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California's Eviction Moratorium May Extend Into 2022: Here's What Investors Should Know

Dec 17, 2020 by Liz Brumer
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In August, 2020, California enacted a statewide eviction moratorium that extended beyond the national eviction freeze put in place by the Centers for Disease Control and Prevention (CDC). The California COVID-19 Rent Relief Act grants additional rent relief and protections to just under 240,000 tenants who are at risk of eviction once the moratorium expires on January 31, 2021.

With the expiration date quickly approaching despite economic recovery and vaccination relief still being a long way off, California policy makers are meeting to discuss the extension of the moratorium for the remainder of 2021. While nothing is set in stone yet, here's what investors need to know about the extensions.

What's being discussed

California Governor Gavin Newsom is being urged by advocacy groups like Housing Is A Human Right (HHR) and the AIDS Healthcare Foundation (AHF) housing division to convene a special December session of the legislature to vote on an extension of the statewide pandemic eviction moratorium into 2022.

They are requesting that $5 billion of California's $15.5 billion federal tax surplus be allocated to extending rent protections and financial relief to struggling tenants and landlords who have been negatively impacted as a result of the global pandemic. Landlord advocacy groups have shared their openness to discuss moratorium extensions, but not without some additional assistance for landlords. Nearly one year without rent for some landlords has been hard enough; many will not be able to survive another year.

Current policy protections

Currently landlords are unable to evict a tenant for failure to pay rent, if the tenant was directly impacted from COVID-19, which could include job less, reduction in income, or illness, and can provide evidence of this through a declaration of COVID-19 related distress, which must be produced by the tenant within the 15-day period from the date the notice to evict was received.

Moving forward, tenants who are unable to pay some or all of their rent because of COVID-19-related impacts and can produce the declaration of COVID-19-related distress must pay a minimum of 25% of their rent each month. Those who are unable to do so are at risk of eviction once the current moratorium expires February 1, 2021.

All unpaid rent from March 1, 2020, to January 31, 2021, will be converted into consumer debt, which can be collected upon through small claims court. Any tenant who has missed payments must be notified of these new rights by their landlord. Tenants who are unable to pay their rent and do not provide a declaration letter during the 15-day period can be evicted as of October 5, 2020, and all past-due rent is expected to be paid upon expiration, or landlords can begin the process of attempting to collect the debt in small claims court starting March 1, 2021.

Investor takeaway

Financially strapped landlords who may already be struggling to maintain property expenses or debt obligations without rent will without a doubt be negatively impacted with a mere extension of the current moratorium. Policy makers and tenant and landlord advocacy groups realize relief is needed just as badly for landlords at this point as is for tenants, which is why a general extension of the moratorium as it's written currently is unlikely. Landlord relief in the form of a stimulus, tax break, or other financial relief is necessary if policy makers plan to extend protections for tenants.

A health and safety solution is on the horizon with the release of the vaccine, but economic recovery takes time. Extending the moratorium as is is a bandaid for a much bigger problem. Right now, landlord advocacy groups are hoping for just under $1 billion in some type of fiscal relief as a part of the new act, but nothing has been put into writing.

Based on the governor's quick passing of the bill in fall of 2020, I personally believe some new long-term moratorium that will last into 2020 will be granted, but how quickly that will be released is the remaining question. There is the possibility of a short-term extension of the existing moratorium for another few months to buy them time as the vaccines are distributed to California residents according to Governor Newsom's new plan.

Honestly, no one knows what the outcome will be. How quickly a new moratorium is passed or a definitive answer on whether the moratorium will be extended as is will depend on how quickly advocacy groups can come to a middle ground and find a better long-term solution that offers protections and relief to both parties. In the meantime landlords need to know their rights and what is or isn't allowed according to the current act and be prepared to proceed or ride out these times accordingly.

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