TransUnion conducted a study to keep a pulse on the financial health and stability of the renter population and the ripple effect on property owners and operators. We offer a couple of takeaways.
Every now and then, it is helpful to focus on the larger picture.
It should go without saying that these have been difficult times for everyone, and that the pandemic does not discriminate against property owners and renters. Our hard-won experience has shown that property owners and their agents have worked with tenants so that both landlords and tenants come out ahead on the other side of COVID.
Real estate numbers have remained relatively strong, and this may be counterintuitive during a public health crisis. The reality is, everyone is tightening their belts. There has been a surge in single-family home sales, according to one economist known for being good at predicting bad news, because aspiring homeowners have piled up a lot of money for a down payment.
This pool of money represents “involuntary savings” that has accumulated during a period when money can’t be spent. Can’t buy a 49ers ticket, can’t go on a cruise, can’t get a massage, or can’t even go out to eat.
Another stabilizing force has been savvy real estate investors taking advantage of declining home prices.
Thrifty renters are spending wisely, too, according to TransUnion’s analysis
Many experts predicted that consumers would turn to debt to meet expenses like rent, but according to the credit reporting agency, they were wrong. Consumers have shown an increased awareness of credit, the study makes clear, noting that renters are religiously checking their credit during the pandemic, with 57% of those surveyed in the study stating that they check their credit once per month.
The opening of new trade lines has actually decreased, and this has led to a corresponding rise in credit scores across the board.
Importance of credit is a positive sign for property owners owed rent debt
Under the COVID-19 Tenant Relief Act of 2020, there will be a mountain of rent debt accrued during the pandemic that can be recovered in civil courts, but our strong preference, of course, is that the rent be paid and that property owners avoid litigation. We are encouraged that conscientious renters have indicated they want to preserve their credit and avoid a judgment on their record. In a recent webinar, we delve deeper into the subject of recouping rent debt.
The TransUnion study offers a bit of advice to property managers, noting that as credit scores in general rise, it may be worthwhile to revisit their credit screening criteria to ensure they account for this change in credit behavior.
Caught in the crosshairs of an affordable housing crisis and a homeless epidemic, vacant property owners are seeing their properties being taken over by unwanted occupants, facing a punitive vacancy taxes, or both.
The occupation of vacant homes has been a newsworthy subject lately, brought to the limelight by single, working women and their children who took over an empty, investor-owned West Oakland house in November. The difficulty of homeless mothers trying to make ends meet amid high rents is certainly one that many can relate to or empathize with, and so the timing was perfect to spawn a movement known as Moms 4 Housing, a group that encourages people to seek comfort in other people’s homes without permission, much less a lease agreement.
Although the cause of preventing homelessness and giving a boost to working mothers is a platform that no one can argue with, the group’s means to an end has been put to the test.
While most squatters live in the shadows, there was nothing clandestine surrounding the move into a house on Magnolia Street that has purportedly been sitting empty for two years.
In front of a throng of reporters, community leaders and supporters, the unauthorized occupants and ambassadors for Moms 4 Housing used the stage to protest the lack of affordable housing in the Bay Area, calling special attention to greed-fueled speculators who they see as profiteers in the widespread displacement of struggling mothers throughout the Bay Area.
Come their day in court, however, an Alameda County judge ruled against the high-profile Moms 4 Housing movement. A one-page order now lands on the desk of the sheriff’s office to evict within five days.
With four mothers now camping out in the property, the household refuses to admit defeat and vows to continue the crusade to protect the human right of housing. Their ambitious agenda includes using eminent domain to reclaim property from corporate speculators and outlaw short-term rentals.
The anger of the emerging group is very heartfelt and legitimate, with virtually everyone agreeing the affordable housing dearth is unacceptable. Mayor Libby Schaaf goes a step further in an email statement, saying “the path to undo the harms caused by decades of exclusionary housing policy is to adopt legislation” that requires an “array of transformative changes that will help lift all of us out of this crisis.”
However, we were hard-pressed to find any officials or other sober-minded third-parties who condone the takeover of vacant homes as an acceptable means to accomplish meaningful change – certainly not Wedgewood Properties, the Southern-California-based real estate investment company that successfully staved off the continued occupation of its property.
Bornstein Law has not been a Johnny-come-lately on this subject. We have always maintained that the housing crisis is due to a multiplicity of factors and that owners should not be assigned inordinate blame. Nor should they bear the brunt of solving it. It takes an entire community to tackle this intractable issue, our founding attorney told the San Francisco Chronicle when asked to weigh in on the story.
Telling the Chronicle that allowing the mothers to stay implanted in the home would open a floodgate of people moving into vacant properties and staking a claim to the right of occupancy, Daniel Bornstein says there is a sense of unfairness in the expectation that owners should shoulder the responsibility.
“In the end, the housing crisis is a community issue and a single owner isn’t the sole person to be responsible for the burden… it isn’t fair to the individual who owns the house to be responsible for housing people at the expense of others.”
You’ll get some argument from the attorney for the mothers. While ‘people over property’ has been a clever phrase coined for tenants’ advocates, it is not about private property versus human rights – it’s about challenging “certain business models that are destroying the fabric of our society,” according to Leah Simon-Weisberg, the legal director for Tenant Rights Program at Centro Legal de la Raza and acting counsel for the protesting mothers. She goes on to say that for-profit developers take advantage of the housing crisis.
Such lofty arguments had little sway in a court that is not tasked with reshaping housing policies and upending industries, but merely to decide whether the mothers are legally entitled to take possession of the Magnolia Street dwelling. Although the defendants filed a right to possession claim, this was a shot in the dark with no legal merit.
In an earlier post, we dived into the law surrounding squatters’ rights, the legal hurdles unauthorized occupants have to overcome when making an adverse possession claim, and how owners can take back their property with a forcible detainer action.
However insurmountable the odds of winning the legal entitlement to a property after breaking into an empty house with family and belongings in tow, it has been done. In a related story, The Mercury News recently followed the path of one man who moved into a dilapidated Oakland house and sued to be declared the home’s rightful owner – in this instance he prevailed.
Regardless of the outcome of the case at hand, a movement has been galvanized by the empathy and momentum their cause has gained. The undercurrents have even percolated to Saturday Night Live. When making his return debut to the show, Eddie Murphy reincarnates the beloved “Mr. Robinson” to make light of weighty issues like gentrification and squatters’ rights.
We all understand there is a crisis, but fixing it requires some creative problem solving and a constructive dialog that is often lacking in a contentious housing debate. You might think a group who advocates for the entry of vacant homes out of necessity and to protest a lack of affordable housing might welcome Senate Bill 50, dubbed the “More Homes Act,” with open arms.
Instead, Senator Scott Wiener’s ribbon-cutting ceremony of his revised bill was disrupted by protest.
San Jose Mayor Sam Liccardo also chimed in, tweeting, “Am puzzled to see @moms4housing take such an adversarial posture toward #SB50, which could do more to produce affordable and accessible housing than virtually any other bill in the last decade.”
We’re loosely reminded of former President Bill Clinton’s advice to the Occupy Wall Street movement, which was gaining steam at the time in raising awareness of income inequality, though the disconnected group was inept at rallying around a solution or even articulating any.
“I think what they should do now is work amongst themselves and with officials and business leaders and other labor leaders… I would organize some meetings and I would try to come up with one to three things that I was for. We know what they are against but now they have to be for something. So that would be my recommendation.”
~ Former President Bill Clinton
Local governments take a more insidious fight to vacant property owners
If elected officials do not embrace the illegality of occupying someone else’s home, they turn to a favorite tool to frown upon underutilized land and properties that can be better used for the public good – taxation.
In an early post, “Vacant property owners a whipping boy with new tax,” we said that Measure W, known as the Oakland Vacant Property Tax, saddled owners of properties that go “unused” for more than 50 days with a punitive tax to fund homeless programs and services, affordable housing, code enforcement, the cleanup of blighted properties and illegal dumping.
We are not always the bearer of bad news – since we last took on the subject, we can report the City eased the sticker shock for landowners subject to the new parcel tax on vacant properties, slashing the $6,000 annual fee in half for most people. Although over 70 percent of Oakland voters approved the measure because it was cleverly marketed, vacant land owners showed up at public meetings in droves in an attempt to add clarity to the ambiguous law and ask officials to cut them a break.
Owners say this concession is a good first step, but the tax remains a punishing expense for owners who are struggling to scrape up the funds to build. While this debate has been centered on well-funded speculators who presumably have the coffers to make vacant properties blossom to full potential, mom-and-pop owners have been largely left out of the discussion. We think a better route to encourage the development of vacant properties is to remove the maddening regulations that impede owners to build on their so-called vacant land.
This story is just one of many that color the challenges that rental properties face, but you can power through these obstacles with the informed guidance of Bornstein Law.
It is the responsibility of both the landlord and the tenant to maintain a habitable dwelling, but when there is a breakdown in communication, problems can brew and quickly escalate.
At the end of the day, rental property owners, real estate professionals, Bornstein Law and our property management arm, Bay Property Group, are in the same business. It boils down to managing relationships. Some are more difficult to manage than others.
After being inserted into thousands of problematic landlord-tenant relationships, the underlying cause in a staggering number of these cases is a lack of communication in many forms. Inspections of the rental property, or lack thereof, can serve as a perfect nest for this insidious miscommunication.
Often, the condition of the property is not brought into the light of day, and the culpability can rest with the landlord, tenant, or both parties who share the dual responsibility to create and maintain a “healthy home,” the term embraced by rental inspection programs.
Let’s talk about potential gaffes in the communication around inspections, starting with the tenant who has a responsibility to report maintenance issues.
Tenants can put shade on the property
Not uncommonly, tenants obstruct access to the rental property to conceal what is going on inside, and this becomes a cat and mouse game with the landlord. Whether it is because of nefarious activity, damage to the dwelling, or substandard conditions, we have seen tenants go to great lengths to keep their abode away from prying eyes.
Indeed, so adamant are some tenants in denying access to the unit, we have observed some who refuse to let in exterminators to remediate a bed bug infestation. Read our article on this subject
With the limited stock of affordable housing, we also see tenants who don’t want to initiate inspections or subsequent repairs for fear they will be displaced – they don’t want to stir up any dust.
Still other tenants are who we would call “silent tenants” who are too busy to engage with the landlord and, despite numerous notices, do not allow contractors access to their unit to make repairs.
Tenants who do not have legal immigration status can be especially prone to burrow into the unit quietly and hesitate to report maintenance issues because they do not want to draw attention, a perceived threat that has been made all the more real by recent ICE raids. Rental housing providers should be aware that immigration status cannot be used as leverage against residents, a topic we took on in our article on what the immigration debate means for rental housing providers.
The cloth cuts both ways, so we pivot to the landlord’s role in ascertaining the condition of the building.
We have said in many venues, such as policing your rental units to identify unauthorized short-term rental activity, that owners or their agents should be the eyes and ears of their property. Although on-site inspections are usually conducted annually, an ironclad lease can stipulate to only two inspections in a year.
Of course, the landlord can get a glimpse into the condition of their property by making necessary or agreed repairs, decorations, alterations or improvements, assuming the tenant has not put up roadblocks as discussed above.
We hasten to say that in many rent-controlled jurisdictions, a failure to give the landlord proper access to inspect or repair the unit constitutes a “just cause” for eviction.
Some landlords avail themselves of Health and Safety Code Section 13113.7 and 13260 to repair, test, and/or maintain smoke or carbon monoxide detectors, but we urge caution when using vehicles such as this, because the excessive “dropping in” can interfere with the tenant’s right to quiet enjoyment and create hard feelings between the landlord and tenant, something we punctuated in our earlier article. We would also be remiss to say that, barring an emergency, landlords must give proper notice to enter the unit regardless of the reasoning to enter.
Real-life consequences
In a perfect world, rental property owners or managers would routinely inspect their properties, tenants would take good care of their units, alert the landlord/manager to any maintenance issues, and allow access to make repairs. Yet, it is not a perfect world we live in and there are plenty of opportunities for failures in inspecting or reporting.
These errors have reared its ugly head in many forms. An overwhelming number of blight complaints, health risks attendant to older housing stock, and recent infernos have forced cities to take a hard look at measures to ensure the livability of tenants by creating proactive inspection programs that identify potential hazards early on.
Of course, the tragic Ghost Ship fire in Oakland is seared into memory and has served as an impetus to these programs, as well as lead poisoning and other risks that threaten the most vulnerable populations, concerns articulated in this moving video by the Healthy Homes Department of Alameda County.
Many of these initiatives have a component of “self-certification,” the process by which landlords religiously make inspections, but are subject to random, proactive audits by the city.
Parting thoughts
Substandard conditions are not acceptable, but now is not the time for finger-pointing. Bornstein Law has always operated on the presumption there are good landlords and bad landlords and in like fashion, good tenants and bad tenants. Yet, we maintain that the vast majority of rental property owners are studious landlords who take good care of their properties and tenants, and so they should not be shouldered with an inordinate amount of blame.
Many problems can be avoided by being tethered to a law firm specializing in managing landlord-tenant relationships and, much like the spirit of proactive rental inspection programs, solve problems before they are enlarged.
At Bornstein Law, we marvel at California’s scenery and are the first to recognize that all of us must be good stewards of the environment, but we also tout new construction as the most sensible solution to the housing deficit. We think that enviros and YIMBYs that say “build baby, build” can not only co-exist but experience synergy in their mutual goals.
In a January Facebook post, we noted that the California Environmental Quality Act may be aggravating the state’s housing crisis and that it may be time to review a 1970 law that requires public agencies to put a finger on the environmental impacts of projects within their jurisdiction.
However well-intentioned, CEQA has become a tool to deny, obstruct or delay residential construction, irrespective of whether there are significant or legitimate environmental concerns. With the housing crisis upon us, the climate seems ripe to re-examine the legislation and so it was only a matter of time before legislators acted to restore a sense of equilibrium between environmental protections and the need for increased housing in the 21st century.
Sen. Steve Glazer took the charge by introducing SB 1340 and SB 1341, bills that recognize that the frivolous lawsuits will halt new affordable housing developments in the Bay Area and beyond.
Glazer takes a two-pronged approach. SB 1340 attempts to break the logjam of litigation – courts would have 270 days to rule on lawsuits that challenge housing projects. Simultaneously, SB 1341 would add a level of transparency to actions by requiring plaintiffs that initiate CEQA-based lawsuits to come out of the shadows and disclose their identities.
The latter point is not that radical of a concept – it is helpful to know exactly who you are being sued by, but a departure from the status quo of anonymous litigants. SB 1341 would also eliminate the wasteful duplication of multiple lawsuits lodged against individual projects that face similar claims.
While Glazer’s pair of bills are flagship pieces of legislation that stand to knock down the walls of CEQA, there are other measures incubating to reform the way CEQA lawsuits are handled, and we will cover these in future posts.
The new face of YIMBYism
Environmentalists would ordinarily be up in arms over any initiatives to curtail protections, but it seems that the torch has passed to a new generation.
As we noted in an earlier article, enviros are joining the ranks of the YIMBY movement, as a growing throng of progressives and Millennials are recognizing that more homes are good and denser housing would reduce the carbon footprint.
Bornstein Law applauds reasonable efforts to remove barriers to much-needed construction and even as we attempt to help shape the larger debate on housing policy, our landlord attorneys are ready to help investment property owners avoid friction within their rental units and manage landlord-tenant relationships – contact our office today.
“We print buildings” is the motto of Apis Cor, a Russian based company that has a unique mobile 3D building printer that is capable of printing an entire house on site. Their engineers, managers, builders, inventors have a lofty goal: to change the construction industry and improve the housing conditions of millions in urban areas, underdeveloped countries, and people affected by disasters.
This visionary company posted a promotional video of the world’s first printed house being constructed in Stupino, just outside of Moscow. They claim the 400-foot structure was built in 24 hours, with the total cost for the project ringing up at just $10,134. Take a look.
The machine spits out layer upon layer of a concrete mixture using a giant printing machine that looks more like a crane, but hasn’t yet eliminated the human factor. The roof, insulation, windows, and other components were all added later by humans.
“I hope that the construction industry once will become as globally widespread as smart apps in social network, and building a house will be as easy as pressing a like button.” ~Nikita Chen jun-tai, Apis Cor founder
In addressing the Bay Area’s housing shortage and homelessness epidemic, we’ve seen a bit of innovation, such as factory-built, multi-unit housing projects, as well as turnkey services for Accessory Dwelling Units and tiny homes, but the advent of technology to print homes opens up a new round of evolution.
New construction isn’t necessarily about return on investment, but a return on creativity.
Californians have felt the pain of the housing crunch, but perhaps no other group is more acutely affected by the shortfall than students scraping by. Landing an affordable abode for those pursuing higher education has proved futile for many students in the highest-rent cities in the nation. Some estimates, in fact, have pegged student homelessness in the double digits.
As this article vividly depicts, some of them are bunking in a cramped car, rationing food to save money, or cramming into the close quarters of a tiny apartment or garage. Campuses have evolved into social service agencies by instituting a patchwork of programs that provide emergency rent payment grants and reserving dorm beds for homeless students.
Legislation floated to address the problem
Amid a torrent of bills that attempt to ease the housing crisis, lawmakers are floating proposals to help these mightily struggling college students secure housing near campus without breaking their budgets.
Sen. Nancy Skinner, D-Berkeley, has led the charge with the introduction of SB 1227, a bill that hopes to spur the construction of affordable housing designed for students. She argues under existing California housing law, there is no clear path for students to prove they are eligible for subsidized apartments, regardless of need. In turn, developers cannot cash in on economic incentives they could realize by setting aside a portion of their development for low-income rental housing. Predictably, they don’t build.
“With the housing shortage that California now has, their costs can be so high that it can be prohibitive for them to go to school.”
~ Sen. Nancy Skinner
If the proposal comes to fruition, SB 1227 attacks the issue on dual fronts. It would allow students to submit financial aid documents to qualify for low-income living arrangements but would also explicitly extend state affordable housing incentives to developers that erect apartments for full-time students.
A developer that designates 20 percent of the units for lower-income students at a specified rent level will receive concessions like the inclusion of affordable units, thereby empowering developers to build more housing in a project that would not ordinarily be allowed.
Bornstein Law has always maintained that brisker construction is the answer to the housing shortage, so we applaud the bill to the extent that it gets at the root of the problem.
Enter SB 922, a bill sponsored by Sen. Janet Nguyen, R-Garden Grove, which focuses on optimizing surplus property near campuses – underutilized space near college campuses would be turned into desperately needed housing for college students. If passed, the California Department of General Services would be authorized to hand over unused real estate within two miles of universities or community colleges to local governments or nonprofits that can build.
Once again, we think this is good policy and as we noted in many other posts about accessory dwelling units, “tiny” homes, and other hybrid forms of living, the conversation around solving the housing deficit should be framed not only in terms of return on investment but return on creativity.
The lot of educators and faculty is not much better.
As California campuses confront the growing challenge of homeless students, school faculty find themselves in a similar bind of making ends meet on an educator’s salary. We came across this article that chronicles the tough times of educators in university housing who are staring down the barrel of rent increases, if not eviction, to make way for students.
While landlords who are subject to rent control ordinances are limited in the amount and frequency of rent increases, universities have no such constraints and have been availing the exemption, though San Francisco State officials are quick to point out that despite the rent hikes, faculty members enjoy below-market rents.
The opacity of these rent increases, however, has been called into question, with claims that the faculty is not given sufficient notice of changes coming down the pike.
Not limited to higher education
Teachers throughout the Bay Area’s public-school system are struggling to keep pace with rising housing costs. As we wrote about in this article, San Francisco teachers may feel some respite knowing that they may be firmly planted during the school year and not face eviction after an appellate court upheld Ordinance No. 55-16, a law that prohibits their displacement through a no-fault eviction. We hasten to say that this decision is “stayed” – awaiting further judicial review after the decision has been contested.
Our take
At Bornstein Law, we believe that awareness is half the solution, so we are encouraged to see the housing travails of educators and students be placed under a microscope. Educators serve a critically important role in inspiring young minds, and so there should be deference to these stewards of our community or the Bay Area risks losing them when they seek greener pastures. The same for students, who should not have to fret about where to lay their head or worry about other sustenance.
Clearly, this larger topic exposes a host of legal issues, whether it is rent control, proper notice, rent increases, and the adaptability to changing laws that are sure to come. On this front, Bornstein Law has you covered – contact our office for informed advice.
Progressives and environmentalists are increasingly coming around to the reality that new housing will advance their agenda.
Meaningful housing policy changes will be shaped by those who show up, but the composition of who is now showing up to support housing construction is refreshing. We were buoyed by an Op-Ed by Maya Rosas, a self-proclaimed idealistic, progressive urbanist and founder of the YIMBY Democratic Club in the San Diego region.
This identity wouldn’t ordinarily be associated with pro-housing policies, but Millennials like her represent the new faces of the “Yes In My Backyard” movement.
If you ask Maya, the YIMBY has a pretty succinct philosophy: more homes are good. Recognizing that the people most affected by a housing deficit are people with the least means, she says that supporting housing construction inexorably furthers progressive values and that land issues don’t always fall cleanly down partisan lines. Many forward-thinking progressives agree that affordable and equitable housing is achievable only through more housing, and these now include a growing chorus of environmentalists.
“You can’t legitimately call yourself an environmentalist unless you support dense housing in walkable neighborhoods with public transportation.”, observes Senator Scott Wiener (D-San Francisco), an unlikely architect of SB 35. The 2017 bill mandates municipalities to build more to keep up with demand or risk temporarily losing control of much of their entitlements process and is a lynch-pin in a prolific package of bills passed aimed to spur new housing in the Bay Area and beyond.
Wiener is an environmentalist and like Maya, a professed urbanist that seems to get that if development in cities is slowed down, houses will sprawl out over farmland and people will wind up making longer commutes and add to the carbon footprint. The Senator is spearheading another piece of legislation, SB 827, that would all but require that new housing near major transit hubs be mid-rise construction of at least four stories.
Enviros and developers are odd bedfellows, but a new generation of environmentalists are joining Senator Wiener in challenging the green’s status quo of opposing new development. As a testament to this, Sierra Magazine wrote an article that says housing – dense, near transit and green – can be a climate solution.
Although California has been a laboratory of archaic rent control laws, there is some evidence that the torch of sensible housing policy is being passed to a young and savvy group that can think on their feet. These energized groups stand to reshape the law and create experiments of their own, in favor of new housing and a pivot from the failed policy of rent control.
If you’ve been following us for any length of time, we’re probably preaching to the choir now when we say that tenant rights advocates have sometimes mischaracterized the overwhelming majority of responsible rental property owners. In framing the conversation on how to solve the Bay Area housing crisis, we believe it’s not productive to put an inordinate amount of blame or burden on any one group.
In our last post, we reported that Silicon Valley has been urged to do more to house its burgeoning workforce, and it is doing its part. If it is difficult for high-tech companies to put a dent in the housing shortage, it is that much more difficult for mom-and-pop landlords to solve the intractable problem of affordable housing. These predominantly responsible, studious rental unit owners are being saddled with rising costs, just like everyone else.
Our conclusion? Rather than penalizing landlords, we should come together to focus on solutions. Of course, that’s easier said than done. Our area is world-renowned for its innovation. If we conjure up the same level of creativity, perhaps we can finally address the endemic problems.
When city leadership, government leaders and nonprofits get creative and serious about tackling the issues, solutions can take shape. Certainly, there is no silver bullet to solve one of today’s trickiest urban issues, and it requires a holistic approach. This involves inclusionary zoning, removing parking minimums, changing building codes to make it easier to rehab older buildings and new funding models.
Fortunately, we can draw upon the examples of other cities such as Denver, Cleveland, Minneapolis, Philadelphia, and Salt Lake City. It’s also instructive to study our neighbors to the North – although affordable housing is a local issue, Canada’s well-conceived national policy and funding has made a huge difference there.
This article takes a sampling of other cities to find out what creative solutions they are employing to address the very same problems we are facing in the Bay Area.
Finding creative solutions to landlord-tenant disputes is what the San Francisco real estate attorneys at Bornstein Law have been doing for over 23 years and it is with the same win-win and outside-the-box mentality that we approach the aggregate housing issues that affect our region. But all parties should lower the temperature of the debate and realize that this is not a zero-sum game.
