Tenant protection bill is failing in California Legislature, again

Categories: Planning Property Management Real Estate Residents

Published 02/22/2022

Photo by Kimson Doan on Unsplash

Assembly Bill 854 would’ve curbed an owner’s ability to evict tenants using the Ellis Act in rent-controlled jurisdictions. Tenant advocates, racial equity groups, YIMBYs, and even some of their usual opponents wanted to see the bill pass. The cities of San Francisco and Los Angeles — which rarely see eye to eye on housing issues — as well as every Democrat on the Assembly Housing and Community Development Committee, signed on.

So why did Assembly Bill 854 die without even a floor vote in the Democratic-supermajority Assembly? Proponents of the longtime progressive priority — which promised to preserve the stock of affordable apartments amid a historic shortage — point to an aggressive campaign mounted by the real estate industry.

But just as a diverse group of advocates united to support the bill, thousands of property owners — even those outside unincorporated Los Angeles County and 20 rent-stabilized cities directly affected — opposed it. United by a sense that the state is chipping away at their rights, just as COVID-19 has decimated their business.

The author of A.B. 854, Assemblymember Alex Lee, says the legislation would have passed out of the Assembly and over to the state Senate. But for the recent departures of four Democrats: Lorena Gonzalez from San Diego, Ed Chau from Monterey Park, David Chiu from San Francisco, and Jim Frazier from Fairfield.

Lee is still weighing whether to reintroduce “substantially the same bill” next year or this legislative cycle — an option left on the table by avoiding a losing floor vote. Similar bills have gotten introduced, unsuccessfully, at least three times before.

Protect small landlords — or big business?

A.B. 854 aimed at the Ellis Act, a state law issued in 1985 that allows owners of rent-controlled properties to evict their tenants if they remove all units in a building from the rental market. A path that may be blocked by local governments - guarding the stock of affordable units. Once off the market, those apartments can be sold as condos or demolished to make way for new homes.

More than 27,000 rent-controlled units have been removed in Los Angeles since 2001 using the Ellis Act, while San Francisco has lost about 5,000 units since then. And they’re sorely needed: the California Housing Partnership estimates 1.2 million low-income renter households don’t have access to affordable homes, and building a new government-subsidized unit costs an average of $500,000.

Lee’s bill mandated a five-year holding period before evicting tenants — an attempt to allow struggling property owners to go out of business, as had been the law’s original intent while preventing speculators from buying up cheap properties and flipping them overnight. The bill also restricted using such evictions to one building per owner per decade.

That would significantly curb Ellis Act evictions, as three-quarters of evictions in Los Angeles between 2016 and 2019 occurred within five years of purchase, according to a recent analysis by Alexander Ferrer, policy and research analyst at SAJE in Los Angeles.

But because of a glaring lack of transparency around who owns buildings in California, the effect on mom-and-pop landlords — a group the Legislature holds dearly — is challenging to determine.

In an opposition letter to lawmakers, the California Association of Realtors asserted that the bill would devastate “Struggling Small Property Owners Who Are Seniors or Individuals of Color.”

Ferrer’s analysis found that owners who had a property registered under their name evicted tenants, on average, eight years after purchase — while limited liability companies, responsible for more than half of those evictions, did so in an average of just three years. But in California, it’s not uncommon for individual property owners to put even a single rental into an LLC.

That means a bid to win more votes — an amendment that carved out an exemption for “natural persons” who own no more than four residential units — is “not logical,” according to Debra Carlton, executive vice president and chief lobbyist for the California Apartment Association.

Ferrer found 45% of Ellis Act evictions during that period in Los Angeles were filed by owners who held five properties or less – L.A.’s definition of a mom and pop landlord – a percentage Wagle, from the California Association of Realtors, says is not insignificant. In addition, he argued, the impact of the pandemic on small property owners should not be understated. Some landlords, he said, have gone nearly two years without rent payments, thanks to eviction bans, while still having to upkeep their properties. Read more on this by visiting the Mercury News article.

Policy and politics at the Capitol

California YIMBY, which often supports housing production efforts, backed the bill because production alone isn’t enough, said legislative director Louis Mirante.

However, The California Apartment Association dubbed the bill the “Stay in Business Forever Act,” arguing that it restricted landlords’ freedoms. Carlton said while a property owner could still sell their building, without the option of turning below-market apartments into more-profitable condos or market-rate units, the universe of buyers shrinks considerably.

The California Chamber of Commerce opposed the measure for the same reason as the California Building Industry Association. Carlton also argued the bill would block “tenancies in common,” in which several families buy a duplex or fourplex together — the only way for some families to enter homeownership as median home prices top $700,000 in California.

An advocate at the Tenderloin Housing Clinic, Sarah Abdeshahian, said during the two weeks leading up to the vote, legislators who had initially demonstrated their support for the bill began parroting the talking points they read in opposition letters by the Realtors and the Apartment Association. That spent $1.6 million and $1.3 million, respectively, in total lobbying efforts in 2021.

Learn more on this by visiting the Mercury News article.