Don’t sound the alarm! CA May rent checks not in freefall
Landlords mildly cheered by public assistance funneled to tenants
Paul Julian was not looking forward to May.
Julian’s income is from rent payments on the 9,000 apartment units he owns in Los Angeles, Orange, and Riverside side counties. And the past month in California was filled with not just economic disaster but legislative proposals plus rent strikes campaigns that target landlords as a scourge upon the state.
But Julian, a principal at Irvine-based Advanced Real Estate, said his May rent checks are down a modest six percent from a pre-coronavirus pandemic month, or around the same drop the landlord saw in April.
“We are surprised,” Julian said. “I am guessing the increase in unemployment benefits, the stimulus money and CARES Act payments people are starting to receive helped.”
California landlords’ rental income situation is complicated, contingent on factors such as the number of units owned and tenants’ economic status. Thomas Bannon, president of the California Apartment Association, said some landlords with low-to-moderate-income residents are seeing an up to 30 percent drop in May payments compared to a typical month.
Generally, though, landlords say May rental collections are not as bad as feared, given the worst U.S. unemployment rate since the Great Depression.
“Collections were not the end of the world this month,” said Kevin Conway, director of acquisitions at IDEAL Capital Group in Clovis. “May is actually better than April at this point.”
Conway, whose property group possesses around 6,000 units throughout California, said that tenants in nicer “Class A” buildings are paying almost 100 percent of their rent due.
Also, most affordable housing properties, which have a rental subsidy component, are near 100 percent. Conway said workforce housing properties for low-income tenants is the only lag, with a 10 percent collections drop.
Neil Shekther, whose NMS Properties owns 2,000 units in Los Angeles and Santa Monica, said he reached a similar rental income level in May compared to April thanks to “affluent renters” who are “less likely to be laid off or furloughed.”
Still, residential landlords are an anxious bunch.
For one, the majority of California landlords own five or fewer rental units, Bannon said, and one unit not paying rent could be crippling.
There’s also the pandemic’s open-endedness combined with landlord-unfriendly legislative proposals.
Landlords are “getting slaughtered” right now, said Daniel Yukelson, president of the Apartment of Association of Greater Los Angeles, because the state government is debating measures like Assembly Bill 828, which would impose rent reductions without compensating landlords, instead of bills to help landlords pay their mortgage.
“Most landlords do not have huge financial reserves,” Yukelson said, adding that he is skeptical of Gov. Gavin Newsom’s pledge to work with banks on mortgage refinancing.
“The whole thing about the governor talking to lenders doesn’t work,” Yukelson said. “Lenders have their own bottom line.”
One measure Bannon would like Newsom sign into law is Senate Bill 1410, a measure to give tenants vouchers to pay rent. But it may be a hard sell with California projected for a $54.3 billion deficit the upcoming fiscal year.
“We really think it is important for the state to give some type of assistance to renters and owners,” Bannon said. “But with a $54 billion deficit, what can you do?”