People Post is a space for opinion pieces, letters to the editor and guest submissions from members of the Long Beach community. The following is an op-ed submitted by Bill Shelton, a sales associate at Berkshire Hathaway Home Services California Properties, and does not necessarily reflect the views of the Long Beach Post.
Californians have lost jobs and income due to the coronavirus pandemic, and every political body, from our state legislature to city councils, to the Judicial Council of California to Gov. Newsom, has passed ordinances, created and passed new laws, and issued edicts to protect tenants from eviction due to non payment of rent as a result of COVID-19-related financial setbacks.
How housing providers/landlords are supposed to pay the expenses of owning buildings, when these new laws prevent them from removing non-payors from their apartments to again generate income from them has barely been considered, as incredible as this is.
This business is like any other—you try your best to make sales and generate as much income as possible because in your best months the costs of running the business eat up 80-90% of the income. If housing providers can’t get rent from 20-30% or more of the units the risk of foreclosure and total non-maintenance is very real.
One of these pending new laws was Senate Bill 1410 written by Long Beach area State Senator Lena Gonzalez. Her bill was written to have the state pay 80% of the tenants’ rent to the landlord for seven months. The state that prohibits housing providers from getting the income they depend on for survival would take responsibility for its actions. The bill was approved by 39 of 40 state senators, and it went to the 80-member Assembly for final passage.
Along the way that bill was hijacked and re-written in a bizarre tradition very few people know about called the “Gut and Amend.” This is where some of the “120” are empowered not to make minor corrections or changes, but to cut off and save the title to the bill—its heading “SB 1410,” then cut off the approving signatures at the bottom, and insert an entirely new bill in between, often with no connection whatsoever to the original bill, reattaching the heading at the top and approval signatures at the bottom like some Frankenstein stitched-together monster, which in this case goes horribly out of line.
Here’s the new version of SB 1410. Housing providers cannot evict tenants who don’t pay rent due to COVID, with no proof of their misfortune—during our “state of emergency,” then possibly for 90 days more. The state will then pay landlords back their lost rent via income tax credits beginning in 2024, paying one-tenth of the losses each year for 10 years through 2034. No interest is due on this money taken from property owners. The credits can be sold, yet market realities might have these selling for 50-70% discounts as the terms are not attractive to investors.
By now you are wondering, do the loans made on these buildings requiring monthly payments, and the roofers, plumbers, property tax collectors, insurers, gardeners and workers at every level of management and maintenance—do all these constant costs related to building ownership get magically deferred for repayment over the next 14 years, with no payment at all for the next four years? Of course they don’t.
By now you are seeing an unworkable, ridiculously impractical idea that had to come from someone who never personally bought or built and borrowed on and managed residential rental property.
You might also be seeing the seeds of a very good idea. At the core of both versions of SB 1410 is provision for the state to pay for the lost rent tenants can’t pay, and landlords can’t get because they can’t evict. The original 1410 has the state pay landlords’ rent for those tenants who are knocked down by COVID, and the new 1410 has the state reimburse property owners for their losses. Far too late and far too slow to keep up with costs that property owners must pay monthly, but these both recognize the state’s responsibility to pay for losses these new statewide laws mandate that housing providers incur.
Could we evolve these bills into one new bill that says: The state shall reimburse landlords monthly for their losses incurred due to tenant non payment due to COVID, and landlords’ inability to evict these non-payors? For as long as the tenants are protected from eviction for non-payment of rent. This same bill would define terms under which California tenants can stay in place without paying rent and not be evicted. One bill to replace the overlapping city council ordinances coming every month, and the myriad state bills coming every month all attempting to deal with these issues almost all of which create the inequity of placing losses of non-payment of rent on the shoulders of the housing providers.
This idea solves these inequities. It uses all the same components and mechanics for reporting losses and distributing payouts already being contemplated in both versions of 1410.
Some $100 million in federal stimulus funding exists for Los Angeles County alone to support tenants on the brink of eviction. Cities like Long Beach also have such city funds tenants can apply to for temporary support. There are different income requirements, location limitations, payout limitations and other complications in working with any of these relief programs.
Is it too simple to just create one statewide program that treats this matter fairly for both tenants and housing providers? Use all these support funds and more federal support to create this reimbursement system. Tenants need not fill out applications, or go online to interpret if they qualify for relief. Landlords submit a form signed by tenants as to how COVID caused their inability to pay rent, and the state sends the landlord a check. Every month. Both tenants and landlord would be held accountable for truth and accuracy in this reporting, with fraud punishable by stiff penalties. The state uses all federal relief funding for this and may need to pass more of the costs up to the Fed. It can’t go broke carrying the whole load any more than landlords can now. Small businesses have been given $150,000 to $400,000 and more in federal stimulus funding to stay open, and it’s time housing providers got the same treatment.
This may take some time to perfect. But to come up as short as SB 1410 does requires it be voted down. Under this bill those apartment buildings that don’t foreclose will become unkept slums. Mom and Pops that have invested their lives into providing housing will be ruined, broke, and some dead by the time repayment starts, many more dead by 2034! If a bill came down from Sacramento saying that a person could go into a grocery store, fill their cart with food, check out and not have to pay for the food they took for four years and then would have 10 years to spread out payments to pay it back—would that make sense? Could the grocer survive this?
Oh, and get this—the tenants are supposed to pay back what monies they “owed” as a result of these rent deferrals. Over the same 10 years. And the state will monitor and administer all this. Collect back rents from tenants that have moved out of state or out of the country. Did I mention this bill was a monster?
Well, Mayor Garcia has endorsed this bill. And many of your state Assembly people will vote for it, unless you contact your assembly person or state senator very quickly to tell them to vote no on SB 1410.
Hey, maybe your business is next. Your customers (what tenants are to landlords) could win a free ride in a new scheme that has you or your employer stopped from all sources of income—customers no longer pay—yet you remain responsible for providing all the services, obligations, work and products you pay for that once created the income side of the ledger. In four years you can start to get your money back, spread out to 2034.
Those public officials endorsing this bad bill have ignored so many realities, and this bill has certainly attained the status of absurd. Let’s make a better one.