One renter, who wanted to be indentified as Ms. Jones (right), meets with Luz Robles, project manager for Reading and Beyond's rental assistance program. Photo contributed by Reading and Beyond.

The number of eviction cases Central California Legal Services has taken on has not significantly fallen from before the pandemic, even with an eviction moratorium, said Brandi Snow, supervising attorney for the housing team at the not-for-profit law firm with offices in Fresno, Visalia and Merced.

“We always have at least 300 files open at any one time,” Snow said. “That has not dropped during this moratorium period.”

Those facing evictions are potentially entering a market with low vacancies and rising rents. The federally funded Emergency Rental Assistance Program in California offers to pay 80% of back rent — so long as it can be demonstrated that past-due rent is because of Covid hardship.

“That’s one reason we really hope to see a significant number of people bailed out of that situation by the Emergency Rental Assistance Program, so that they don’t exit the period of eviction protection owing more than they can likely ever pay,” Snow said.

 

Brewing tsunami?

The ability for the Emergency Rental Assistance Program to stave off what some have feared would be an eviction tsunami come July 1 depends on tenants and landlords being able to understand the rules behind accessing funds. What’s more is it will take both tenants and landlords working together — a relationship not always known for being cooperative.

The first step to preventing a flood of evictions is getting back rent paid.

Data from the Federal Reserve Bank of Philadelphia show that of the 33.5 million renting households nationwide, more than 12 million had at least one income-earner out of work at some point. A study by the Bay Area Equity Atlas in January found that more than 23,000 households in Fresno County were behind on rent, with an average debt of $1,834. In Madera County, they estimated 2,636 households averaging $1,887 in debt. Kings County had 3,206 indebted households averaging $1,741 in debt and Tulare County had 9,766 households with $1,680 in debt.

In January, total rental debt was estimated to be $42.7 million in Fresno County. As of April 26, Fresno County had accepted more than $1.9 million in claims, with the average claim being $7,134. They had 623 total applications started, with 275 completed. The City of Fresno, in its own program, had distributed $555,382 by April 27.

 

Renters at risk

Many of the people struggling to catch up on back rent are the same ones struggling to properly fill out applications, said Luis Santana, executive director for Reading and Beyond, a nonprofit contracted with the City of Fresno to help process rental assistance applications. The nine-page document requires several forms of income verification and access to online resources.

“People who have been struggling have not just been affected by Covid,” Santana said. “They have been living through struggles even before Covid.” There are people who are still working, looking for jobs or taking care of children.

As of April 21, Reading and Beyond had processed 50 applications for the program that opened April 5, with a waiting list of 250 people. Santana predicted the same number of applications for the five other organizations processing them.

Sometimes, appointments take only an hour. But it can also take three or four appointments before an applicant has everything they need.

 

Pay me to leave

While rental assistance was designed to keep people in their homes and prevent an eviction tsunami, it requires compliance with the terms of the law.

When renters heard the term “eviction moratorium,” many assumed they didn’t have to do anything, Snow said. California’s SB 91 outlined the rules by which federal rental assistance funds could be distributed. Many didn’t know they had to fill out hardship paperwork. Many also didn’t know it requires that 25% of back rent be paid in order to avoid eviction.

Then there are the renters who haven’t bothered to reach out.

Laws have put negotiating power in the hands of tenants, says Robin Kane, senior vice president of the Mogharebi Group, which specializes in brokering the sale of apartment complexes.

Covid-19 has restricted how tenants can be evicted, said Kane. And when they are evicted, landlords are restricted on how much they can report on the renter’s credit history.

“As the amount of deferred rent continues to grow, the power has begun to shift from the landlord to the tenant,” said Kane. “We are seeing tenants negotiate their occupancy for large sums of money in exchange for vacating.”

The settlements — referred to as “cash for keys” — began in Oakland and Santa Monica, Kane said, but has since spread throughout the state. It followed with many renters falling further behind and landlords not seeing a way out.

“If a tenant was only $1,000 behind, the landlord is in the driver’s seat,” said Kane. “But when a tenant is $5,000 or $10,000 behind, the tenant is in the driver’s seat.”

 

Landlords see leeway

With the rental market so tight, landlords don’t have to wait long to fill vacancies. California law AB 1482, passed in 2019, limits rent increases to 5% annually, plus inflation. Once a unit is vacated, it is no longer bound by that rule. Landlords can raise it to market rates.

“It’s a win-win-win situation,” said Kane.

For landlords, chance has largely governed exposure to tenants hit hardest by Covid. And largely, it’s been the smaller “mom-and-pop” landlords who are suffering the most, said Kane.

Some 100-unit complexes may only have a couple of delinquencies while some smaller complexes may have 25% of tenants not paying.

The chance to collect 80% of unpaid rent means making up for a majority of their losses without having to go to the courts. For tenants, it can mean a fresh start with rental debt paid off.

Even still, there are reports of non-cooperation from both sides. Some landlords have been struggling to get tenants to apply for rental assistance. Landlords started some 101 of the 623 applications in Fresno County.

 

Some not participating

At Reading and Beyond, Santana said they have encountered a number of landlords who have refused to sign off on the application for whatever reason.

“There is no shortage of tenants looking for rentals,” he said.

If landlords want to receive rental assistance, some counties electing to administer the program on their own have covenants restricting the reasons landlords can evict a tenant. Some require protection for eviction against things such as noise complaints or people living in the apartment not named on the lease.

“They don’t want to compromise those rights in exchange for 80 cents on the dollar,” said Kane.

Snow said a lot of eviction cases going on now are carefully worded to avoid any mention of nonpayment. Some of them are regarding nuisances or safety standards and others are for things such as a person living in the unit not on the lease.
“It may be something they’ve known about forever but suddenly it’s a problem,” said Snow.

For landlords who refuse to sign off on applications, tenants can receive a payment of 25% of what they owe sent directly to them, said Santana. While it is supposed to cover what 25% required to keep them from being evicted, that isn’t necessary.

 

Market conditions complicating

Snow said she plans to argue that landlords who don’t sign off on applications are forfeiting any future claim for unpaid rent.

People agree that the disbursement of funds has come too late and has been difficult to navigate. Still, increasing rents have created a unique market condition where it’s more profitable for landlords to pay out tenants with considerable rental debt. And in a marketplace such as the Central Valley where rents have increased 12% during the pandemic — according to real estate firm Apartment List — cash may be the only help people already rent-burdened have to keep off the streets.

Snow said they were hoping rental assistance would be more widespread and easier to access.

“Even if it gets rid of a majority of those cases, so many people have been impacted in the last year we are going to see more evictions,” Snow said. “I think we’re going to see a flood and the flood may be a tsunami.”