As the coronavirus pandemic and rising unemployment create a new wave of economic hardship for tenants, renter advocates have built a growing statewide Cancel Rent campaign demanding Gov. Gavin Newsom offer sweeping relief.
But can a California governor wave a wand of emergency powers and make rent and mortgage debt go away?
Though some advocates want Newsom to eliminate the housing debts built up by renters and small landlords during the crisis, many legal experts doubt any government force can wipe away unpaid rents and mortgages without smashing through state and federal constitutional rights. And that’s before the lawsuits any state-initiated deal would likely spark from banks, landlords and others feeling short-changed.
But landlords, tenants and homeowners — many already burdened by the state’s highest-in-the nation housing costs — have all turned to lawmakers for big solutions.
The search for answers and the debate over government emergency powers have sent lawyers digging through decades-old case law for guidance during an almost unprecedented crisis.
Newsom so far has waded cautiously into the private transactions. He enacted restrictions on some evictions during the pandemic, which were quickly overtaken by more vigorous renter protections set by the state’s Judicial Council and a collection of tightly drawn city and county bans.
The governor also negotiated with a handful of large banks and nearly 200 state-chartered financial institutions in March to grant 90-day grace periods on mortgage payments for borrowers suffering from the crisis.
The economic slowdown has put the squeeze on thousands of California renters and property owners. Despite record unemployment, late payments on mortgages and rents have yet to spiral into crisis. But some warning signs have appeared.
More than 4 million financially struggling U.S. homeowners have requested federal mortgage relief during the pandemic, according to the Federal Housing Finance Agency. Real estate data firm Black Knight found 3.6 million households were late on their mortgages in April, the highest since January 2015. But any foreclosures would likely be months away.
The National Multifamily Housing Council reported that 93.3 percent of tenants made full or partial rent payments by May 27, slightly up from the prior month. In the Bay Area, payment rates for early May ranged from 89.6 percent in the San Jose metro to 88 percent in San Francisco and San Mateo County, and 85.9 percent in Oakland and the East Bay, according to real estate data firm RealPage.
“The results are definitely encouraging,” said RealPage analyst Adam Couch. But supplemental unemployment payments of up to $600 a week end in July, he added, and “that could mean some problems in August.”
At the same time, rent strike efforts have spread through the state, with 23,000 tenants registering an online pledge with Alliance of Californians for Community Empowerment (ACCE) to withhold payments.
Merika Reagan has seen income from her dog-walking business in Oakland vanish during the pandemic. She’s lived in the Bay Area most of her life, moving to different neighborhoods and cities as she’s gotten priced out. She has no sympathy for corporate landlords.
Her lost income inspired her to join the rent strike movement, she said. “There’s no way I can pay rent,” said Reagan, a member of ACCE.
Leah Simon-Weisberg, legal director of ACCE, said the governor’s emergency powers could allow him to commandeer apartments and other properties and not charge rent. The group is asking for a few months of rent and mortgage forgiveness.
But other lawyers doubt government action could swiftly or smoothly eliminate payments.
Berkeley law professor Ted Mermin said the issues are far from resolved. On one hand, under the emergency services act, “the governor really does have very broad powers,” he said. But, he added, both the state and U.S. constitution restrict the government’s power to alter private contracts, even during a crisis.
The once-in-a-century pandemic has sent lawyers searching far and wide for legal precedents, he said. Landmark cases testing emergency powers date back to the beginning of the Cold War and the Depression. In a 1934 case, the U.S. Supreme Court ruled states could in some cases enact emergency laws to provide temporary relief from mortgage payments.
“There’s not a lot of case law on this topic,” said Mermin, executive director of the Berkeley Center for Consumer Law & Economic Justice.
Landlords have also called for federal and state relief. But Stephanie Shirkey, senior attorney for the California Apartment Association, hasn’t found dramatic, constitutional powers for executives to eliminate rents and mortgages. Any such effort “would definitely be subject to challenges,” she said.
Newsom has used executive power to commandeer hotel rooms to shelter homeless residents. But Shirkey said the state is fairly compensating hotel owners by paying for the rooms.
Even during the Depression, Shirkey said, homeowners were given mortgage relief for two years but only as long as they made some payments. If property owners were given a waiver for months of mortgage payments, she said, banks would “go straight to court.”
Although many elected local leaders have discussed imposing rent forgiveness programs, just one California city — San Jose — has brought it to a vote. The measure failed.
San Jose City Attorney Richard Doyle and his staff said in a memo that the city could risk significant costs if council passed a rent forgiveness ordinance. “While cities can enact reasonable rent control legislation,” Doyle wrote, “it must be in harmony with Constitutional principles and within the boundaries of California law.”
