A house divided: Landlords split on whether to fight anti-eviction bill

Last-minute legislation to halt California residential evictions has revealed a divide in political strategy among Golden State landlords.

The California Apartment Association and larger property owners did not publicly contest Assembly Bill 3088. They have bigger fish to fry, namely ballot referendums dealing with property taxes and rent control.

(The legislation was passed before the federal Centers for Disease Control issued an executive branch order Tuesday banning evictions from Sept. 4 until the end of the year for qualifying tenants.)

But the Apartment Association of Greater Los Angeles plus some individual landlords argue the legislative session – the final one of 2020 – was the time to cash in their political chips.

“This law will have devastating effects on small property owners and leave them holding the bag,” said Daniel Yukelson, executive director of the Apartment Association of Greater Los Angeles.

“Clearly,” said Neil Shekhter, CEO and founder of NMS Properties, “the landlords were left out to dry.”

California residential landlords have been unable to evict tenants since April due to an emergency rule by the California Judicial Council, the state court’s rulemaking body. But the rule sunsetted Aug. 31, prompting legislators to introduce AB 3088. The legislature passed it Monday night and Gov. Gavin Newsom signed it into law 45 minutes later.

Unlike the Judicial Council rule, AB 3088 compels tenants to show they experienced coronavirus-related hardship in order to get a rent break. However, if renters can do so and also pay 25 percent of the rent, they can stay in units until Jan. 31, when AB 3088 expires.

The Judicial Council order also imposed a moratorium on foreclosures, but the California legislature passed no legislation on that front.

“The state of California has no regulatory power on lenders and banking institutions,” Yukelson said. “All they can do is window dressing.”

The new law amplifies the frustrations of landlords, who throughout the pandemic have been compelled to cut tenants a break, while not getting mortgage relief for themselves.

“The tenants and lenders get a good deal, while the landlords have to make concessions,” Shekhter said.

So why didn’t the California Apartment Association fight the bill?

Thomas Bannon, executive director for the group, argues that AB 3088 was preferable to an earlier anti-eviction measure and provides landlords some relief such as the ability to evict problem tenants.

“This at least creates a path for cooperation between landlords and tenants affected by Covid,” Bannon said.

Bannon noted that the law expires Feb. 1 and it may have been the best California landlords could do after a proposed rental voucher measure went nowhere. Plus, there are other battles to fight, especially for landlords with large investment portfolios.

“The bigger issue is what’s on the November ballot,” said Kevin Conway, director of acquisitions at IDEAL Capital Group. “That’s what matters in terms of multifamily investing appetite.”

Conway, whose firm manages 9,000 apartment units throughout California, had in mind Prop 15, which would periodically reassess the value of commercial property each year for tax purposes instead of taxing the property at its purchase price. Also on the November ballot is Prop 21, which would institute rent control for residential properties not built within the last 15 years.

Prop 15 does not affect multifamily properties. But Conway is concerned apartment buildings could soon be targeted for higher taxes.

Bannon, meanwhile, is focused on Prop 21 — and hopeful his group’s conciliatory stance on AB 3088 could prompt Newsom to come out against Prop 21.

“I’m optimistic that he will oppose,” Bannon said.