California’s most vulnerable tenants may continue to stay afloat during the pandemic, thanks to recent actions taken by the state legislature. On Thursday, January 28, 2021, California lawmakers approved the use of $2.6 billion in federal stimulus money to pay off up to 80% of income-qualified tenants’ unpaid rent. Governor Gavin Newsom is expected to sign the legislation into law. The solution directly responds to the challenges many renters still face today, nearly one year after the pandemic started.
“The pandemic has created a mountain of unpaid rental debt, which has caused instability and financial hardships for both tenants and landlords,” said Democratic Assemblywoman Eloise Gomez Reyes, the majority floor leader. The legislation provides “urgent assistance to renters and for the first time to struggling mom-and-pop landlords across California.”
History of California Moratorium on Evictions (2020-2021)
Since March 2020, states across the nation and the federal government have passed legislation to protect tenants struggling due to COVID-19. Like other states, California has experienced an economic downturn due to stay-at-home orders issued by health officials last March. Millions of workers have lost their jobs or income, causing them to fall behind in rent payments and putting them at risk of eviction.
In April 2020, California’s unemployment rate hit 16.4% and had remained staggeringly high, fluctuating between 8.1% and 16.4% since. The ongoing financial uncertainty caused by COVID-19 has forced state legislatures, including California’s, to help American renters avoid becoming homeless due to unemployment. Here’s a recap of the laws that were passed last year and are still in effect today:
Action by the California Legislature
In March 2020, Newsom signed an executive order establishing a statewide moratorium on evictions. “The Order prohibits landlords from evicting tenants for nonpayment of rent and prohibits enforcement of evictions by law enforcement or courts. It also requires tenants to declare in writing, no more than seven days after the rent comes due, that the tenant cannot pay all or part of the rent due to COVID-19.” Initially set to expire on May 31, 2020, the moratorium was first extended until September 30 and then until February 1, 2021, following Newsom’s signing of two executive orders.
Action by the CDC
Six months later, the Centers for Disease Control and Prevention (CDC) issued a similar order. On September 4, 2020, the CDC Order, Temporary Halt in Residential Evictions to Prevent the Further Spread of COVID-19, went into effect with an expiration date of December 31. At the end of the year, the CDC extended the expiration date until January 31, 2021. Then, on January 20, the CDC announced its decision to extend the Order until at least March 31.
The Order prohibits residential landlords nationwide from evicting certain tenants. The Order protects tenants who:
- have used their best efforts to obtain government assistance for housing,
- are unable to pay their full rent due to a substantial loss of income,
- are making their best efforts to make timely partial payments of rent, and
- would become homeless or have to move into a shared living setting if they were to be evicted.
In addition to the above requirements, one of the following financial criteria must be met. To qualify for protection, tenants must:
- expect to earn no more than $99,000 (individuals) or $198,000 (filing joint tax return) in 2020,
- not have been required to report any income to the IRS in 2019, or
- have received an Economic Impact Payment (stimulus check) pursuant to Section 2201 of the CARES Act.
Recent California Legislation
The most recent agreement concluded by Newsom, Assembly Speaker Anthony Rendon, and Senate President Tem Atkins protects renters financially impacted by COVID-19. Here’s how the agreement works:
- The state will pay up to 80% of eligible tenants’ unpaid rent from September 2020 to January 2021, but only if their landlords agree to forgive the remaining 20% and not to evict the tenants.
- To be eligible, tenants must sign a “Declaration of Hardship.”
- If the landlords refuse the deal, the state will pay them 25% of their tenants’ unpaid rent. These tenants will then qualify for the state’s eviction protection, and landlords will not be able to evict these tenants until after June 30.
The approval extends current state law, scheduled to expire on February 1, that prevents landlords from evicting tenants affected by COVID-19 who could not pay their rent between March and August 2020 and is considered essential for residents who continue to face economic hardship within the state.
“I represent the sixth-poorest district in the state,” said Assemblyman Mike Gipson. “This bill is essential to protect all individuals in the state of California [who] are suffering from this pandemic.”
Moving into 2021
California’s legislation is among the most progressive in the nation. Already facing a housing crisis due to lack of affordability, the state could experience even more economic chaos due to the impact of COVID-19 if the government doesn’t intervene.
According to State Senator Robert Hertzberg, the number of households at risk of eviction ranges from 240,000 to 700,000. He concluded that the wide-ranging estimates mean “nobody knows” the true scale of the back rent owed by tenants statewide.
However, some questions remain: Will $2.6 billion be enough to prevent a further crisis? Is the ongoing moratorium a real solution or an avoidance of the inevitable?
It’s too soon to tell. As the Governor’s Office indicated, “our work is far from over.” While renter aid is needed now to address the continuing pandemic, more work needs to be done to resolve the state’s structural housing crisis. The hope is that progress can be made by June, helping to combat the underlying issues spurring economic uncertainty and unaffordable housing in California.