PD Editorial: Sweeten the deal for landlords and tenants

California, like most states, has struggled to balance the competing needs of landlords and tenants. The Legislature recently passed a pretty good plan, but it could be better.

The $900 billion coronavirus relief package approved by Congress in December included $25 billion for housing assistance. California’s share is $2.6 billion. The COVID-19 Tenant Relief Act, signed by Gov. Gavin Newsom last month, is the state’s blueprint for spending that money.

Landlords are intended to be the primary conduit for the aid. The act allows them to obtain 80% of rent that has gone unpaid for reasons related to the pandemic during the year that began on April 1, 2020. But there’s a catch. Landlords must agree to forgo collecting the other 20% from tenants.

That’s great for tenants, provided their landlords agree to take a 20% hit. Not all landlords can afford that. Losing one-fifth of a full year’s rental income would push some landlords, especially small mom-and-pop owners, into the red, resulting in foreclosures and distress sales.

The Legislature could make the deal more attractive to landlords by allowing them to claim a state income tax deduction or credit for pandemic-related losses not covered by federal aid. That might allow some small landlords on the edge of losing their property to survive.

Without widespread participation by property owners, federal aid will be of much less use to California tenants. The state’s plan allows low-income tenants whose landlords opt out of the 80% program to apply for funding to cover 25% of past-due rent. Filling only one-quarter of the debt hole would leave many renters unable to see daylight.

That leaves the fate of tenants in the hands of landlords, and too many of those tenants are in dire straits. The Bay Area Equity Atlas, in partnership with Housing NOW!, estimates that as of December, 1.1 million California households were delinquent in their rent to the tune of $3.7 billion. In Sonoma County, the atlas reports, 10,545 tenants owed $36.5 million in late rent.

That’s an average debt of $3,358 per delinquent household statewide, and $3,460 in Sonoma County. The debt is heavily concentrated among the groups hit hardest by COVID-19’s medical and economic effects: low-income households, Blacks, Latinos and Asian Americans.

California’s nonpartisan Legislative Analyst’s Office paints a different picture. It reported last month that the past-due rent bill totaled only $400 million. The office arrived at the lower figure by taking into account the direct payments and expanded unemployment insurance benefits flowing from state and federal coronavirus relief efforts.

Whichever number is correct — and probably it’s something in the middle — tenants need continued assistance to carry them through to the end of the pandemic. A survey conducted last month by the U.S. Census Bureau found that 1.4 million of California’s 10 million renters have no confidence in their ability to pay next month’s rent.

Additional housing aid is contained in President Joe Biden’s $1.9 trillion coronavirus relief package, which Congress may approve this week. The prospect of further federal assistance makes it all the more vital for California to ensure that directing aid to landlords is an effective means of rescuing tenants from insurmountable pandemic-related debts.

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