Tenants, COVID & Evictions Update

“A landlord accepting the federal money would be required to ‘forgive’ the remaining unpaid rent…”

On January 25, 2021, the Governor issued the following statement:

“Today, we are announcing an agreement to extend the eviction moratorium in California through June 30, 2021—protecting tenants and small landlords from losing their housing as the nation continues to confront the pandemic. We are also moving forward as quickly as possible to deploy California’s share of the latest federal stimulus bill—ensuring that up to $2.6 billion in renter aid is administered quickly, equitably and accountably.

“While we are proud of this agreement, which maintains California’s COVID eviction protections as the strongest statewide rules in the nation, our work is far from over.”

The bill, SB 91, is a simple majority vote bill that proposes to use federal funds (not state or local revenue) to pay up to 80 percent of past due rent that started on April 1, 2020, and ended March 31, 2021. A landlord accepting the federal money would be required to “forgive” the remaining unpaid rent, which if the property is in a rent control community, could become a significant issue.

Federal money could (if available) help pay for the unpaid rent from March through June 2021.

The extension of the provisions of AB 3088 was in large part due to sunset on January 31, 2021. Quite frankly, no one reasonably expected the law to sunset. The author of AB 3088 proposed to extend the date to December 31, 2021… a date that would have allowed tenants to remain in possession and not pay rent from March 2020, through the end of this year. The author, Assembly Member David Chiu, proposed several other restrictive measures in a bill he recently introduced.

Tenants that pay just 25 percent of the rent will receive protection from evictions. Other elements of the bill that created the rental assistance program that became law on February 1, 2021:

  • Attorney fees are capped.
  • Courts are permitted to reduce the damages awarded to a landlord if the court determines that the landlord did not in “good faith” seek rental assistance from the new program. Thus, landlords will be “encouraged” to participate in the State Rental Assistance Program.
  • Federal law set the program in place to establish eligible tenants whose household incomes do not exceed 80 percent of the area median income for calendar year 2020.
  • And federal law, and thus state law, gives priority to tenant households whose income does not exceed 50 percent of AMI. To implement the program, the state has structured the program as follows:
    • These households are placed in Round 1.
    • Round 2 are communities that are disproportionately impacted by COVID-19 as determined by the state.
    • Round 3 are eligible households not otherwise in Round 1 or 2 but are not earning more than 80 percent of the area median income.
  • It is important to note that the eligible uses for funds made available to a locality or a grantee as follows:
    • Rental arrears
    • Prospective rent payments
    • Utilities
    • Any other expense related to housing as permitted by federal law.
    • Priority, however, is to be given to rental arrears to stabilize renter households and prevent evictions.
  • Will pay rental property owners 25 percent of rent in arrears if the tenant applied for assistance (not likely) but the owner elects not to participate in the program. Should an owner decide not to participate, the tenant household will remain in possession.
  • All property owners will be required to provide a notice to tenants that owe back rent of the existence of the new rental assistance program. Owners will be prohibited from proceeding with an eviction due to the non-payment of rent if notice is not provided and with an opportunity of the tenant to respond to that notice.
  • The State of California will select a vendor to serve as the program administrator to manage and fund services. The vendor will be a Community Development Financial Institution (CDFI).
  • Federal funds will be allocated by population, consistent with federal law.
    • $150 million is set aside for counties with populations under 200,000.
    • Populations greater than 500,000 will receive their funding as a block grant from the state and the money is to be implemented locally. Our involvement in this aspect of the program will be essential. The bill prohibits a locality that receives the funds in this manner from instituting additional program matic requirements that inhibit participation in the program and it requires any locality that receives a block grant to attest to the state that it will distribute assistance equitably and consistent with need with that jurisdiction. All locals must request block grants by February 12, 2021, and are to contractually obligate at least 65 percent of those funds by June 1, 2021, and fully expend those funds by August 1, 2021. Failure to meet those deadlines by localities will require return of unused funds to the state for reallocation.
  • The new law imposes a moratorium on actions that seek to recover COVID-19 rental debt until July 1, 2021. All landlords seeking to recover COVID-19 rental debt are to provide documentation to the court that the owner has made a good faith effort to cooperate with tenant obtaining rental assistance.
  • Administrative fees cannot exceed 10 percent ($260,000,000). Yes, that’s right, $260 million. Our forms will be revised and updated. There will be new forms that will be available to members as well.

Educational seminars will be provided during February 2021.

Ron Kingston may be reached at Ron@CalStrategic.com