Here’s What Tenant Rights Groups Are Saying About Proposed Restrictions on the Use of the Ellis Act
Executive Director, Daniel Yukelson Responds to Tenant Propaganda
Assembly Bill 854 (A.B. 854), proposed by Democratic, Northern California Assembly Member, Alex Lee, was an attempt to strip rental property owners of their rights to leave the rental housing business, even when YOU may be losing money! A.B. 854 was another re-treaded attack on California’s Ellis Act, and fortunately, through our Association’s strong lobbying efforts, Assembly Bill 854 failed on the Assembly floor when it was not even considered for a vote.
But wait, Assembly Member Lee is back with another proposal that would place restrictions on the use of the Ellis Act…twice in one year! Is this the definition of insanity? Keep trying the same thing over and over again hoping for a different result? Well, it appears that way. Under Assembly Member Lee’s latest Trojan Horse approach, he is back again stripping away the rights of property owners with Assembly Bill 2050 (A.B. 2050), which if passed and eventually signed by the Governor, it could become State Law compelling YOU to continue offering housing for rent or lease no matter the circumstances.
A.B. 2050, like its failed predecessor A.B. 854, seeks to prohibit filing a notice of an intent to withdraw a rental property that is under rent control, from recovering possession of rental units, or from even threatening to do so, unless all the owners have owed the property for at least 5 continuous years or have withdrawn another rental property from the rental market or recovered possession of rental units with the intention of withdrawing such units within the past ten (10) years. This proposed bill would also require rental property owners to notify the local jurisdiction of an intention to withdraw the property from rent or lease and to identify each person or entity having an ownership interest in the property, which information would be made publicly available. Penalties are actual damages, special damages of not less than $2,000 in addition to attorneys’ fees.
The Ellis Act is a 1985 California state law that allows landlords to evict residential tenants to “go out of the rental business” despite any desires by local governments to compel them to continue providing rental housing. The Ellis Act was passed in response to the California Supreme Court’s decision in Nash vs. City of Santa Monica that held that municipalities could not prevent landlords from evicting their tenants to “go out of business” in order to withdraw their property from the rental market. Only in California do we need a law to allow us to go out business in a money-losing business enterprise!
Tenant advocate group, Housing Now, has published various, so-called “myths” about A.B. 854 and have provided responses to each such “myth” which they characterized as “facts” but which we shall call “tenant propaganda” because we will always call things as they are!
1. MYTH: “A.B. 2050 forces property owners to stay in business even when they can no longer afford to do so. In some situations, A.B. 2050 would prevent an owner from ever moving into their own unit.”
TENANT PROPOGANDA: “Owner move-in evictions are a just cause eviction under Assembly Bill 1482 and are not affected by A.B. 2050. Property owners are still able to sell their building without using the Ellis Act to evict long-term tenants. A.B. 2050 does not force property owners to stay in business, it prevents speculators from evicting tenants without ever even being in the rental business.”
REALITY: Owner “move-in” has nothing to do with this because when using the Ellis Act, owners are taking their entire property off the market, not one unit for owner move-in.
Further, while housing providers have invested in rental properties over the years for hoped for stable retirement incomes, like with stocks and other investments, an income stream (with stocks you get dividends vs. rental income) is only part of the expected returns. The other returns are from increased value in a property. If a long-time owner wishes to sell, a property value is enhanced for the new owner who may wish to improve upon a property (major remodel or re-develop), change its use, or do a number of other things to enhance value to which property owners are entitled to do. A.B. 2050 will harm sale values of properties by requiring owners to “sit out” for 5-years (or up to 10-years in some cases.) Real estate investors should be compensated for giving up this valuable property right.
Finally, there is absolutely no need for A.B. 2050 because most local jurisdictions have already “piled on” local restrictions on the use of the Ellis Act to protect tenants such as requiring notices, relocation fees, and forcing owners to pull every conceivable permit for any redevelopment project before proceeding, among other things.
2. MYTH: “A.B. 2050 interferes with a family that needs to move into their rental home and would not allow a family to timely move an ailing family member into their home. A.B. 2050 interferes with new owners’ dreams of owning and living in their own property.”
TENANT PROPOGANDA: “A.B. 2050 does not change laws around owner move-in evictions. Property owners are still able to move into their rental home with A.B. 2050.”
REALITY: See my response to Myth No. 1. Owner move-in has nothing to do with the Ellis Act. I have never heard the housing industry use this excuse as a reason for preserving the Ellis Act. Again, A.B. 2050 is more “stripping away” our valuable property rights. It’s all just more of the same old tenant rights group “B.S.”
3. MYTH: “There are sufficient tenant protections currently in place.”
TENANT PROPOGANDA: “There are no protections against the Ellis Act. The Ellis Act has been used as a major loophole to get out of the pandemic eviction moratoriums as well as other tenant protections in place.”
REALITY: See my response to Myth No. 1. There are numerous local protections already in place including punitive relocation fees.
4. MYTH: “The Ellis Act establishes a fair balance between landlords and tenants as the invocation of the Ellis Act does not result in the loss of housing units as most units are converted to tenancies in common, which creates affordable home-ownership opportunities.”
TENANT PROPOGANDA: “Removing affordable rental units from the market is not a solution to the affordability crisis. We need to preserve existing rental units and build more housing for the middle, working class and low income residents. The Ellis Act results in the loss of rent-controlled units, and we are not building enough to make up for the amount of units we are losing.”
Now here’s a bit of truth…the Ellis Act does create more home ownership opportunities for people by converting often C-class or D-class apartment buildings into condominiums (not TICS or Co-Ops as we do not see many of these in California and good luck getting a loan on one of these – this is not New York).
Again, the continued chipping away of property rights discourages investment in rental housing which is why we have the shortages of not only housing, but of affordable housing here in California. California’s rental property owners are heading for the exit ramp and moving money outside of the state or into other investment vehicles. The days of the old lady, small landlord willing to give a break to a tenant she perceives that she likes and go for years without rent increases (a/k/a, the owner of naturally occurring affordable housing) will become extinct here in California.