California Gov. Gavin Newsom and the state's top two legislative leaders pledged Monday to pay off 80% of most people's unpaid rent that has piled up during the coronavirus pandemic — but only if landlords agree to forgive the other 20%.
The proposal, which must be approved by the Legislature, could wipe out potentially billions of dollars in debt hanging over renters in the nation's most populous state by using federal relief money to compel landlords to forgive debt. It also would extend a law scheduled to expire next Monday that bans landlords from evicting people as long as they pay at least 25% of their rent.
But housing advocates worry the plan gives landlords too much power to decide what happens to their tenants' debt. If landlords refuse to forgive the debt, the state will only pay 25% of their unpaid rent to ensure their tenants qualify for the law preventing evictions through at least June 30. But there appears to be no recourse for tenants whose landlords don't take the deal.
“This really sort of puts the ball into the landlords' court in a way that we're not quite happy with,” said Cynthia Castillo, policy advocate for the Western Center on Law and Poverty. “It does the urgent work of extending the (eviction) moratorium, which we were very concerned about."
Landlords aren't happy with everything in the bill, either. But the California Apartment Association, which represents owners, investors, developers and managers of rental homes and apartment complexes, said the most important part “is the payment of dollars for rent that is owed.”
“Without this money, many landlords are at risk of losing their rental units," said Debra Carlton, the association's executive vice president of state public affairs.
The plan would cover unpaid rent between April 2020 and March 2021. Landlords would get more money to cover 25% of rent due from April to June.
California has lost 1.4 million jobs over the past year because of the pandemic, according to the state's latest employment survey. It's processed more than 19 million claims for unemployment insurance, paying out more than $114 billion in benefits.
But it's been difficult to track how that economic turmoil has affected housing. In October, the Federal Reserve Bank of Philadelphia estimated that California renters had compiled $1.7 billion in unpaid rent. This month, the nonpartisan Legislative Analyst's Office said the increase and extension of federal unemployment benefits had reduced that to $400 million, accounting for just 2% of all renters.
California housing advocates dispute that figure, with the Bay Area Equity Atlas and Housing NOW! California estimating as many as 1.1 million households were behind on their rent in December, facing an estimated $3.6 billion in debt.
Meanwhile, a survey by the State Water Resources Control Board found 1.6 million residential water customers, or 12% of all households, haven't paid their bills, creating a debt of $1 billion.
The proposal announced Monday is California's first major attempt at paying back those debts. The state would pay for the program by using $2.6 billion in federal rent relief money from the most recent coronavirus rescue package. About $1.5 billion goes to the state, while the other $1.1 billion goes to cities and counties with populations of at least 200,000.
The state can't tell cities and counties how to spend that money. But the legislation would give them an incentive to send it back to the state and let them operate the program. California hopes some smaller cities and counties will choose that option because they don't have experience with complex federal spending requirements.
The agreement is between Newsom, Assembly Speaker Anthony Rendon and Senate President Pro Tem Toni Atkins — all Democrats. The state Legislature, which is dominated by Democrats, is scheduled to vote on the bill Thursday,
In a statement, the three leaders said the proposal “maintains California’s COVID eviction protections as the strongest statewide rules in the nation.”
Assemblyman David Chiu, a Democrat from San Francisco, said it was “troubling” that the amount of debt renters will have paid off is “determined solely by the cooperation of their landlord.” But he praised the proposal for extending “critical eviction protections through the end of June.”
“I expect there will be a need to revisit this legislation to address gaps and provide relief to additional tenants,” Chiu said.
The federal money can only be spent on households whose income is 80% or less of the area median income. It prioritizes relief for households at 50% or less of the median income and those unemployed for at least three months.
State Sen. Scott Wiener, a San Francisco Democrat and chairman of the Senate Housing Committee, fears the proposal will leave some tenants out. He also worried the Newsom administration might bungle distribution of the money, “given California's logistical problems during the pandemic” with unemployment benefits and vaccines.
But Wiener said the state “must pass this proposal by the end of the week to avoid mass evictions.”
“This proposal is a step toward the critical goals of housing stability and economic and health recovery,” he said.