Unstable Property, and We're Not Talking About Earthquakes

As we predicted when it was first enacted almost one year ago, the moratorium against evictions for non-payment of rent has been impossible to terminate. It was supposed to end in June, then September, then December, and now under a deal that's sure to be rubber-stamped by the legislature it's been extended to June, 2021.

Gov. Gavin Newsom and state legislative leaders have agreed to extend California’s partial eviction moratorium by another five months as they prepare to hand out billions of dollars in federal rent relief to struggling tenants and property owners.

The deal, which still must pass the Legislature, was put into print on Monday morning, meaning lawmakers could vote on the bill as soon as Thursday. It would allow tenants who are facing financial hardship because of the coronavirus pandemic to stay in their homes until at least the end of June, when property owners could again pursue evictions for nonpayment of rent.

Sure, landlords, try to collect almost a year's back rent next summer. As I wrote in September

There is a next-to-zero chance of collecting the unpaid rent once a tenant moves out, so basically the State will have taken tens of $thousands per rental unit from property owners in order to effect public policy.

Your humble blogger understands why they did it--California did not want thousands of people to be out on the street while the coronavirus was raging--but the burden should have been borne widely by the State treasury, not narrowly by the landlords, once the eviction suspension lasted more than a couple of months.

Nice condo: now it won't be rented till July

It's possible, though admittedly this is probably at the high end of the range, for a landlord to be out $45,000 (15 months x $3,000). Meanwhile, the landlord had to pay property taxes, mortgage debt, maintenance, and association fees, none of which were deferred or forgiven.

We caught up with the small landlord who has been holding her rental condo vacant since last September. Though she's not wealthy by local standards, she can bear the burden ($2,200 per month) of keeping it empty until the State enforces real estate contracts again. She'd rather carry a vacant property than run the risk of getting a squatter who will stay there indefinitely. Even so, once the moratorium is lifted she will only lease to a tenant with the best credit rating and the most stable employment.

The irony is that, in the face of a housing shortage, housing is being withheld from the market not because of landlord "greed" but because of the much higher business risk that the Government has created through its constant changes to the law.