A photo illustration by Daniel Yukelson and Thomas Bannon
Last-minute legislation to stop evictions in California has exposed a divide in policy among Golden State landlords.
The California Apartment Association and major homeowners have not publicly challenged Convention 3088 Bill. You have bigger fish to fry, namely polling speakers who deal with property taxes and rent control.
(The law was passed before the Federal Disease Control Centers issued an executive order on Tuesday banning evictions for qualified renters from September 4 through the end of the year.)
But the Greater Los Angeles Apartment Association and some individual landlords argue that the legislature – the last of 2020 – was the time to cash in their political chips.
"This bill will wreak havoc on small homeowners and leave them in their pockets," said Daniel Yukelson, executive director of the Greater Los Angeles Apartment Association.
"Sure," said Neil Shekhter, CEO and founder of NMS Properties, "the landlords have been left to dry."
California residential landlords have not been able to evict tenants since April because the California Judicial Council, the state court's regulatory body, passed an emergency rule. But the rule went under on August 31, prompting lawmakers to introduce AB 3088. Legislature passed it on Monday evening and Governor Gavin Newsom signed it 45 minutes later.
Contrary to the Justice Council rule, AB 3088 forces tenants to provide evidence that they have faced coronavirus in order to receive a rental break. However, if tenants can and also pay 25 percent of the rent, they can stay in units through Jan 31, when AB 3088 expires.
The Justice Council order also imposed a moratorium on foreclosures, but California lawmakers passed no laws on the matter.
"The state of California has no regulatory powers over lenders and banking institutions," said Yukelson. "All they can do is window dressing."
The new law adds to the frustrations of landlords who, throughout the pandemic, have been forced to give tenants a break without receiving mortgage relief themselves.
"The tenants and lenders get a good deal, while the landlords have to make concessions," Shekhter said.
Why didn't the California Apartment Association fight the bill?
Thomas Bannon, managing director of the group, argues that AB 3088 was preferable to an earlier eviction measure and offers landlords some relief, such as the ability to evict problematic tenants.
"This at least creates a path for collaboration between landlords and tenants affected by Covid," Bannon said.
Bannon noted that the law expires on February 1 and that it was possibly the best California landlords could do after a proposed measure for rental coupons got nowhere. There is also other struggles, especially for landlords with large investment portfolios.
"The bigger problem is what's on the November ballot," said Kevin Conway, director of acquisitions at IDEAL Capital Group. "This is important for the investment appetite of apartment buildings."
Conway, whose company manages 9,000 residential units across California, had Prop 15 in mind, which would periodically revalue the value of commercial real estate each year for tax purposes rather than taxing the property at purchase price. Also in November is Prop 21, with which the rent control is to be introduced for residential properties that have not been built in the last 15 years.
Prop 15 does not affect apartment buildings. However, Conway fears that homes may soon receive higher taxes.
Meanwhile, Bannon focuses on Prop 21 – and hopes that his group's conciliatory stance on AB 3088 could lead Newsom to stand up to Prop 21.
"I am optimistic that he will resist," said Bannon.