Mom-and-pop landlords getting squeezed in Sonoma County with cascading regulation
When Gov. Gavin Newsom on Friday signed legislation to extend a statewide moratorium on tenant evictions until June 30 because of the pandemic-induced economic upheaval, he emphasized the sweetener included for landlords in the law.
Newsom was referring to the pool of $2.6 billion for landlords to cover a portion of tenants’ unpaid rent between April 1, 2020 and March 31, 2021.
“We are trying to help small landlords as well here at the same time we are helping tenants,” the governor said.
Even with the olive branch from the state, smaller landlords in Sonoma County are unhappy, calling this another regulation that will squeeze them. They are left questioning whether owning rental investment properties is still viable for them — especially since the county Board of Supervisors are considering further action next month to add to tenant protections.
With the strengthening protections for residential tenants, some of the spotlight has shifted to the “mom-and-pop” landlords who typically own a few rental homes in the county. Monthly rents provide them with extra income until they eventually cash out and sell their properties.
About 60% of the 80,000 rental units in the county are owned by this type of property investor, said Ross Liscum, a Santa Rosa real estate broker affiliated with Century 21 NorthBay Alliance.
Jennifer Coleman is one of them. For almost 30 years, she has been a landlord renting two duplexes and two townhomes. They are in a partnership that she has with another investor, a rental portfolio rebuilt since the Great Recession in 2008. She owns one townhome rental on her own and has sold three single-family units from tightening regulations..
She cited the list of expenses for each property: taxes, insurance, maintenance and more. She and her investor partner rely on cash flow from monthly rents to be sustainable.
“We took what little money we had left (after the last recession) and with sweat equity put it into an investment property. So these are my semi-retirement earnings,” said Coleman, who is also a renter. “I can't afford to subsidize people.”
Besides the statewide eviction moratorium, since last January landlords have been operating under another law that capped annual rent increases at 5%, plus the rate of inflation for much of the state’s multifamily housing stock. And landlords are required to show “just cause” to evict tenants who have been living in a property for 12 months or more.
Sonoma County is under even greater rental protections, after last month Newsom extended through Dec. 31, 2021 a price-gouging order originally enacted after the 2017 North Bay wildfires. It prohibits rental increases of no more than 10% from the time when the measure first went into effect in fall of 2017.
Now, the county supervisors, led by newcomer Chris Coursey, may tighten eviction restrictions even more with a new ordinance under consideration to block evictions when property owners seek to sell or move into their own properties.
“This is about a pandemic,” said Coursey, who tangled with the local apartment management lobby before when he served on Santa Rosa City Council. That battle ended up being an unsuccessful effort to implement rent control.
“We don't need people being kicked out of their homes, having to either be out on the street or doubled up with a friend or family in overcrowded conditions,” he said.
Talk of such tighter rules for landlords are having an effect on the rental market, Liscum said. He had five clients who sold their rental properties in 2020 and they were bought by owner-occupied buyers. His research concluded 46 single-family homes in Santa Rosa and another 138 condominiums that had been rented were sold last year.
That’s 184 rental properties that are out of the market, he said.
“If there's a need to help tenants who for whatever reason are unable to make their payments, there should also be a need for government to help those folks that are providing the housing opportunities to be made whole ... and not just discounting it because they're rich people and all this other stuff that gets thrown around,” Liscum said.
For example, the real estate broker cited Bob Miller, who has owned three rental properties in Sonoma County for almost 20 years. One of his tenants in a southeast Santa Rosa unit has not paid rent since April. After repeated requests to learn more about the situation, the tenant told Miller there’s financial hardship.
Miller finally hired an attorney who reached an agreement last year with the tenant. The tenant was supposed to pay $100 weekly. But Miller never heard back from the tenant. In September, the tenant started paying 25% of the monthly rent — the minimum amount required under the state eviction law extended last week to avoid being removed from a rental home.
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