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North Bay property owners, managers fear impact of eviction bans

State and local governments that continue to allow renters in this pandemic era to delay payments are raising concerns among property owners and managers.

Their looming question: If tenants don’t pay their rent to the landlords, how will property owners pay their mortgages?

Some have already answered that question — by selling off properties.

Keith Becker, general manager for DeDe’s Rentals and Property Management of Santa Rosa, said that of 500 tenants Becker’s company rents to, four have stopped paying, negotiating and communicating. Eleven renters are attempting to pay but have fallen short.

The loss of tenant income has resulted in 12 units leaving the rental market. Eight units are on the market, and property owners plan to sell four.

“I can’t tell you we’re doing great. In the last three months, the number of properties rented have consistently flat-lined, and the clients are unsettled,” he told the Business Journal.

Property owner Jennifer Coleman knows the territory far too well. The Sonoma County landlord has sold two single-family homes and a townhouse to scale down the number of properties she rents.

“It’s the draconian evolution of laws. I wanted to lighten my risk. It frightened me,” said Coleman, who has rented her own space for 19 years.

Owing debt is hard enough for a homeowner owning one house, much less multiple locations.

“It’s a gamble, but this is my retirement,” she said.

Many costs are associated with owning rentals. For starters, there’s insurance to be paid under commercial umbrella and earthquake policies as well as homeowner association dues and expenses for repairs and improvements, she mentioned.

The matter is so monumental, the Sonoma County Board of Supervisors postponed the discussion and action Aug. 6 an ordinance designed to expand tenant protections. Supervisor James Gore initiated the request to continue the item “until we have the big picture” from the state. Board Chairwoman Susan Gorin said the county has heard from a multitude of constituents from “both the tenant and landlord perspectives” who want to weigh in on the matter.

Moratoriums on evictions for nonpayment of rents have already been extended through Sept. 30 in Marin and Napa counties.

Napa County requires rents to be due starting in October, and those payments may be staggered. Marin County mandates property owners allow renters to forego paying until “90 days after the expiration of the resolution.” The moratoriums were placed in the counties in July.

California is placed in charge

The next move belongs to the state.

California Democratic Assemblyman David Chiu introduced in June a bill, Assembly Bill 1436, that would prevent the eviction of renters unable to pay during the pandemic’s “emergency period.” The governor declared a pandemic shutdown in mid-March and, though it was relaxed in some areas later, a spike caused the restrictions to be restarted in the North Bay and elsewhere in the state.

Gov. Gavin Newsom’s order on March 27 prohibited the courts from processing evictions through May 31. The state administrative arm of the courts, the Judicial Council, extended the time period by 90 days. The responsibility now falls onto the Legislature.

“Aug. 14 is when the Judicial Council (of California) lifts the statewide moratorium. Then, all past due rent is due. This could impact a huge number of renters,” Chui told the Business Journal, calling such a perfect storm of financial events a “catastrophic” situation. “We have to do something. We can’t allow mass evictions.”

Chiu, whose 17th district includes San Francisco, fears an unprecedented level of homelessness and a worsening health care crisis as a result — with a diminishing safety net.

The state has already performed a complete U-turn in its budget. It entered the fiscal year with a $21 billion surplus. Now the pandemic has turned it into a $54 billion deficit.

“We’re not holding out breath for help from the federal government. We all wish (it) would come through. We don’t print money,” he said.

Meanwhile, sentiments for property owners are starting to be heard more loudly. As recent as July 28, the bill was altered to provide mortgage forebearances for those who rent out their units and homes. It currently sits in the Senate Judiciary Committee.

“The provision mirrors the federal CARES Act,” he said, referring to the huge coronavirus-related stimulus plan issued by the U.S. Congress.

Also in the works within the other arm of state government, California Sen. Anna Caballero, D-Salinas, has brought forth Senate Bill 1410 as an Emergency Rental Assistance Program run by the state housing department. The bill now being changed in the Assembly aims to help tenants pay their rent due and provide $10 billion tax breaks to property owners.

“We believe the outcomes will bring a balanced approach of help to the struggles of tenants and property owners,” the assemblyman said.

But Alex Khalfin, the spokesman for the California Apartment Association based in Sacramento, contends “forebearances are difficult to get” in the grand scheme of things.

Khalfin’s hope is that lawmakers consider more property owners like Coleman at this time, as despite a common misconception, aren’t made of money.

“These folks are still paying property taxes. They still hire gardeners. They still go to restaurants. They’re beaten down,” he said. “It’s unfortunate we seem to be dealing with only a part of the equation. Everyone’s nervous. We need to think about the relationship between tenant and landlord.”

A strained relationship

With over half California renters paying over 30% of their household income in rent, high housing costs have already saddled state residents. Lawmakers are concerned their financial circumstances will worsen with millions of people on unemployment and unable to pay their rents.

Many of these people are disproportionately people of color, who have absorbed the brunt of crises such as these, according to civil rights advocacy groups.

“There are currently no statewide protections to shield renters from evictions once courts reopen post COVID,” said Matthew Warren, a housing attorney with the Western Center on Law & Poverty based in Sacramento.

To Warren, the world’s fifth largest economy can weather much but “thousands of renters on the street isn’t one of them.”

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