Legislative Rabbit Holes

“ A Compelling narrative fosters an illusion of inevitability.” – Daniel Kahneman

Legislative Rabbit Holes

“ If I had an hour to solve a problem, I’d spend 55 minutes thinking about the problem and 5 minutes thinking about solutions. ”
— Albert Einstein

 

As solutions to the housing shortage are proposed by almost every legislator in California, it is easy to see how the powerbrokers and advocates could get lost in the proverbial weeds. And, friends, they have most certainly lost their way. Senate Bill 529 by Senator Durazo is one such example. The bill would allow tenants to form a tenant association (which may be presently formed) through which they could engage in concurrent, and basically indefinite, rent strikes for almost any grievance one could imagine. The following quote is from the Senate Judiciary Committee that heard the bill:

 

“…tenants from three or more units belonging to the same landlord [may] band together as a ‘tenant association.’ Members of such an association could not be evicted absent good cause, and they would have the right to engage in brief, collective rent strikes: jointly withholding rent payments until the landlord has engaged in a good faith bargaining process to address written grievances from the association.”

 

The above paragraph probably sent tingles down your spine, but it is actually far worse than it may seem. Those “brief” rent strikes may result in rent not being paid for up to 37 days without penalty. Additionally, nothing prevents those rent strikes from occurring back-to-back, potentially subjecting you to over 70 days without rental income.

 

Withholding rent for 37 days could result in substantial detriment to a rental owner, but to go almost 80 days without rental income would basically bankrupt many mom and pop owners across California.

 

The bill attempts to limit the number of rent strikes to two per calendar year, but it does not place conditions on the number of associations a tenant may form and be a participant of. As written, the bill would allow tenants to form multiple associations for varying issues, with titles such as Tenant Association to Address High Rates, Tenant Association to Address Habitability, or Tenant Association to Address General Repairs. In that way, tenants would have the power to strike twice a year per association. It is easy to contemplate a world where tenants form multiple associations in order to increase their bargaining power with the property owner.

 

SB 529 is emblematic of the lack of concern for property owners. Unions may be effective in balancing the power dynamics between an employer and an employee but trying to incorporate union provisions into rental arrangements is not rational. A rental owner is not the same as a small business employer. Should SB 529 be passed, it’s easy to envision a world where multiple grievances are proffered and the tenants go to the property owner and say “either we litigate in court, which could cost you thousands, or you lower the rent for all of us and we remove our grievances.”

 

While the housing shortage is untenable, the solution is not giving tenants absolute authority to dictate the terms of rent. The fact that the negotiating structure of employer-employee labor unions is even being discussed proves that the Legislature is more focused on appearing to solve the problem than actually addressing it.

 

Ron can be reached at ron@calstrategic.com