For Landlords in the Greater Los Angeles Area, All Doors Are Shut for Seeking Rent Relief

Written by Landlord Property Management Magazine on . Posted in Blog

By David Evans, Multifamily Advisor, KW Commercial

For the past two and a half years, rental housing providers in the Greater Los Angeles Area, from owner-occupied duplexes to 4-unit apartments buildings to the largest apartment communities have seen their rental income squeezed by the lingering effects of eviction moratoriums coupled in some instances by moratoriums on rent increases, which protections have been extended through to another year. Compounding the effects of the eviction moratorium is record high inflation (9.1% as this article is being written) causing the cost of materials and utilities to increase significantly over last year.

While the strong real estate market in 2021 and the first quarter of the current year allowed many owners to refinance existing debt at historically low rates, allowing them to mitigate their mortgage costs or tap into equity to carry them through the long months of COVID-19 as they waited for payments from the state’s Emergency Rental Assistance Program, as of March 31st of this year, the rent assistance program has been closed and no longer taking applications.

On June 28th, Kathryn Barger, 5th District Supervisor of the Los Angeles County Board of Supervisors filed a motion to review the moratorium’s impact on property owners under the County’s tenant protections. Supervisor Barger also held an online forum where rental property owners across the County could call and email regarding their experiences with the eviction moratorium: close to a thousand pages of comments and letters poured in from all types of rental housing providers, from small, private owners to institutional apartment operators all who implored the County to end the moratorium, which currently has been extended through June 30, 2023.

Barger’s motion directed the Los Angeles County Counsel, the Department of Consumer and Business Affairs, and the Chief Executive Office’s Homeless Initiative to report back in 30-days on the status of legal challenges to the County’s protections for tenants and recommendations on whether the Board should consider an earlier phase-out plan for its tenant protections.  While County Supervisor Barger’s efforts are noble, owners in Los Angeles need immediate relief, and even if the ability to evict was granted right away, it could be up to a year long wait to gain possession back of their property, and possibly losing tens of thousands of additional dollars in rents, attorney fees and repair and turnover costs during this time.

The solution that would be the most beneficial the area’s rental housing providers and renters alike would be the reopening of the City of Los Angeles’ Emergency Rental Assistance Program and the State’s Housing is Key program for those who could not submit their application by the March 31st deadline. If the County is concerned about the effects of a mass eviction on the economically unstable, then this solution would be the most sensible until another viable solution can be found.

If rent relief is not provided to Greater Los Angeles Area landlords, ultimately it is the County (e.g., the Assessor through delinquent property tax payments) and the tenants who will suffer- operating with less or no income makes it impossible to make repairs and address required maintenance, especially when it comes to state and local government mandated upgrades and repairs, such as earthquake seismic retrofitting (as of this writing, 691 apartment buildings have not submitted plans in the City of Los Angeles alone and other local jurisdictions have recently adopted seismic retrofit ordinances) and balcony inspections and repairs (as required by relatively new state law, Senate Bill 721).

It’s important to note that the eviction moratoriums have also had a damning effect on the equity of minority owners, as it has disproportionately affected communities where the owners and tenants are minority based-where it is more difficult to obtain financing from traditional lenders.  Driving through many neighborhoods in Los Angeles, one can see an increasing divide between the owners who are well capitalized who can afford to make improvements to their properties, with walls freshly painted in white or grayish hues and those who cannot, often properties that are faded peach or orange colored with rusty gates and other aging metal elements. These are the properties that are owned by those property owners who cannot afford to make the repairs / improvements under the challenging conditions imposed by government in response to COVID-19.  Yet, such repairs / improvements are desperately needed to command market rate rents which is nearly impossibly as these properties tend to be those that are inhabited by tenants who can only afford to pay rents that are below market rate, or that have not paid rent for extended period of time due to COVID-19 protections.

If the Los Angeles Housing Department and the state’s rent relief program does not reopen its portal for new applicants desperately in need of relief, then it will be tough year ahead for tenants and their landlords as there does not appear to be an end in sight to eviction moratoriums and freeze on rent increases coupled with high inflation.

David Evans is a Multifamily Advisor for KW Commercial.  His focus is helping sole owners and real estate corporations alike with the acquisition and disposition of their multifamily assets.  He holds a Masters Degree from Chicago University and a Bachelors Degree in Journalism from Southern Illinois University at Carbondale.  You can reach Mr. Evans at (310) 804-3829 or david.evans@kwcommercial.com.  Mr. Evans is a member of the Apartment Association of Greater Los Angeles’s Business Council.

(Editor’s Note: A small “glimmer of hope” for rent relief has been built into the state’s 2022 / 2023 approved budget, but only for those that had submitted applications by the March 31st deadline.  We shall see if the state lives up to its promises and delivers the relief where needed rather than squander it away to fraudulent applicants and the like.)

PayRent.com