LA moratorium to go, but “just cause” eviction rules to come

For Los Angeles landlords, the hard work is just beginning.

After more than two years of the Los Angeles eviction moratorium, landlords had to be satisfied with the L.A. City Council vote to lift what was the longest running prohibition on evicting non-paying tenants in the state. California and almost every other county and municipality had lifted their pandemic emergency eviction moratorium earlier this year. L.A. County supervisors voted to end the county moratorium on Sept. 14.

On Oct. 4, the L.A. City Council voted 12- 0 to lift the moratorium by Feb. 1. But with the end of the moratorium, the City Council started the process to implement new regulations on landlords.

The Oct. 4 L.A. City Council vote approved a new “just cause” eviction rule, which was championed by progressive members Nithya Raman and Kevin de León.

The City Council requested the city attorney and the Los Angeles housing department create a draft of a new ordinance that will expand just cause evictions to all residential rental properties in the city. Previously this rule was applicable to units covered by the city’s rent stabilization ordinance. A draft of this ordinance will be discussed by the council on or before Jan. 31, according to the L.A. city clerk.

Under just cause rules, a landlord can only evict a tenant for certain reasons, which must be enumerated in writing. Under the current rent control rules, the reasons include failure to pay rent and unauthorized people living in the unit.

During the pandemic, property owners complained the restrictions, which started in March 2020, left them vulnerable to scammers who used the pandemic as an excuse not to pay rent. Landlords also complained that they were not offered financial lifelines to help them through the pandemic, unlike renters and lenders such as banks, which received federal assistance. While landlords’ revenues declined, costs to maintain apartment buildings increased.

Recouping lost revenue is never easy. But the “just cause” rules could make it harder than usual.

Daniel Yukelson, executive director of landlord trade group Apartment Association of Greater Los Angeles, said that apartment owners were glad that the moratorium was ending, but he forecast renter protection rules set by the state and city will severely curtail attempts to collect rent due.

“Literally hundreds of millions of dollars are on the table that will ultimately become complete write-offs. The City of Los Angeles and other jurisdictions imposing these moratoriums might have simply exploded a bomb over the heads of housing providers and would have had the same effect,” he said.

Ari Chazanas, an AAGLA director and president of Lotus West Properties, which owns and manages 1,000 residential units in Los Angeles, said that many of his colleagues predict that they’ll never recoup their losses. Rather, he forecasts that property owners will be able to eventually recoup lost revenue through property tax breaks and discounts with utility companies.

This could happen if AAGLA and other apartment landlord groups prevail in several legal challenges active around the country, including the U.S. Supreme Court, which decided not to hear the AAGLA case earlier this year.

Despite the economic pressures of the pandemic, Los Angeles’ multifamily market is doing well, said Josh Kaplan, a managing director in the Los Angeles office of Transwestern, a national brokerage. The city’s strength as an economic engine has continued to attract renters looking for housing.

However, mom-and-pop landlords suffered during the pandemic.

“The L.A. eviction moratorium did not have a defined end date for a long time. A lot of landlords did not know when they would be able to collect rent,” Kaplan said. It made standard lenders anxious.

“A lot of buyers who wanted to buy a small to mid-sized property where they would be able to easily cover debt service on a monthly basis, couldn’t make sense of a building with collection issues. So this shrunk the buyer pool for these properties. This situation attracted mostly value-add buyers who could take on a non-traditional loan, like a short-term bridge loan or hard money. They could take the risk of not collecting from a non-paying tenant,” he said.

Raman’s office said that before the pandemic, an estimated 30,000 evictions were filed in the city of Los Angeles. During the pandemic, eviction filings dropped 67 percent due to the moratorium.

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