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Eviction bans taking a bite out of landlords’ bottom line

LA Daily News logo LA Daily News 9/18/2020 Jeff Collins
a man standing in front of a mirror posing for the camera: Adam Bray-Ali currently has one unit for rent in a Los Angeles triplex after a tenant moved out owing $6,000 in back rent. He’s now losing money on two of this five rental properties, is dipping into savings and has skipped some of his mortgage and utility payments. He is considering selling one of his buildings to make up for lost rent and negative cash flow. (Photo by Sarah Reingewirtz, Los Angeles Daily News/SCNG) © Provided by LA Daily News Adam Bray-Ali currently has one unit for rent in a Los Angeles triplex after a tenant moved out owing $6,000 in back rent. He’s now losing money on two of this five rental properties, is dipping into savings and has skipped some of his mortgage and utility payments. He is considering selling one of his buildings to make up for lost rent and negative cash flow. (Photo by Sarah Reingewirtz, Los Angeles Daily News/SCNG)

Real estate agent Adam Bray-Ali hopes to retire someday off the income from his small portfolio of triplexes and four-plexes.

But lately, his side job as a landlord isn’t going so well.

Tenants in three of his 20 units stopped paying rent after the coronavirus pandemic hit in March. One tenant moved out owing $6,000. Now Bray-Ali is losing money on two of his five buildings, and he’s thinking about selling one of them. Thanks to forbearance, he’s been able to skip some mortgage payments and about $10,000 in water and electric bills.

“I’m paying what I can on the five properties … (but) I don’t have enough cash to pay everything,” Bray-Ali said. “I’m absolutely dipping into savings.”

a man standing in front of a house: Adam Bray-Ali, 46, of Alhambra is losing money on two of his five rental properties after tenants in three units stopped paying rent, including this triplex southwest of Pasadena. One in five Southern California renters said in late August they were behind on the rent because of the pandemic, a U.S. Census survey showed. While eviction moratoriums seek to protect renters who fell ill or lost income due to the coronavirus, landlords complain the government has left them shouldering the burden of tenant protections. The rental housing industry is calling on Congress to pass $100 billion in rental assistance to protect landlords from foreclosure. (Photo by Sarah Reingewirtz, Los Angeles Daily News/SCNG) © Provided by LA Daily News Adam Bray-Ali, 46, of Alhambra is losing money on two of his five rental properties after tenants in three units stopped paying rent, including this triplex southwest of Pasadena. One in five Southern California renters said in late August they were behind on the rent because of the pandemic, a U.S. Census survey showed. While eviction moratoriums seek to protect renters who fell ill or lost income due to the coronavirus, landlords complain the government has left them shouldering the burden of tenant protections. The rental housing industry is calling on Congress to pass $100 billion in rental assistance to protect landlords from foreclosure. (Photo by Sarah Reingewirtz, Los Angeles Daily News/SCNG)

Bray-Ali is one of thousands of landlords large and small who say they have been forced to shoulder the burden of protecting tenants during the six months since the pandemic hit and eviction bans took effect.

When lockdown orders caused unemployment to skyrocket last March, public officials quickly realized evictions and foreclosures would soon mushroom without extreme measures.

By the end of the month, Gov. Gavin Newsom signed three executive orders protecting tenants from eviction.

In a state that leads the nation in homelessness, most renters would remain housed — no matter what. And while a handful of local governments are providing rental assistance to help landlords and tenants stay afloat, state and federal governments have yet to approve such funding.

Meanwhile, the unpaid rent — estimated at nearly $100 billion dollars nationwide — continues to accumulate as a debt that out-of-work renters somehow are expected to repay down the road.

A survey by Apartment List shows 31% of U.S. renters owed back rent at the start of September. The number is higher for minorities: 41% for Black renters and 48% for Hispanic renters. A U.S. Census survey showed 20% of Southern California tenants reported being behind on the last month’s rent. Statewide, 15% were late in August.

And property owners are left holding the bag, more than a dozen landlords and property managers told the Southern News Group this month.

Some have put their properties up for sale. Others face default or rising vacancies as problem tenants drive away good ones. Some property managers report they now have squatters invading their properties.

Although researchers say most tenants are making an effort to pay the rent, landlords are skeptical. Many tenants who can pay, they believe, are using moratoriums as an excuse for taking a rent holiday.

“We’re trying to be compassionate to the tenants,” said Evelyn Garcia, whose father is struggling to keep his seven-unit apartment building in South Los Angeles after rent collections fell by half this summer. “But we also need compassion on the other end, for landlords. We’re the only ones holding the burden for everyone. Nobody’s helping us. It kind of seems illegal to take someone’s income.”

Flouting the rules

Without the threat of eviction, landlords said they’re unable to do anything about tenants who flout the rules.

a close up of a sign: (Photo courtesy of Adam Bray-Ali) © Provided by LA Daily News (Photo courtesy of Adam Bray-Ali)

Management of a Huntington Beach apartment complex, for example, was inundated with complaints and started losing new tenants after an Aug. 11 fight broke out between warring neighbors.

One resident attacked another with a hammer, according to police logs. Others were pelted with rocks, leaving four or five with injuries. The landlord wasn’t able to act until 22 days later when a court ban on nearly all evictions, including nuisance cases, was lifted. The new ban limits evictions to tenants with non-COVID lease violations.

Noise complaints have become commonplace, property managers said. Some tenants are holding loud parties and blasting their music. Following one argument over noise, police arrested a tenant last June after he punched his upstairs neighbor in the face, breaking his jaw.

“Since this pandemic started, we have received an unusually high number of complaints from tenants on tenants, which I am sure is due to everyone being home,” said Irma Vargas, chief financial officer for RST & Associates, a Los Angeles property management firm.

Up to 10 units in an Anaheim apartment complex have been advertised on Airbnb, a clear violation of lease terms, said Amy Fylling, a regional supervisor for Advanced Management Co., owner of 50 Southern California apartment complexes. It’s even more galling when those “businesses” aren’t paying rent and are annoying other tenants with people coming and going, she said.

“They don’t feel like they have to go by any rules,” Fylling said. “They know that there’s nothing that we can do, that our hands are tied.”

Even squatters enjoyed special protection under a state court rule that froze nearly all eviction cases. The rule expired Sept. 1, although unauthorized occupants still are protected in some cities, including Los Angeles.

In one recent case, a woman moved out of her apartment in Koreatown and turned in the keys, according to Vargas, the L.A. property manager. A company employee went to check on the apartment and found a man still living there. He said his sister left him the apartment. Although he wasn’t paying rent, he planned to stay.

“He’s squatting,” Vargas said.

Steve Askin, owner of a Long Beach fourplex and a member of the tenant-friendly Property Owners for Fair and Affordable Housing, said landlords’ problems pale in comparison with the hardships tenants are facing. For example, when his wife recently lost her job, Askin said, he quickly got three-months forbearance on paying his mortgage.

“Landlords, even if we don’t have it easy, do have more resources than tenants,” Askin said. “You hear landlords who complain about this, that and the other. The fact of the matter is most landlords have a significant asset that most tenants don’t have. That gives them significant leverage.”

Rental assistance

Landlords, especially mom and pop owners, do have hardships.

A recent survey of small landlords by UC Berkeley’s Terner Center for Housing Innovation found 57% reported rental income had declined since the pandemic began. Twenty-five percent said they had to borrow money to make ends meet.

“If these properties fail, a cascade of negative outcomes ensue,” the Terner Center warned. Wall Street-backed firms will scoop them up, leading to consolidation, the loss of local wealth-building opportunities and higher rents.

To offset such losses, the National Multifamily Housing Task Force and the National Apartment Association teamed up earlier this year to support the $100 billion rental assistance plan contained in the HEROES Act passed last spring by the U.S. House of Representatives.

Paula Cino, vice president for construction, development and land-use for the National Multifamily Housing Council, worries that unless federal assistance is approved, a collapsing rental housing market will end hopes for a quick economic recovery.

“A protracted moratorium without rental assistance is totally unsustainable,” Cino said. “The only real solution is federal investment in renter support.”

Debts mount

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Pharmacist Babak Eghbali, 34, is worried a favor he did for his brother’s friend could cause him to lose the Hollywood triplex where he lives.

One of his two renters stopped paying rent in April.

The other, his brother’s friend, hasn’t paid a nickel since moving in last October.

The friend had said he only needed the unit for three months while he looked for a permanent place to live. He asked if he could stay there and pay the $1,800-a-month rent in a lump sum when he moved out.

Then, he never left.

“He just stayed,” Eghbali said. “By the time I wanted to evict him and kick him out, COVID hit, and I couldn’t do it.”

RELATED: SIX MONTHS OF PANDEMIC PHOTOGRAPHY

Moratoriums have affected real estate sales as well. Agent Stephanie Mosher said her sale of a Laguna Niguel rental house fell through last month after the tenant backed out of a promise to move out. The home went back on the market and sold again. But the owner had to pay the tenant $10,000 and forgive $17,750 in back rent to induce him to leave.

“The laws aren’t protecting the sellers, a buyer coming in (or) me as an agent trying to support my family,” Mosher said. 

Things are improving for landlords trying to evict problem tenants. The state’s new moratorium, the “Tenant Relief Act of 2020,” allows evictions for non-COVID related “just cause” reasons.

Even before the new law, local sheriff’s departments began processing eviction orders handed down before the pandemic.

Juliette Worthe was able to get an eviction order last winter for a tenant who stopped paying rent in October. But the lockout took about 2 ½ months longer than expected because the Orange County Sheriff’s Department halted all evictions in mid-March. Orange County resumed processing those pre-COVID eviction orders on June 1, San Bernardino County resumed them in late June and Los Angeles County began pre-COVID evictions in early August.

Although Worthe’s case had nothing to do with the virus, the delay cost her an additional $17,000 in missed rent.

“He was evicted,” said Worthe, said of her tenant. “I’m still out $82,000.”

Bray-Ali, 46, of Alhambra, said his missed rent now totals $30,000.

Like other landlords, he’s skeptical he’ll be able to recover that amount from his tenants through the courts. How realistic is it, he asked, to sue somebody who doesn’t have any money?

“I recognize this is not the time to be pushing people around, forcing people out. But at the same time, I have obligations. I have to pay maintenance. I have to pay utilities. I have to pay the mortgage,” Bray-Ali said. “I like to get along with my tenants. But I don’t have unlimited resources.”

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