April 17, 2020
By Dennis Kaiser
A new California legislative proposal in response to COVID-19 would force every rental property owner in the Golden State to reduce rents by 25% and subsidize the rents of tenants. The California Apartment Association (CAA), says the AB 828 legislation, introduced by Assemblyman Phil Ting, may be too narrow, while ignores the robust rent and eviction controls already in place across California.
CAA’s Tom Bannon says, “Clearly, I think the intent of AB 828 was to address those tenants who either lost their jobs or had paychecks cut or reduced and for whatever reason were not able to tap adequate unemployment insurance or other assistance programs.”
“What this measure tries to do is address a specific problem,” says Bannon. He points out that specific problem (ability to pay) may represent just 20% of the rental population, but it brings the entire rental population into the equation. The bill may be “well intended, but it misses the mark and has sent shock waves and tremors through the rental housing industry,” he adds, noting there is “no rational basis” for this bill, “it makes no sense.”
But Bannon adds, “This bill goes way beyond those tenants who have been impacted by COVID-19 and to a point where the measure actually requires landlords to reduce rents by 25%. The provisions and terms of the bill don’t require tenants to prove they were impacted. There really is no proof required. That is placed on landlords to demonstrate why a tenant can’t pay.
Further, the trade organization says the bill provides no assurances that landlords can collect rent, remove problem tenants, or get a fair hearing in the court system. CAA points out AB 828 is an unfair attempt to allow the government and the courts to give reduced rent and extended tenancies to all renters even if they do not face economic hardships, and it provides no safeguards or protections for landlords.
Bannon notes, AB 828 denies equal justice to housing providers by:
- Forcing landlords to reduce rents by 25% even if a tenant cannot demonstrate a hardship or need.
- Allowing judges and the court system to set rents and change the rental agreements already in place.
- Assuming every tenant is facing a hardship related to COVID-19 and must be compensated for this hardship.
- Protecting nuisance tenants as it does not require tenants to answer an unlawful detainer complaint.
- Mandating that rental property owners demonstrate an economic hardship to collect the contracted rent.
Bannon admits the bill’s intent was likely grounded on the best of intentions to help renters during a difficult time, though the consequences to landlords weren’t fully considered. He says there are “huge exceptions” that haven’t been clearly spelled out or thought out. As currently written, the bill doesn’t require residents to provide proof that they need rent relief, they only must say they’ve been impacted by COVID-19. Owners can’t even ask why a tenant can’t pay. The justification for not paying rent is simply if there’s been an increase in household expenses. The landlord won’t be able to go to court until later and even then, the burden to demonstrate why a tenant can’t pay rent will rest on landlords. Bannon says, “That is backwards from where logical judicial evenness is supposed to be.”
Bannon says CAA members are understandably concerned about how this bill will impact their businesses, even as they weigh the problems renters face today. He noted landlords were already working with their residents to figure out how to tackle thorny payment issues. This bill adds to the myriad issues brought on by the coronavirus pandemic a landlord now must address ranging from eviction moratoriums to outright mortgage restrictions with lenders. Bannon says, AB 828 “adds to the difficulty landlords have to operate a building.”
Bannon indicated CAA looked at ways to create a workable bill through amendments and the legislative process to give apartment owners options, though he admits it doesn’t seem like there’s any “place to go as it relates to this bill. If there ever was an over-reach, this bill is it.” But he’s “guardedly optimistic that the legislature and governor will understand” and step in on behalf of apartment owners who are reaching out to them.
Already, CAA has tracked more than 40,000 emails that have been sent to the state capital from apartment owners and those in the CRE industry, which Bannon notes has clearly caught the attention of legislators, many of whom “didn’t really understand the magnitude, imbalance and harm AB 828 will bring to the housing industry. Our sense is the legislature will, in fact, come out opposed to this bill.”
For comments, questions or concerns, please contact Dennis Kaiser