Sacramento Report

Rent Relief Debrief

written by Debra Carlton

After more than a year of rent
uncertainty, rental property owners
can receive funds for back rent.

It has now been more than a year since the COVID-19 pandemic shut down the economy and upended American life.

Since then, hundreds of thousands of Americans have died, shelter-in-place orders have gone in and out of effect enough times to induce whiplash, the stock market has tanked and rebounded to record highs, and COVID-19 infection rates have spiked and dropped only to spike and drop again. 

In a year with few constants, California landlords and tenants could count on one thing: evictions would be few and far between during the pandemic.

To this day, California remains under a statewide eviction moratorium tied to the virus. The latest moratorium, which comes from Senate Bill 91, differs from earlier measures because it includes rental assistance to pay landlords who’ve gone months without compensation.

That’s a big change. Early in the crisis, California governments made the eviction moratorium a go-to policy, but help for landlords was conspicuously missing. City councils, boards of supervisors, the state legislature, the governor—and even the judiciary—got in on the action.

By mid-March 2020, several major cities in California had imposed such orders, including San Francisco, San Jose, Sacramento, Los Angeles, and San Diego. Many more would follow.

Later that month, Governor Gavin Newsom gave cities and counties his blessing to pass such policies, issuing an executive order clarifying that they had the authority to temporarily ban evictions for nonpayment of rent when COVID was to blame.

The California Apartment Association, meanwhile, worked to ensure that any local eviction bans were reasonable for both rental property owners and tenants. At the same time, CAA continually pushed for local, state, and federal funding to help renters and landlords who’d lost income due to the pandemic, although it would take months for significant results to materialize.

Shortly after authorizing local eviction restrictions, the governor took the matter into his own hands. He issued a second order, creating a statewide eviction moratorium for COVID-impacted renters. His order also prohibited enforcement of evictions by law enforcement or courts. This measure would last through May.

But in early April, while the Legislature was in recess, California’s Judicial Council got involved, passing a rule that went further than Newsom’s order or anything done at the local level. During an emergency meeting, the council suspended virtually all evictions in the state, basically inviting tenants to withhold rent without consequences. The council’s Rule 1, as it would come to be known, would allow evictions only to resolve threats to health and safety, a standard that was difficult, if not impossible, for many landlords to meet.

For several months, CAA urged Judicial Council members to revise their eviction rule to be more consistent with Newsom’s order. CAA’s suggestions sought to preserve the council’s goal—protecting tenants from unnecessary evictions during the pandemic—while still allowing landlords to terminate tenancies when a set of justifiable circumstances exist.

Rule 1, however, would remain in effect for most of the summer.

In August, the Judicial Council voted to allow the courts to start processing eviction cases again the following month. That decision came with the expectation that the Legislature and governor would find a replacement for Rule 1 by month’s end.

A few proposals came to the surface. One of them, AB 1436 by Assemblymember David Chiu, caused particular concern. The San Francisco Democrat’s proposal would have forced landlords to defer rents until 15 months after a state or local state of emergency was lifted.

In California, states of emergency can linger for years—take the emergency declarations tied to the Wine Country wildfires, for example. CAA organized a successful grassroots opposition campaign to AB 1436, which the association termed the “free rent” bill. Like the Judicial Council’s Rule 1, it would have encouraged unscrupulous tenants to withhold rent without consequence—for months or even years.

Another piece of legislation offered a better but more expensive solution. The bill, SB 1410, would have leveraged dollars from the State of California to cover 80% of unpaid rent from COVID-impacted tenants. For landlords to receive the money, they would need to agree to forgive the remaining 20% of rental arrears. This legislation proved too costly to move forward, although elements of the bill would resurface several months later.

By mid-August, the California Apartment Association was engaged in almost nonstop negotiations with the governor’s office and leadership in the Senate and Assembly. The challenge was to craft legislation that would keep COVID-affected tenants housed, allow landlords to evict tenants who wreak havoc at their properties, and ensure that rental owners would start collecting rent again on a reasonable timetable.

The result was AB 3088, or the COVID-19 Tenant Relief Act of 2020. On August 31, lawmakers rushed to pass AB 3088 amid dual deadlines. The 2019-2020 legislative session would expire that day at midnight, and the Judicial Council’s moratorium on unlawful-detainer cases would lapse at midnight Tuesday, September 1.

The bill passed both houses of the Legislature with a super majority and bipartisan support. The governor signed it into law almost immediately.

Under AB 3088, landlords regained the ability to proceed with eviction cases against tenants who cause problems at the property, such as by causing nuisances or threatening their neighbors. The bill also allowed owners to terminate the tenancies of renters who had the ability to pay rent but refused to do so.

To qualify for eviction protections under AB 3088, tenants had to claim a COVID hardship by signing and returning a declaration. High-income tenants, those making 130% of the area median income, had to provide documentation of their COVID-related hardship.

To stay protected against eviction, tenants would have to start paying something. Under AB 3088, they were given until January 31, 2021, to pay at least 25% of the rent owed since September. The remaining 75 percent was not forgiven, however.

By late 2020, COVID cases were again on the rise. It became clear that AB 3088 would need an extension. At the same time, California’s landlords could no longer keep housing tenants without compensation.

Any renewal or replacement of AB 3088 needed to include dollars for unpaid rent. Again, CAA engaged in almost nonstop negotiations, this time through the Christmas and New Year’s holidays straight through January.

Remember SB 1410, the bill that would have paid 80% of unpaid rent with state dollars? While the price tag was too high in August 2000, in January 2021 it was a different story. Late last year, Congress passed a COVID-19 stimulus bill with $25 billion for rental assistance—and $2.6 billion of it was heading to California.

Just a few days before AB 3088 would expire, the California Legislature passed and Gov. Newsom signed SB 91. This legislation keeps the eviction protections of AB 3088 in effect through June 2021. While it gives tenants another five months to pay the 25% of rent owed since September 2020, it also includes government funding to compensate landlords who have gone unpaid during the pandemic.

With SB 91, the state will use federal funds to pay landlords up to 80% of a tenant’s back rent accumulated between April 1 of last year and March 31, 2021. A landlord who accepts the money will have to forgive the remaining unpaid rent for that period. If the landlord refuses this arrangement, the maximum subsidy drops to 25%.

As of this writing, CAA was working to secure additional federal dollars to help cover unpaid rent between April and June of this year.

To qualify for the federal dollars, the unpaid rent must be owed by a tenant who earned less than 80% of the area median income in 2020 or at the time of application. The state must first prioritize dollars for lower-income tenants—those earning up to 50% of AMI. 

Like AB 3088, SB 91 is not perfect, as it doesn’t address situations in which tenants make more than 80% of AMI but still cannot pay, or cases in which the tenant simply won’t cooperate or communicate with the landlord.

As of now, SB 91 is the state’s answer to the rental housing element of the COVID-19 crisis. And if the past year is any indication, it won’t be the last.

The California Apartment Association has published a plethora of compliance information on COVID-19 Tenant Relief Act. Learn more at caanet.org/ctra.

Debra Carlton is the California Apartment Association’s executive vice president of state public affairs.