Why Renting A Place in California Is Getting So Hard | Jonathan Madison

There's going to be a wave of evictions like nothing ever seen before. In some cities, though, including L.A., the moratorium is being extended. The California legislature quickly passed a bill to give tenants who have applied for rent relief a longer window of protection from evictions. Here, I'm not allowed to do anything. I'm told to just continue to provide adequate housing, whether they're paying or they're not paying. It's just stockpiling, you know, day after day, month after month. Now we're at two years after the moratorium has started. You're in a situation where landlords are losing their homes by bankruptcy, by foreclosure. And this has changed the dynamic of the relationship between tenants and landlords. If you're a tenant out there, it is hard to qualify for a new place. You have the financial evaluation qualification. They're put in between a rock and a hard place, admittedly, because rents are high everywhere and there's a scarcity in housing. My guest today is Jonathan Madison, lead attorney at the Madison firm. I represent two clients, and there's a tenant there that has been living there rent-free for about two years. I think the back rent owed is around $196,000. Surely this wasn't the intent of the eviction moratorium, right? Did the eviction moratorium impact the relationship between tenants and landlords? Is this affecting the renting process in California? Keep watching to find out the answers. I'm Siamak Khorrami. Welcome to California Insider. Thank you. Thanks to you, man. Good to be back. We want to talk to you about a phenomenon that's happening in California. Rents are skyrocketing. Rents are going up. And also renters. One of the things that's happening now in California that it wasn't like this before. You have to show that you're making three times the amount of the rent. It's very hard to get qualified for renters. Some people think that eviction moratorium had a negative effect on this relationship between renters and landlords. Can you tell us what's going on in the state with this? Absolutely. I mean, there's sort of a reaction to what this moratorium has done in large part. And now landlords are, to some extent, understandably scared about being able to pay the mortgage, being able to keep their houses and their buildings. So landlord advocacy groups here, the Apartment Association, the California Association of Realtors, they've really put pressure on the government to heighten awareness standards for who they're letting in their properties. And so now you see these forms, these financial qualification forms that tenants have to abide by. They have to qualify by a certain amount that they make, maybe by their credit. But landlord advocacy groups and mom and pop landlords, I mean, they've really been hit hard. So they've really put a lot of pressure on local government officials to make sure that tenants adhere to these new standards. So that's what's happening. How did these landlords get hit hard by this eviction moratorium? Weren't they supposed to get paid? Can you explain that? Well, I guess I'd explain it like this. At a high level, there's an old proverb that says, hope deferred makes the heart sick. And I think it's relevant here because with each passing moratorium extension, it's giving hope to landlords that's deferred. Saying, you know, there's another date that this moratorium could phase out. You'll be able to get your rent back. You'll be able to evict. You'll be able to kind of do what you want to with your property without Big Brother looking over your shoulder. And that deferment has continued and continued and continued. Now we're at two years after the moratorium has started. So now you're in a situation where landlords are losing their homes by bankruptcy, by foreclosure. And corporate entities are actually purchasing a lot of their buildings because the moratorium started without any promise of landlords getting their rent payment back. That's how it's all started. And then only after the second extension and the third extension, AB 832, SB 91, I could take time, but I don't want to take too much time. But these continued extensions started saying, OK, landlords will get X percentage of their rent back. Right. Eighty percent. Twenty five percent. The number kept going up. And now we're in a situation currently where the promise is that landlords will get all of their money back. But even that's not happening. Right. So it's been one promise after another. And I think the heart of what you're getting at, CMAC, is the problem of the problem between the promise and the promise actually being fulfilled. Right. And I think the breakdown has been that, yes, the government has has funneled. The federal government has funneled five point two billion dollars into rent relief. The problem is that the agencies that are dispersing the money are tenant advocacy groups in large part. And so now you have a situation where those advocacy groups are targeting and giving preference to tenants that get the money before the landlord. Often that works out if the tenant pays the landlord. But if the tenant doesn't pay the landlord, which is what's happening right now, is that happening now? It is happening right now. I have some cases on file right now where I've seen that the tenant has gotten the rental assistance money, spent it on something else. And, you know, the landlord is left with no other alternative but to file a fraudulent report with the government saying, look, this is what's happened. But there's no promise of them getting the money back, you know. And they're still living in the unit. They're still living in the still living. So they got the money from the government. They're still living in the unit, but they haven't given it to the landlord. Absolutely. Absolutely. And it doesn't always work out that way. There are situations where the landlord will get the money, which is what's supposed to happen. But there's other situations where the tenant will get the funds first and the tenant, their obligation is to pay the rent to the landlord. That's not always happening. I can personally attest to that. So you have these myriad of problems, layered problems on the way that rental assistance relief is structured. And this has changed the dynamic of the relationship between tenants and landlords. Has it created more tension? Absolutely. Tension, hostility, you know, it's unintentional, right? I mean, obviously the purpose of the moratorium is to help tenants during the pandemic. And I think it's done that to some extent, to some extent. Right. There are people who are able to stay in their homes and especially at the height of the pandemic, you know, when there weren't vaccinations available, it's done some good. And a lot of people couldn't do their jobs. Some service jobs are completely gone. Absolutely. Service jobs, restaurants, all those were gone. So I don't suggest that the moratorium was bad altogether, but there are some negative ramifications now. And now that we have vaccinations available, now that a number of jobs are back, not all of them. There are more jobs available than before the pandemic. There are more jobs available now than before the pandemic. And, you know, so the idea of the pandemic was of the moratorium was to give tenants just some additional time to find ways to make ends meet. And, you know, while the vaccination things were going through, while while jobs were still coming back. Right. The problem is, you know, the moratorium was set to sunset at some point, like a lot of provisions in government. You call them sunset provisions. Right. At some point. So they will end. Yeah, exactly. At some point they end. The problem with the moratorium is it's not setting. It's not it's continuing to go on. And so I think that's what I know. We'll talk about this at some point. But that's what John Lee, one of the city council members in Los Angeles, the one in 11 votes that said no to the moratorium extension on July 27th. He actually made that point. He said the eviction moratorium is ongoing without any hope in sight for landlords at this point. We need a firm date. Now, this is happening across a bunch of cities. Right. And also, before we get into that, some point that I need to make is that we are hearing that some of the tenants are are not paying rent. And some of the landlords that are connected to them on Facebook or however they're connected, they see them taking vacations. Yes. And then meanwhile, the good paying tenants that have been paying rent, they are getting it's harder for them to find if they want to move. Their rents have gone up significantly and it's harder for them to get qualified. Yes. You point out two very big problems. One, who's taking advantage of the system? And two, if you're a tenant out there and you want to move or you have to move, how are you going to find another place to stay? Because landlords and property owners in large part now, at least ones that I represent, are continuing to take their or progressing to take their properties off the market altogether. Because they're just tired of dealing with the moratorium without any promise of someone paying the rent and them being able to pay their mortgage. They say, well, it's cheaper for me rather than to let someone stay their rent free. And me having to deal with all the complications of that, cheaper for me to take the property off the market. So to your point, yes, there are tenants out there who are taking vacations, who are living well. Some from the rental relief assistance money. I represent, I don't speak to this as just a critic, I've seen it. I represent two clients, a couple, a senior couple who migrated here from India, built a whole family. And they have about two rental properties, one that they live in, one that they rent out in Alameda County. And there's a tenant there that has been living there rent free for about two years. And I think the back rent owed is about $196,000. And it's just, it kind of blows my mind because I had my first consultation with this couple. They're such a nice couple, you know what I mean? And they were telling me, yeah, this guy, we saw him, he's gone at least one month out of the year and he's vacationing. He's going to this place, he's going all over the world and stuff and he's traveling. And I just said, how is this happening? Surely this wasn't the intent of the eviction moratorium, right? Because now we're in a situation, hopefully we're going to close the gap on that. But there's really no one in sight if you're in places like Alameda County or Los Angeles, right? So that is happening. And then, you know, the other problem being that, you know, you have tenants who are often looking to find ways to, you know, make, cut a deal with their landlords and say, OK, I'll move on to the next place. I'll find a new place, you know, often minorities, you know, and they're put in between a rock and a hard place, admittedly, because rents are high everywhere and there's a scarcity in housing. The California Legislative Analyst's Office published a report last year that said we'd have to, California would have to build like 10,000 new properties a month in order to keep up with demand of more housing, of the need of housing, right? So if you're a tenant out there, it is hard. You know, it is hard to find a new place, number one, to qualify for a new place. You have, like you said, CMEC, you have the financial evaluation, qualification. You have to show that you have the income. Exactly. It wasn't like this. It wasn't like this. It wasn't always like this. This was born, that qualification financially was born out of the moratorium, you know, and it's somewhat arguable it's necessary, but it's also problematic. It means that there is no trust because a lot of those people probably will pay their rent no matter what. Absolutely. Yeah. I mean, to your point, just because you make under, below a certain threshold financially doesn't mean you're not going to pay the rent. In fact, I've seen tenants that make less money than other tenants that pay their rent more than tenants with more money, you know. Case in point being the tenant who is $196,000 in back rent, and he's taking vacations around the world. You know, he's doing well. And I don't just say that. I've seen financials. So, your financial status does not determine whether you're going to pay your bills. Now, in terms of these counties that have extended the moratorium with no end in sight, which counties are there? Alameda County, Los Angeles County. Those are the two counties with no end in sight. San Francisco, San Diego. There's a potential of a phase out there. But for counties like Alameda, let me just speak to Alameda just briefly. This is a situation where you have a board of supervisors who approved a moratorium that basically says, that has language that says, the moratorium will end 60 days following the removal of the declaration of a state of emergency. So, the moratorium can only expire the date that the board of supervisors meet and come together and say, look, the state of emergency is over 60 days after that date. There have been rumors that they were going to do it for the past three months. I mean, there's been every rumor I've been hearing about all my clients and industry professionals. It's going to happen. It's going to happen. It hasn't happened. And last month was probably the biggest letdown because, I mean, everybody seemed to just know this was the month. Because things have gotten better for Alameda County, in large part, in large part, financially anyways. So, people thought they were going to make that declaration and 60 days later that happens. The language is set up to the point where that declaration could be removed next month, two years from now, 2025. I mean, who knows? There's a lot of uncertainty about what will happen. A lot of uncertainty. What about L.A.? Los Angeles has extended their moratorium until August of 2023. And July 27th, that's the date that they voted to approve the extension. In an 11 to 1 vote, John Lee, one of the council members, I mean, I really, really look up to that guy. I mean, he, in the face of a cancel culture these days, in the face of people who deem certain actions right and wrong because they don't align with their ideologies, I mean, he just took a stand and said, no, there needs to be a date in sight to end it, right? And in that meeting, the city council meeting, what's happened in L.A. is there's a movement that some people want to cancel rent. Right. And there were protesters and they were pressuring the city council. What are your thoughts on that? You know what? I would quote from one of the board members of the apartment association in Los Angeles, Cheryl Turner. I thought this was a great analogy. She said, you know, you don't get to go into a local grocery store and take whatever food you want and then hedge your way out the door without paying and say, well, because food is a necessity, I shouldn't have to pay. And I mean, I think to some extent, not to that extreme, but I think to some extent that applies here as well, because, you know, for the folks that say, yeah, cancel rent. You can't cancel rent justly without canceling tenancies, because, I mean, people forget there's an exchange going on here. It's fundamental supply and demand economics, right? This is the part that everybody gets in economics. Someone gives something and someone gets something. It's an exchange. In the law, we call it consideration, right? You know, if it were that landlords have to rent out to tenants without the promise of rent, you're going to see mom and pop landlords, eventually the bigger ones, too, because they need income to operate, right? But the mom and pop landlords, I'm even speaking about minorities here. A lot of people think it's, and unfortunately, a lot of people think it's just, you know, a certain, just Caucasian or certain people, certain demographics. And it's minorities. It's everyone. People at the high end of the economic spectrum and people at the lower end. I have clients right now who are financially just barely making it, right, somewhere on the verge of losing their properties. You have these folks who are depending, who are depending, their income depends in large part on rent, right? Senior citizens, people who are retired, right, make a quick point. At the last Alameda County meeting, perhaps two meetings ago before the Board of Supervisors, they wouldn't even allow landlords to speak at the city council meeting, speak about the moratorium. And so, you know, to have people thinking in their mind, we should cancel rent, it's a danger not only, it's a danger not only to the landlords, but that concept is a danger to tenants. Because if you tell landlords, cancel rent, landlords say, okay, cancel properties being on the market. And now you have a situation where tenants all together are just not going to be able to find a place. Which is somewhat happening now. It is. There's some level of, there's less properties available and it's harder to get them and they're more expensive. Why do you think this Board of Supervisors didn't want to listen to landlords? You know, I think one, and this is my personal opinion, I think it's this concept of cancel culture, even being funneled through the government to some extent, at least ideology wise. Because there are certain actors in the government that say, look, it's my opinion, or it's no opinion. Right. And, you know, so I think part of it is not wanting to hear other perspectives. I think the other part is the fear that what if you allow landlords to speak and you find that there's more community support for landlords that don't look like anything being perpetrated by the media. Right. The community starts to see landlords as human beings rather than as people that were trust fund babies, so to speak, or people who are at the higher end of the socioeconomic spectrum. They start seeing them as people who are retired individuals, minorities, people from all backgrounds. And so I think that was the fear there because there's no other reason to silence the public, you know, a segment of the public. And it's not the first time I've seen city councils do that, where they may even have one or two people speak from one demographic. And they may have 20 people speak from the other side because they know they have an agenda and, you know, these 20 people have things to say that will align with their agenda. Now, what about the rest of the state? What does it look like in the rest of the state? You know, in other parts of the state, you think about Central California, you think about even places like where I'm at in San Joaquin County. You know, it's more conservative, right, because they don't have the ongoing moratoriums. And these are the places I'm least concerned about because you're not going to anticipate a wave of evictions following some moratorium. Because it's already happened. It's already happening. It's already happening. For tenants that might be taking, they may not want to take advantage of the system, right? Right. Well, it's harder for tenants to take advantage of a system that's actually in place and working, right? There are certain parts of California right now that look like it did, certain parts that look like it did before the pandemic started, right? Where you have the ability to sue to evict your tenant if they're not paying the rent or if they're causing a nuisance or something is wrong, right? You have the ability to do that. And by the way, there's no guarantee that you're going to succeed. It just gives you the right to do it, right? And tenants also have the right to sue their landlord if the landlord is not doing something right. Electrical issues, plumbing issues, warranty of habitability encompasses all the myriad of issues that can go wrong. Tenants have the ability to enforce their rights. And it's a system that is not perfect, not perfect, but it's working better than a system that basically says cancel rent. But this is going to hurt us eventually. If you continue these kind of laws and things that don't make common sense, it's going to hurt us. Absolutely. It's hurting us now. I mean, I want to make that clear. I think it's hurting us right now, but it's only going to get worse. Because if this moratorium continues and continues and continues, say even to next year or the year after. And by the way, some people may watch and say, well, that's crazy. See, Mac, you and I were just here last year around this time. And I was saying, well, I think it's going to go on for years. And I actually had people hit me up, reach out to me on the chat. And people just email me and say things like, you don't know what you're talking about. It's not going to go any further than a few months. And we're here. It's been over two years. But to my point, we could have something continue on for two, maybe three more years for all we know. And I say that because tenant advocacy groups have been pushing for this kind of system. Not exactly geared towards the pandemic. No one could have predicted that. But they've been pushing for a system that enables tenants to not pay rent or pay a lower amount of rent at the expense of the landlord. That's been happening for years. So it's been a long time coming. And what's going to happen, to your point, see Mac, in a year, maybe two, whenever these moratoriums end, I mean, there's going to be a wave of evictions like nothing ever seen before. It's just stockpiling day after day, month after month. And I still get calls from people today just saying, hey, do you know when it's going to be over? I have to move on certain properties. I have to do an eviction here. And so the longer this goes on, it's only going to get worse, to your point. Now, is there a way for us out of this? Yeah. Set a date certain for all eviction moratoriums to expire. That's got to be step one. I think there's multiple steps to this. But step one is stop deferring hope for landlords and creating uncertainty. Because it's not just uncertainty for landlords, but it's also uncertainty for tenants. Tenants are out there thinking, OK, well, how long can I do this? How long can I afford to do this? Should I be looking for housing now? And the city councils are out there just saying, yeah, I think it will expire in a few months or maybe it'll be August 2023. So if you're a tenant and a landlord, especially if you're a landlord, there's a high degree of uncertainty out there. So if the date is three months from now, if the date is a year from now, let that be the date and actually phase it out on that date. I think that's the first thing is to stop the uncertainty. That will also allow landlords, I have to make this point, that will also allow landlords to make things clear with their banks. If they're in a situation where they could lose their property, they could say, look, after the moratorium expires, I'll be able to make certain changes. Because they have mortgages and they're not paying them. They might not be able to pay them. Absolutely. Some of my clients haven't been able to pay their mortgage in six months or longer. So that will give them some hope, not just hope, but some certainty as to how to proceed. So that's step one. Step two, make sure, and this is going to be one that the government really has to enforce, make sure that you're paying landlords the back rent. Because it's not just enough to give landlords their properties back. And that's a lot, but if you have your property back and can't afford to pay the last six months of the mortgage, your property is gone regardless. So step two is a really big step, and it's going to take cracking down on fraud to some extent. Like the kind we talked about where tenants, some tenants, not all tenants, will be using the money for other things outside of paying rent. And it's also going to take, I want to make this point, it's also going to take being mindful and maybe cracking down on attorneys who are using the rent money, sort of weaponizing the rent relief money to get the kind of settlement agreements they want for their clients. I've had tenant advocacy attorneys on the other side say to me, well, my client will not pay the back rent with their rent relief check unless your client agrees to let them stay for X period of time. And you're not supposed to condition government funding, right? Just for the benefit of your client. I'd be a very rich man if I could do that. So you have to crack down on the fraud. Again, step one, we set a date to phase out the moratorium. Step two, we actually pay landlords what they're supposed to be paid. And then step three, I think there does need to be a phase out. It shouldn't necessarily be one date that it all phases out on. It should be a series of steps. There's certain moratoriums that have worked where they may have phased out a certain part of the moratorium and then they phase out a second part of the moratorium over the span of... So do them step by step instead of doing it in one go. Yeah. I mean, there's no reason to cold turkey it immediately, right? And people are hurting out there and I'm sympathetic to that. But if you can do it in an orderly fashion, even if you were to say, okay, you can evict for Ellis Act evictions now and you can evict for certain non-payment of rent now if it's been over six months, because those are the hardest hit people, right? Now you can hone in on the people who are hurt most. And for the individuals that are paying the rent, the individuals that are doing what they need to do, even if they're behind a few months, they can still be somewhat comfortable as the moratorium phases out. So I think those are the three steps. So for places that don't have the eviction moratorium, do they face the same challenges? No, no. With the exception of there being a scarcity in housing, because that's transparent throughout the state, right? I mean, the effects of one county will impact another county. So for example, you have San Francisco and Alameda counties that have the eviction moratorium going on right now. Because of this domino effect. There's a lot of people coming from LA and San Francisco and other places. Exactly. So that problem is still there. The scarcity of housing is still there. But what's different is that landlords are able to at least go through the process of terminating tenancies for justifiable reasons, many of them, right? If you have a tenant that's not paying their rent, guess what? You can do something about it. It's not like your hands are tied and you just have to hope for government assistance to come in so you can keep your home, pay the mortgage, right? You can avoid foreclosure. You can avoid bankruptcy. So you have a system in place in areas such as San Joaquin County that allow sort of a cyclical system to occur, right? If you're doing what you're supposed to be doing as a tenant, then you'll be fine. And if you're not, there's at least a remedy available for the landlord. And I think that's the root of your question, CMAC, is what's the key difference is that landlords actually have a remedy available. And if they didn't have a remedy available, that could be considered a taking under the Fifth Amendment, right? We don't have to go into that, but it's very necessary that landlords have a remedy when their tenants aren't paying rent. Do you have any other thoughts for our audience? I think one thing that gets lost in translation out there because the media is heavily biased towards tenants right now. And by the way, I represent tenants as well, so I want to make that clear. I'm not just a landlord attorney, so I see it from both aspects. I see it from all sides. But one of the things that has gotten lost in translation is that there's a lot of minorities that have been hurting on the tenant side and the landlord side. That's just not the case. But I represent both, and I've seen minorities on both sides. I think it's hurting to see that people are not paying rent. And an owner of a property who's probably worked very, very hard to achieve being able to even afford to purchase a property, credit rating, all of that. For them not to be able to pay their mortgage and losing their property. So I think one of the ways that we as minorities can step up and continue to climb the socioeconomic ladder of success, continue to achieve and continue to progress, is to do our part. Whether that's you're a tenant, you're supposed to pay your rent. If you can afford to pay your rent, pay the rent. And if you can't afford to pay it, obviously the government has given you other alternatives now. And if you're a landlord and you can afford to do something good for your tenant, I don't mean to do it. But I would just say that because I think a lot of what's going on in the media has kind of made that get lost in translation. But there's a part to do for all of us, whether you're on the tenant side or whether you're on the landlord side. Jonathan Madison, lead attorney at the Madison Law Firm, it was great to have you on California Insider. Thank you. Thank you. See you back. Always great to be here.