In recent days, the federal government, the state of California, and many local governments have taken action to provide tenant and homeowner protections in response to the COVID-19 pandemic.

On March 18, President Trump announced a suspension of foreclosures and evictions by the Department of Housing and Urban Development through April 30. The moratorium will apply only to homeowners with mortgages insured by the Federal Housing Administration.

Also on March 18, the Federal Housing Finance Agency directed Fannie Mae and Freddie Mac to suspend foreclosures and evictions for at least 60 days.

At the state level, on March 16, 2020, California Governor Gavin Newsom issued Executive Order N-28-20 prohibiting rent hike evictions, authorizing local governments to implement further protections against evictions, delaying foreclosures by mortgage lenders, and monitoring customer service protections delivered by utility providers. Unless extended, the protections under the order are in effect until May 31, 2020 and are intended to address the challenges for many Californians to pay rent, mortgages, and utility bills as a result of the COVID-19 pandemic. A summary of protections included in the order is as follows:

• It is unlawful to evict any residential tenant through May 31, 2020 (as may be extended) and subsequently rent or offer to rent to another person at a rental price greater than the evicted tenant could be charged. Landlords may continue an eviction process that was lawfully initiated prior to March 4, 2020.
• Local governments may impose substantive limitations on residential or commercial evictions through May 31, 2020 (as may be extended) where the basis of the eviction is nonpayment of rent or a foreclosure, and the tenant or homeowner can demonstrate economic hardship caused by the COVID-19 pandemic.
• Public housing authorities are requested to extend deadlines for housing assistance recipients and applicants to deliver documents.
• Home and commercial mortgage lenders are requested to immediately place a moratorium on foreclosures and evictions that arise out of economic hardship caused by the COVID-19 pandemic.
• The California Public Utilities Commission (CPUC) is requested to monitor and report the customer service protections provided by utility providers for electric, gas, water, internet, landline telephone, cell phone service, and other critical utilities, in response to COVID-19.

The order contemplates that a quarantine or similar public health measure could also prohibit an eviction if it compels an individual to remain physically present in a particular residential property.

The order does not relieve a tenant from its obligation to pay rent, nor does it restrict a landlord’s ability to recover rent.

On March 17, 2020, the CPUC confirmed that, retroactive to March 4, 2020, utility companies under CPUC’s jurisdiction (including PG&E, AT&T and Comcast) will not be allowed to suspend service for customers who cannot pay their bills during the COVID-19 state of emergency.

Cities in California that have moved to impose temporary moratoriums on evictions include San Francisco, Oakland, San Jose, Los Angeles, Santa Monica, San Diego, Santa Barbara, South Pasadena, and Suisun.

• On March 13, San Francisco Mayor London Breed issued a 30-day moratorium on residential evictions related to financial impacts caused by the COVID-19 pandemic. Tenants will have up to six months after the end of the emergency declaration period to pay the total of their missed rent. Guidance for tenants and landlords, including tenant obligations to provide notice of inability to pay rent, can be viewed here.
• On March 14, Santa Monica issued a temporary moratorium on evictions for non-payment of rent by residential tenants financially impacted by COVID-19 during the period of local emergency. A landlord also cannot pursue a no-fault eviction during the period of local emergency unless necessary for the health and safety of tenants, neighbors, or the landlord. On March 18, Santa Monica added a moratorium on commercial tenant evictions through April 30, 2020.
• On March 15, Los Angeles Mayor Eric Garcetti issued a moratorium on residential evictions through March 31, 2020 where the tenant can demonstrate economic hardship caused by the COVID-19 pandemic. Tenants will have up to six months following the expiration of the local emergency period to repay any back due rent. The Mayor is considering a halt to commercial evictions as well.
• A proposed ordinance for a residential eviction moratorium in Oakland will be considered at the Oakland City Council’s next meeting on April 7.
• San Jose City Council is moving forward with a temporary ban on COVID-19-related residential evictions, which is expected to receive final approval in the next week. Council members will consider adding small businesses under commercial leases to the moratorium.
• San Diego city leaders voted on March 17 to draft an emergency ordinance aimed at preventing residential rental evictions triggered by the COVID-19 pandemic.
• Santa Barbara City Council will vote on a draft ordinance pausing evictions on March 24, 2020. It is undetermined whether the pause will extend to both residential and commercial evictions, or one or the other.
• On March 18, South Pasadena considered a resolution that would establish special protections for residential and commercial tenants and property owners.
• Suisun City Council is poised to pass a resolution that would prohibit any new residential or commercial evictions due to financial impacts caused by the COVID-19 pandemic.

The situation and responses are evolving quickly, and other local jurisdictions are considering similar controls. The Governor’s Office may also provide additional guidance on this issue. We will continue to monitor these developments.

 

SB 50, Senator Scott Wiener’s bill to boost housing production near transit and job centers, has been defeated. The bill fell three votes short on Wednesday, and Wiener was unsuccessful in his reconsideration request today.

The bill was stalled in the Senate last May when the Chair of the Appropriations Committee deferred action on the bill until 2020. On January 24, Senate President Pro Tempore Toni Atkins moved it to the Rules Committee, which she chairs, and Senator Wiener introduced amendments designed to address certain concerns regarding local control and potential impacts on low-income residents. The amendments included a “local flexibility plan” that would allow local agencies to create alternative housing plans that are designed to produce the same number of units as SB 50 compliance would. The amendments also added a neighborhood preference for 40% of new low, very low and extremely low income units developed under SB 50.

Both Governor Newsom and Senator Atkins have indicated that regardless of the fate of SB 50, some form of legislation to increase housing production will be passed this year.

The Housing Crisis Act of 2019 (Senate Bill No. 330; Senator Skinner) goes into effect on January 1, 2020 and expires on January 1, 2025. It aims to address the statewide housing crisis by limiting the number of public hearings for new housing developments and reducing the timeline for permit review, placing limits on permit processing, limiting fees and exactions, and making it more difficult for local jurisdictions to deny or modify housing projects. To summarize, the Act:

1. Provides more certainty for housing developers by prohibiting local agencies from:

• Requiring compliance with an ordinance, policy or standard adopted after a “preliminary application” is submitted, except under limited circumstances, such as where compliance is necessary to avoid or substantially lessen an otherwise significant impact under the California Environmental Quality Act (CEQA).
• Imposing or enforcing design standards established on or after January 1, 2020, unless they qualify as objective (as defined in the Act).
• Imposing new or increased development impact fees, unless an automatic annual adjustment based on an independently published cost index referenced in the legislation establishing the fee.

2. Prohibits caps, moratoriums and density reductions by disallowing agencies from:

• Reducing permitted housing density to below that allowed on January 1, 2018.
• Imposing moratoriums (or similar restrictions) on new housing development unless the Department of Housing and Community Development agrees that it is necessary to protect against an imminent public health and safety threat.
• Limiting the total number of housing units in a local jurisdiction, unless approved by the voters prior to 2005 for a “predominantly agricultural county.”

3. Shortens the approval process

• No more than five public hearings may be held on a housing project (if it complies with applicable objective general plan and zoning standards) and the overall timeframe for review and approval (or disapproval) under the Permit Streamlining Act is reduced.

The Act adds and amends various California Government Code sections, including the Permit Streamlining Act (Cal. Gov’t Code Section 65920 et. seq.) and the Housing Accountability Act (Cal. Gov’t Code Section 65589.5 et. seq.). It applies to “housing developments,” which include mixed-use projects with two-thirds or more of the square footage dedicated to residential use. Protection is limited under the Act. The vesting protections lapse if construction is not commenced within two and a half years from the date of final project approval (which period would be stayed during litigation) and/or the residential square footage or number of units is increased by 20 percent or more after the preliminary application is submitted, exclusive of any increase resulting from a density bonus. See the full text of the Act for additional provisions not summarized here (e.g., relocation assistance requirements).

In September, the California Legislature approved AB 1482, the Tenant Protection Act of 2019. Governor Newsom signed the bill on October 8, making California the third state this year to impose statewide residential rent control, behind Oregon and New York. The legislation also includes “just cause” eviction provisions.

Until its repeal date of January 1, 2030, AB 1482 limits rent increases for many residential buildings. For covered buildings, during any 12-month period, the bill prohibits a landlord from increasing a tenant’s rent by an amount that is the lesser of: (a) 5% plus the percentage increase in the cost of living based on the regional CPI (for the Bay Area, roughly 4% or a total of about a 9% increase based on the 2019 CPI), or (b) 10%. The cap applies to rent increases imposed after March 15, 2019, and for existing tenants, a landlord may not increase the rent more than twice in a 12-month period.

In an effort to address the impacts of the rent cap on new construction, the Legislature included an exemption for housing constructed in the past 15 years. AB 1482 also exempts certain affordable housing, college dormitories, single-family homes, and owner-occupied duplexes and condominiums (except where the owner is a REIT, corporation or limited liability company where at least one member is a corporation). The bill does not apply to housing that is already subject to local rent control measures. The City of San Francisco currently imposes rent control on buildings constructed before June 13, 1979. The San Francisco Rent Ordinance caps annual increases in residential rents based on a specific formula tied to the regional CPI. Since the 1980s, the effective rate cap has ranged from 0.1% to 7.0%, and the current cap in effect through February 29, 2020 is 2.6%. These protections will continue to apply. The AB 1482 rent cap provisions will apply to buildings that received certificates of occupancy between June 13, 1979 and December 31, 2004. A building constructed in or after 2005 will not be subject to the new AB 1482 rent caps until the building is at least 15 years old.

The legislation also imposes “just cause” eviction procedures, which apply to tenants who have continuously and lawfully occupied a residential property for at least 12 months (or at least 24 months in the case of one or more new adult tenants), unless the eviction results from an “at-fault” or “no-fault” just cause, as defined in the bill. For a “no-fault” eviction, such as an owner move-in or substantial renovation, the landlord must provide tenants with relocation assistance or a rent waiver in the amount of one month’s rent. The exemptions are similar to those for rent caps, and also include dormitories for K-12 schools, housing associated with a nonprofit hospital, religious facilities, extended care or licensed residential care facilities, hotels, and individual rooms or accessory dwelling units rented out by a homeowner. Local just cause ordinances such as San Francisco’s prevail, provided they were either in effect on or before September 1, 2019, or are adopted thereafter but are more protective than the state legislation.

The bill faced substantial opposition, led by the California Apartment Association – which ultimately dropped its opposition – and the California Association of Realtors. Opponents raised concerns that the bill would chill housing production, curtail economic development, and complicate the eviction process.

While many tenants’ rights groups supported the legislation, others remain critical of certain provisions, including the lack of vacancy control and longer-term tenant protections. Bay Area Mayors London Breed, Libby Schaaf and Sam Liccardo endorsed the measure.

Costs for many non-residential developments in San Francisco are poised to increase. On September 19, 2019, the Planning Commission approved a proposed ordinance that would more than double the City-wide Jobs Housing Linkage Fee (JHLF) rate for office and laboratory development. The ordinance now moves to the Board of Supervisors for consideration.

The key provision is a substantial hike in fees for office and laboratory development. The ordinance would increase the JHLF rate per gross square foot (gsf) for office uses from $28.57 to $69.90 and for laboratory uses from $19.04 to $46.43. With the proposed changes, a 100,000 gsf office building would be required to pay a nearly $7 million JHLF.

The proposed ordinance does not include a grandfathering clause so pipeline projects and certain approved projects would be subject to the JHLF changes. The JHLF is normally calculated and due at the time of issuance of the first construction document for a project, which is typically a site or building permit. The proposed ordinance provides that certain projects approved by the Planning Commission (or Planning Department, if applicable) on or before the end of the year (December 31, 2019) will be subject to the higher fee. This applies only if the proposed ordinance is in effect when the JHLF is normally due or a condition of approval is imposed requiring payment of any higher JHLF rate in effect prior to issuance of either the certificate of occupancy or final completion for the project. Such a condition was imposed on at least one already approved Central SoMa project in anticipation of the proposed ordinance.

The proposed ordinance would also change the options for developers to satisfy the JHLF requirement. Compliance through payment to a residential developer would no longer be allowed, but land could still be dedicated in lieu of payment of the JHLF (or in combination therewith) if specified requirements are met. That option would be expanded under the proposed ordinance to all projects, not just Central SoMa projects.

Under state law, the development impact fee must bear a reasonable relationship or “nexus” to the actual impacts of new development and the costs of mitigating those impacts. The City retained consultants to prepare a May 2019 Jobs Housing Nexus Analysis (“Nexus Analysis”) and a June 2019 Jobs Housing Linkage Fee Update Development Feasibility Assessment (“Feasibility Assessment”). The Nexus Analysis examined the connection between employment growth and affordable housing demand in the City and concluded that for each job created, the demand for housing and cost of producing it is substantially higher than what was identified in the original 1997 nexus analysis. It did not include a maximum recommended rate. The Feasibility Assessment examined various office development prototypes and concluded that for some product types and under certain conditions, a JHLF increase of up to $10 per gsf would be feasible. The Feasibility Assessment did not address laboratory space.

The staff report to the Planning Commission recommended approval of the proposed ordinance with modifications to conform to the Feasibility Assessment: a $10 per gsf increase for office uses, and no increase for laboratory uses. The Planning Commission considered testimony regarding the proposed rates and analysis and, in deliberations, generally expressed support for the ordinance while acknowledging that additional work needed to be done to confirm the appropriate maximum increase. The approval was in support of the ordinance without modifications.

We will continue to track this proposed ordinance. It has not yet been scheduled at the Land Use and Transportation Committee of the Board of Supervisors, which is the next step before final consideration by the full Board.

San Francisco’s Community Opportunity to Purchase Act (COPA) became effective earlier this month but the Mayor’s Office of Housing and Community Development (MOHCD) has clarified that sellers of multi-family residential rental properties and certain vacant lots in San Francisco will not be required to comply until September 3, 2019 (90 days after the effective date). That date is the deadline for MOHCD to release a formal implementation program, including a list of “Qualified Nonprofits” that have been granted certain rights of first offer and first refusal under COPA.

MOHCD has also confirmed that it will not require COPA compliance if a property owner has entered into a “binding contract for sale” prior to September 3, 2019. That term is not defined, but appears from the COPA legislation to include not only a binding purchase and sale agreement but possibly also other forms of contract, e.g., an option to purchase.

Although not addressed in the legislation, MOHCD has also provided guidance for property owners that list property subject to COPA for sale prior to September 3, 2019, but have not entered into a “binding contract for sale” prior to that date. Under that scenario, the yet-to-be-identified Qualified Nonprofits must be given a right of first refusal (ROFR), but not a right of first offer. Because the ROFR would be the seller’s first contact with “Qualified Nonprofits” they would presumably have 30 days (rather than five days) to respond; however, that wasn’t specified by MOHCD. The ROFR process is summarized in our March blog post and this graphic.

As reported in our May blog post, the San Francisco Apartment Association has stated that it believes the legislation is “illegal and unconstitutional,” and has indicated it plans to bring litigation against the City this year. We will be monitoring any legal developments surrounding the legislation.