✔ FORGIVES all missed rent
✔ PROTECTS tenants from eviction
✔ PREVENTS wage garnishment
✔ SAVES our rental housing
In the wake of COVID-19, different legislative bodies have employed various strategies to protect rental housing. Eviction moratoriums have been passed and extended in order to protect renters who have been furloughed or left unemployed due to the economic shutdown. However, tenants realize all moratoriums must someday end, and looming over their already difficult financial situation is the fear that they will be expected to pay back three- to six months of back-rent. Governor Newsom’s September “rent relief” bill only adds to this insecurity:
“Tenants are still responsible for paying unpaid amounts to landlords, but those unpaid amounts cannot be the basis for an eviction. Landlords may begin to recover this debt on March 1, 2021, and small claims court jurisdiction is temporarily expanded to allow landlords to recover these amounts“
Landlords have gone three to six months without receiving any rent, and many are in a situation where they cannot afford to maintain their property or pay the mortgages, property taxes and fees required to continue to provide housing. Many may themselves in a situation where they believe that they have no other choice but to seek judgments against tenants in the pursuit of retrieving outstanding rent. A judgment can be attached to a tenant’s bank account, where 25% of a tenant’s wage can be garnished.
This process is long and frustrating for housing providers who would much rather go another route to be made whole, but current legislation is leaving them without any other option.
My proposal is different: The COVID-19 Rent Forgiveness and Housing Security Act will forgive all unpaid rent for tenants struggling with this economic disaster while assisting small-time housing providers to pay their mortgages, taxes, licenses, maintenance, etc. This way we can protect the housing that we already have in Long Beach, and tenants can be secure in their homes.
This plan is accomplished through a financial instrument known as a Special Benefit Assessment District. It is similar to the Special Assessment District bond that the City issued in 1992 for earthquake retrofitting, except that it is not tied to infrastructure improvement, value improvement by construction, flood abatement, or fire safety improvements. This plan is based upon a specific value indicator and is not linked to improvements.
This kind of Assessment can be written per a valuation set for the intended purpose. For instance, we can structure this plan based upon square footage, average rent per unit, per zip code, lot size, HUD pricing designation, etc. This will have to be determined before we submit the program to a firm for an engineering calculation. We can pull from the County Assessor’s Office for real data on expected Property value increase or decrease. We have previously done an independent Rent Survey, and the Development Department has another rental survey which has a higher rental value that our independent survey. Either may be used as a qualifier for units and the adjusted rent lost per unit.
Here is how this project works. We tap into a source of money, The CARES Act of 40 million which although wrongfully allocated can be reallocated. Various Federal Grant monies like the Mainstreet Program. The Spend Representative is in Los Angeles, State recovery funds, or City of Long Beach Reserves. We can use a combination of all of these funds to create a specified enrollment fund.
The essence of this plan is that a housing provider enrolls voluntarily in the program, they state the amount of rental income lost due to the Covid-19 pandemic. This amount must be verified by an independent accounting firm (not associated with City Hall) who will look at the rental books of the participant. There will be an application form which must be notarized for each participant.
Once we determine the actual amount lost, and we match that with the guiding measurement instrument we can determine a verified sum. The program will loan up to 75% of the lost value to the housing provider for 20 years. This will give the housing provider enough funds to pay the back mortgage payments, the property taxes, the insurance, and maintenance on the housing stock.
We will determine the automatic payment back to the fund through auto-debit or auto bank account withdrawal (no exceptions). We will write a contract of agreement with the owner, which binds this loaned amount to the land in the grant deed, so that if there is a transference of title the obligation is still maintained, and the interest paid. We will record everything in the County as an addition to the grant deed as if it were an easement on the title.
The going interest rate on such special assessment bonds is a little below 2%. There will be a management fee, which is usually around 1% to 2%, depending on how well we negotiate. In the end, the cost to the housing providers for this immediate cash will be around 4%. That is a very low-interest rate over time. This is fully sustainable and if managed takes no city staff time or cost. If we wish to audit the program from time to time we already have a City Auditor, but companies that regulate and manage assessments districts are already under the scrutiny of the Federal Government, FINRA.
The elegant simplicity of this plan is that it gives the housing provider the funds needed to pay the bills associated with the rental housing stock, but since the lost amount is being made up, (albeit in a loan for 20 years) tenants are no longer expected to pay this outstanding rent. Upon agreeing to receive this loan landlords will be required to sign a waiver declaring that any outstanding rent is forgiven.
It is far more desirable for housing providers to get the funds upfront than wait 5+ years for the tenant to pay for the missed rent. Besides, no tenant can afford to lose 25% of their wages and continue paying rent. We would only be delaying the inevitable wave of mass evictions. The COVID-19 Rent Forgiveness and Housing Security Act is an opportunity for Long Beach tenants and housing providers to move forward together while we navigate this new economic world.
All in all, this is a win/win proposal to ensure Housing Security in Long Beach
This plan has been vetted by the highest rated Bond and Assessment Management Company in the State of California. When Long Beach subscribes to this plan, we will be the first municipality to use this methodology which will no doubt be copied throughout the state as a magnificent example of problem-solving during an economic downturn.
Let us move forward with Rent Forgiveness. Working together we can restore the peace of mind of all our people in the City. Let’s make a fresh start together.