In one of the largest spending measures ever enacted, the CARES Act, the Consolidated
Appropriations Act of 2021 (H.R. 133) was signed into law on December 27, 2020. Although it is unprecedented in size, there is a consensus among economists that the bill is not enough to stop the bleeding.
The law also extends the eviction moratorium imposed by the Centers for Disease Control and Prevention (CDC), but this is moot for California landlords because the state has more protective measures.
Allocation of funds to California and
Manner in Which it is Disbursed
As the most populous state in the Union, California will be the biggest recipient of rental assistance. The National Low Income Housing Coalition estimates the state will have $2,630,186,000 to dole out. It is not clear which agencies will be tasked with doling out rental assistance funds, but if the CARES Act is any example, much of the money will be paid to local governments that will have to come up with their own process to distribute funds.
Timetable for Rental Assistance
January 26, 2021 [was] the deadline for the Treasury Department to fork over the funds to the states and local municipalities. In turn, state and local governments will have until December 31, 2021 to spend the money. If they don’t use it, they lose it. That is, for any states or local governments that are laggards and do not take advantage of this pot of money, the funds can be revoked starting September 30, 2021 and reallocated to other locales.
Purpose of the Funds
The lion’s share of the handout (90% to be exact) is designated for eligible households to pay for rent and rental arrears, utilities, and other expenses related to the pandemic. Ten percent of the funds are reserved for administrative costs and case management services.
To qualify for rental assistance funds, renters must check all of these boxes:
- Household income no more than 80% of Area Median Income (AMI).
- At least one household member has either qualified for unemployment benefits or experienced
a reduction in household income as a consequence of COVID-19, or has incurred significant
costs due to the pandemic.
- At least one individual in the household must demonstrate a risk of being homeless, evidenced
by a past due utility or rent notice, or service of an eviction notice, unsafe or unhealthy housing
conditions, or other risks to be determined by the agency charged with dispersing funds.
The federal government has mandated that agencies prioritize tenants most in need Households with income south of 50% of AMI will be first in line. A household member that has been unemployed for 90 days preceding the application for relief will also take precedence.
We hasten to say that the ball is in the court of local municipalities to come up with additional criteria if they chose to do so. Although this is not required, 2020 has taught us that given state edicts, local governments will not have to be told twice to enact their own measures. Expect local criteria to be forthcoming.
Applying for funds on behalf of tenants, landlords can apply for help on behalf of a tenant, so long as the tenant is aware of the application and consents. Keep in mind, this process will require more than permission from the renter to seek assistance. Rental property owners will need a good deal of cooperation in filling out the application and proving eligibility.
Dollar Amount Up in the Air
The new law does not hint at a maximum dollar amount, but it does want to break the umbilical cord. Assistance cannot last more than 12 months. The California Apartment Association (CAA) notes that because H.R. 133 is framed as the maximum allowable benefit but does not compel state and local governments to require up to 12 months of assistance, it appears that municipalities will have free rein to set their own limitations on maximum benefits.
We will keep you in the know as appropriations trickle down to the local level. A direct shot in the arm of landlords, the new law spells out that any assistance given to eligible tenants is to be paid to the rental property owner unless the landlord objects to third-party payments. There is no downside to accepting rent from other individuals or entities, provided there is an arms distance that does not create a tenancy with the provider.
While many landlords will say that the federal aid is too little, too late, rental property owners can use all the help they can get, so H.R. 133 is a positive sign. When there are instances of tenants who are chronically not paying rent during the pandemic and even after eviction moratoria end, rental property owners should know that there are options available.
To discuss a course of action, seek informed legal advice on navigating these most challenging of times.
As the founding attorney of Bornstein Law, Daniel is a well-respected authority in landlord-tenant disputes and property management issues. With over 23 years of experience in handling real estate and civil litigation throughout the Bay Area, he also manages rental properties, is instrumental in completing real estate transactions and is renowned for his educational seminars. For more information, visit https://bornstein.law/.
Reprinted with permission of the Small Property Owners of San Francisco Institute (SPOSFI) News. For more information on becoming a member of SPOSFI or to send a tax-deductible donation, please visit their website at www.smallprop.org or call (415) 647-2419.