Some takeaways from Alameda County Supervisor Haubert’s online meetup with housing providers

 

There was a lot of buzz leading up to and during the debate between Governors Gavin Newsom and Ron DeSantis that aired around the same time, but we were tuned into a town hall-style meeting to address the concerns of rental housing providers.

Although Alameda County Supervisor Lina Tam was originally set to take the stage along with Haubert, she was unable to attend, leaving him to go solo in the Zoom meeting, but Tam was there “in spirit,” Haubert said. We did, however, hear from Jennifer Pearce, the Assistant Deputy Director of Alameda County’s Housing and Community Development Agency (CDA), who was called upon often to clarify issues raised by Haubert and the over 200 attendees on the call, mostly small, “mom and pop” landlords.

We thought we would come away with some sort of action plan to address the concerns of rental housing providers. While we learned that malicious tenants were intentionally pouring concrete down toilets, we didn’t come away with the sense that there was a concrete plan to assist landlords who are owed a mountain of rent debt. There is no way of putting a dollar and cents figure on the amount of COVID-related debt owed to landlords in Alameda County, but Supervisor Haubert speculated it hovers at $600 million.

Though not scientific, the ad hoc poll revealed that a staggering 35% of respondents have taken their rental units off the market. Bornstein Law can attest that many of our clients have called it quits. Small property owners are owed tens of thousands in rent debt and, at any rate, are facing a maddening regulatory regime and have said enough is enough. They are selling their properties, and to whom? Many are scooped up by the so-called “greed-fueled” corporate landlords that politicians loathe.

A matchmaker between buyers and sellers?

With Alameda County touting programs and perks tailored to first-time homebuyers, a question was posed: Can the county facilitate in being a matchmaker by pairing up aspiring homeowners with landlords looking to sell their rental properties? Can fed-up owners pass the torch to someone else looking for homeownership?

Although Jennifer Pearce committed to looking into this option, Supervisor Haubert pointed out that this defeats the purpose of preserving housing stock. We want landlords to stay in business and thrive, realize a reasonable return on investment, and continue to provide the community with quality housing, versus looking for an escape hatch to leave the rental business.

We hasten to say that when a new owner buys the building, existing tenants may remain ––with the rights of the previous owner being transferred to the new one. Yet we know that a vacant unit sells for more than one that is tenant-occupied and so the question becomes how to effectuate the vacancy.

This is a core practice area of our firm. With no other legal or convenient means to evict, we can facilitate a buyout agreement, assisting the owner in weighing the painful aspect of paying the tenant to voluntarily move out against the upside potential of selling the property vacant. Owners can use the Ellis Act to remove rental units from the market but this is the nuclear option and comes with a host of statutory requirements.

What about damage inflicted on the rental unit from rogue tenants? When asked if tenants left the place in shambles, 33% of Zoom respondents stated there were $5K or more damages. Supervisor Haubert says he wants to hear from landlords who have had their properties damaged beyond “normal wear and tear.”

Owners can email telldistrict1@acgov.org to give an account of damages in their units.

Although the audience was encouraged to share their horror stories, there is no clear answer as to how landlords can recoup their losses from the damage inflicted in their units. Thinking out loud, Supervisor Haubert mused that perhaps the County can deny legal assistance to tenants who have left substantial damage in their wake, but this is a slippery slope. Good in theory to deny a problematic tenant a free attorney, but no one is going to pick and choose which tenants will be represented.

 

If Alameda County is paying the legal bills for tenants, why can’t landlords get representation? 

Although fumbling on exact numbers and how the money is spent, Jennifer Pearce of CDA said the county forks over around $1.8M to Centro Legal De La Raza

The legal arm of the organization “strives to stop displacement and stabilize our communities through eviction defense, drop-in legal clinics, affirmative litigation, policy advocacy and administrative hearings before rent boards," according to its website. 

This group is only one of several contracted organizations that provide free legal representation to tenants facing eviction, but we are unaware of any government-funded legal aid for housing providers. Supervisor Haubert and those in attendance recognized this discrepancy.

The fact that housing providers do not get free legal representation funded by the government is one thing. But consider that the same tenant attorneys subsidized by the county are ratcheting up the legal bills of landlords. Not only are housing providers denied a free attorney; their legal expenses are jacked up by opposing counsel paid for by the taxpayers. 

Naturally, we are asked by housing providers how much it costs for our firm to settle a landlord-tenant dispute, and the answer is we don’t know because the biggest variable is which attorney a tenant gets and how hard they fight.

We have no doubt that tenant attorneys zealously representing their clients have done a lot of good. They have forced housing providers to remedy unacceptable conditions in rental units, kept families housed when there was no good reason to be displaced, and served justice to countless tenants who could not fend for themselves. We get it.

Bornstein Law does not paint anyone with a broad brush. There are good tenants and bad tenants. By the same token, good landlords and bad landlords. There is a system in place to air grievances and distinguish between the two.

Yet if good tenants are provided a free lawyer to take on bad landlords, why not provide a free lawyer for a good landlord dealing with a bad tenant? We believe that this message has resonated with Supervisor Haubert and hope that it sinks in for his colleagues, as well.

 

How effective was rental assistance? 

Less than ideal. A large number of people on the call reported that tenants were uncooperative in applying for rental assistance, many of them still working, had no genuine COVID-related hardship, but just chose not to pay because they were insulated from eviction because of the moratorium. We recall one occasion where a nonpaying tenant asked their landlord for additional parking space to park their shiny new Tesla.

This frustration is felt by many in our community, and for those fortunate enough to get help from Uncle Sam, 33% of those in attendance of the online meetup received less than $5K, clearly a drop in the bucket of what is owed.

 

We’ve given varying grades to the Emergency Rental Assistance Program (ERAP). 

Midstream, we gave it a B minus, but it steadily went down to a C and in many cases, an F. Tenants could not profess ignorance over the availability of rental assistance funds; short of erecting a billboard in front of every rental property, there was a massive outreach campaign to educate them on a pool of available money.

 

So, we had a throng of tenants who simply did not qualify for rental assistance because they made too much money, some lacked the technical prowess to complete the application, and others who flatly refused to cooperate.

Sure, there were many people who had technical difficulty going through the Housing Is Key website. There were incremental changes made along the way to make the portal simpler for users, but it was still a technological marvel and some tenants lacked the tech-savviness to complete the application from start to finish. Indeed, many didn’t even have a computer, much less a scanner.

We’ve experienced this ourselves with our client intake form, in which we ask prospective clients to upload their lease so that we could review the rental agreement to have an informed conversation, but some do not know how to share the document. During the application for rental assistance, then, we urged landlords to be proactive and assist tenants by showing up with a laptop and guiding them along through the steps, but it was hit or miss.

What has really earned the ire of our clients are those unresponsive tenants who could have applied for rental assistance but out of spite, decided they would stick it to the landlord. For whatever reason, they didn’t think the landlord was deigned to get help for unpaid rent.

According to Supervisor Haubert’s unscientific poll, 38% of those who did not get compensated for COVID-related rent debt say it was because the tenant was uncooperative and refused to submit information. In these instances, Haubert pledges to make them whole, although there are scarce details on where any money would come from.

 

Roughly half of the respondents have sued or intend to sue tenants for unpaid rent, while the other half have no plans to go to small claims court. 

At one time, landlords could sue for up to $10K in small claims court but it was clarified that lawmakers expecting a deluge of litigation removed this limitation; tenants can be sued for any dollar amount.

However, we liken small claims court to a kangaroo court with little due process and a volunteer judge. The plaintiff landlord cannot be represented by an attorney unless the defendant tenant appeals.

If there is a substantial amount of rent debt owed, it may be more prudent to commence a lawsuit in Superior Court. It is more costly, but the plaintiff can be represented by an attorney and there is more due process, making it more likely that the landlord will obtain a judgment.

Keep in mind that a judgment is a piece of paper. The judge will not pick up the defendant, turn them upside down, and shake money out of their pocket. Collecting on the judgment is a whole other matter yet to unfold. One consideration is the credit-worthiness of the tenant. If they are living hand to mouth and have other judgments, it may not be worthwhile to aggressively pursue rent debt, while more well-to-do tenants with an upward trajectory in life (and bank account) may be more motivated to negotiate a settlement to avoid a judgment on their record and preserve their credit.

One novel idea suggested was that the County buy COVID-related debt and then as the one holding the debt, the County seek collection of the rent arrears, but this was quickly dismissed as impractical with no mechanism to accomplish this.

 

Tax abatements and/or cold cash?

Alameda County lawmakers can provide tax relief for distressed rental property owners or find funds to cut them a check. The county did get a windfall of tax payments under Measure W, but these funds are in a suspended state of ambiguity because the matter is embroiled in litigation.

 

We can go on, but let’s stop and make some parting remarks to Supervisor Haubert directly.

Mr. Haubert, thank you for recognizing the hardship of rental housing providers and the inequity of county programs that keep people housed but have done little, if anything, for landlords. We were disturbed to learn that when probed, Jennifer Pearce was hard-pressed to cite any meaningful, if any, impact that the CDA and its contractors have had on rental property owners, and that assistance is only available to a subset of low-income owners or those at risk of imminent foreclosure.

We attended your town hall meeting months ago, where you struck all the right chords with the rental housing community. We love you. But now this empathy toward our community should be translated into action.

We know that you have job security, but the political future of other Board members is more tenuous as they make a balancing act between landlord and tenant groups, so you’ll need to sell your position to others. Now is the time to rally your colleagues to your side.