Insider Knowledge: Thoughts on Proposed Legislation and the Pandemic

Industry News,

It is apparent that the Governor’s office really does not have a real strategy or solution at this point to deal with the worsening pandemic and growing budget crisis. The State’s budget, keeping Californians housed, the feared wave of evictions, keeping Californians healthy, and growing unemployment are just some of the many issue areas in front of Governor Newsom today with this current pandemic predicament.

Despite all this, and priorities are priorities after all, Governor Newsom did find time recently to move into a new palatial estate in a gated community just about a month ago. With the move out of the way, he is certain to get back to the business of protecting we Californians. I am sure the press will soon be onto the Governor’s move in the upcoming.

With the Governor’s housing needs out of the way, he can now turn to solving the crisis in housing about to be unleased following months of eviction moratoriums that began with the Governor’s own Executive Order back in March. Despite the Governor’s attempts to hold-off evictions, many Californians continue to suffer after being out of work or becoming inflicted with the Coronavirus, and the Governor’s and local jurisdictions’ eviction moratoriums have only caused rental property owners to suffer along with their renters, and soon the lending community will suffer too in a wave of foreclosures.

From a political perspective we could only surmise that if people started getting evicted in the so-called pending “wave,” this might just be the only thing that could actually help the supporters of Proposition 21, the rent control ballot initiative. This is a valid threat and must be taken into consideration as we negotiate with our elected officials in Sacramento. More than likely, the Governor and State Legislature will try to leverage our government advocates and lobbyists to reach a compromise on proposed legislation such as Assembly Bill 1436 (Chiu) and Senate Bill 1410 (Caballero) in exchange for lifting the State’s eviction moratorium and forcing the California Judicial Council to again permit the State’s courts to issue summons in connection with unlawful detainer (eviction) cases.

As they currently stand, Senate Bill 1410 and Assembly Bill 1436 entail the following:

  • Senate Bill 1410 POSTPONES PAST DUE RENT COLLECTION UNTIL 2024 AND ALLOWS TENANTS 10-YEARS TO REPAY…WITH NO INTEREST! That’s right, YOUR tenants will have 10-years to repay deferred, past due rent unpaid during the COVID-19 emergency start in 2024. That means, YOU will not be “made whole” until sometime in 2033! YOU will not receive actual cash, but YOU will be given tax credits by the State of California for the value of deferred, unpaid rent, which YOU can redeem over a 10-year period from 2024 to 2033. YOU will not be paid interest. YOU will not be fully paid for 12-13 years from now! Unfortunately, YOU cannot pay mortgage, insurance, maintenance, property taxes or personal living expenses with the tax credits offered under Senate Bill 1410.
  • Assembly Bill 1436 POSTPONES PAST DUE RENT COLLECTION FOR 15-MONTHS PAST THE DATE THE STATE OF EMERGENCY IS LIFTED, OR UNTIL MARCH 31, 2022 (WHICHEVER COMES FIRST)…AND, WITH NO INTEREST! Assembly Bill 1436 GIVES TENTANTS UP TO 15-MONTHS FROM THE LIFTING OF THE COVID-19 EMERGENCY DECLARATION OR UNTIL MARCH 31, 2022 (WHICHEVER IS EARLIER) TO REPAY PAST DUE RENT WITHOUT INTEREST OR LATE FEES. As a property owner, YOU would not be allowed to evict YOUR tenants during the 15-month period or until March 31, 2022 (whichever comes first) for nonpayment of rent. Postponing your ability to collect rent for years will both decrease the likelihood that you will ever collect all or a major portion of past due rent, and the extended payback “scheme” will significantly reduce YOUR
    Once a deal is agreed to among the Governor, State Legislature and Multifamily Housing Industry, it will be put into the two bills, Assembly Bill 1436, and Senate Bill 1410. This will likely happen in a few weeks while both bills go through appropriations. Ultimately, we believe that a main provision will likely be that the eviction moratorium will continue through the end of the year, however, it will them be removed except for more specific provisions for “at risk” residents such as elderly, and there will need to be a more immediate benefit to housing providers in Senate Bill 1410 by, for example, the tax credits would need to be available prior to 2024 and earned sooner than over a 10-year period.

While none of this is great for the rental housing industry, the one thing we must remember is that we are being forced to negotiate with a gun to our head. If we do not cut a deal, government simply will not lift the eviction moratoriums. No matter what deal we can cut for our members, the deal will not be optimal and could never be that great for the housing industry because there are just not many options open to us. But, when you think about how horrific it is now with the two proposed state bills and all the eviction moratoriums, it will be better than where we are today. As we always must do, we have got to look at this thing from the glass half full viewpoint. It is the same idea as when I tell my wife I could have gained even more weight, so be happy I put on just a few pounds.