average of $1,500/month and a period of 18 months about $27,000 after taxes or approx $40k before. I can see how many people would simply decide to walk away with ‘eviction’ on their record for such a cash hoard. The further they lengthen the forbearance period, worse it is going to be for everyone.
But the legislation lets the non paying renters off the hook if the landlord concedes to 80% of the payment owed. Most will concede I think.
It does create a moral hazard, people will argue. How about the people who fought to stay paid up? “What if everyone starts acting like they’re Goldman Sachs and will get bailed out when things go wrong?”
You, like, see what I did there, right?
Government can bail itself out, right? At this point, why bother paying rent or taxes?
Here we have an instance of a government that is proposing solutions to the situation it precipitated. We really need to go back and look at the data and the basis on which the lockdowns were undertaken. In relative comparison with other states, it appears California is doing just as bad or worse than those states that did not shut down. Its a good thing for everyone to be housed, so where was the thoughtfulness around economy AND affordability immediately prior to during the shutdowns?
$1.5B doesn’t quite accommodate (see Math below) Are we setting ourselves for a large bailout bill in the months ahead? And what does it mean in terms of impact on savings and affordability for those who could be bearing this?
Sounds like California just added another item to the list of “unfriendliness” to citizens and businesses.
Absolutely. I would bet that most of the people will not pay the 80% due and will choose to walk away. Just think of the backlash when the these forbearance periods finally expire, if they ever do. These programs almost always create an outrage when they are removed. This is not going to end pretty.
The government pays the 80% to the landlord. There is no need to walk away. Taxpayers pay the rent. Everyone stays housed.
Ballpark $2,000/month, 14 months April 2020 – June 2021. $28k.
So for $1.5B that’s around 50,000 people. CA has a 40Million population. And usually these government programs have a surprising amount of administrative overhead. This looks mostly symbolic to me. I agree with Mike L & Cave Dweller, there is going to be a vacancy wave, not an eviction wave.
The $1.5 billion outlined above is net of administrative fees and other benefits of the program.
Once again, keep in mind that “walking away” won’t discharge any accumulated rental debt.
Wilson – I think your example is extreme. I had/have three tenants in Sacramento who lost jobs due to COVID.
One moved out voluntarily after three months without paying. I tried calling and emailing to no avail. I had to take her to small claims court and we have an extended payment plan that may or may not work out for us.
A second one built up about $7k in debt and then paid off about 50% of that. They still owe the rest and every day it grows.
A third was about the same $7k and then qualified for a state grant that paid up to $4k.
So now I just have the balance (call it 2 @ $4k) that would be eligible for this plan.
These are all good people whose lives were upended by the virus. I really doubt there are many who want to strategically default and ride out of town. One still really needs a good reference from a previous landlord to get the next place.
@soccermom – Sure, I don’t think everyone will strategically run up the full balance. But the point is that only a few tens of thousands in a state of 40 million could take a big chunk out of this fund. And in past housing crises even homeowners walked away from their debts, they used to call it ‘jingle mail’ because apocryphally people would mail their keys to the bank and walk away.
And sure, the debt isn’t forgiven by this, but what’s the collectability on that debt like? Especially if people move out of state, can’t get a job and/or don’t have the money.
And sure, if someone does this it will be harder to rent in the future, but again from past housing crises, people quickly figure out that they should move first and default second and not the other way around.
Debt is forgiven by this program, which is a reason why it is better than your strategic default hypothetical. If the landlord accepts the 80% payment (and yes every real estate attorney or person who has been to small claims court will say take the 80) then the ll can’t chase the tenant. The account resets. We might run out of money, but if we avoid a mass displacement that’s good for society.
I don’t know the rules but there should be a ceiling on the total $ value paid on one tenants behalf. In the state program my one tenant participated in, $4k was the ceiling. There should be something similar here to spread the benefits.
Of course people will use the money. The point is that $1.5B isn’t as much as it seems and I expect that we will see a great deal of upheaval even with the $1.5B. The PPP program was nearly $1T and in spite of that we still saw significant changes in employment.
I’m not saying that this $1.5B won’t help. I’m just saying that if you think that this money will solve all the problems with built up back rent, I think you are mistaken.
No one has said $1.5 billion is a panacea. A lot of what government is trying to do right now is like this – a step in the right direction, but no one knows if it is ‘enough.’ We had two rounds of PPP giveaways. There was demand for a second after the first round. If this eviction-avoidance scheme goes well but runs out of funds, it would be easy for the legislature to write another check.
Keep in mind that “walking away” won’t discharge a tenant’s rental debt or void an existing rental contract.
Sure. But it is also a matter of scale of how many people are affected by this and the untenability of the situation given the circumstances. Isn’t the fact that state is kind of/sort of attempting a bailout here is evidence enough of the scale and gravity of the problem?
Its an outcome of a state imposed situation. How will punitive measures help anyone in this regard?
This is not a good look for the credibility of the state governance, in my opinion.
The only way I can see state digging out of this one is help boost the economy while improving housing affordability for everyone — on war footing in my view.
“This is not a good look for the credibility of the state governance, in my opinion”
What are you talking about? Subsidizing people in their existing homes is worse than having a wave of unemployed people being evicted this coming summer?
What’s the cost-benefit analysis where the second scenario is better?
how do taxpayers feel about subsidizing renters, and by extension landlords, who stopped paying rent on $6000/month luxury apartment/condos?
and how ripe for fraud would such a program be, with what kind of verification that a landlord did in fact have a bona fide tenant that stopped paying rent, in light of how much fraud has occurred lately for the other programs and handouts.
This is still asking landlords to take a 20% haircut, which could be all their profit. I hope large landlords file a class action suit against California under the 5th Amendment “takings” clause. As a taxpayer I also see no reason that I should be dragged into a contractual relationship between two private parties, the tenant and the landlord. More failed big government policy.