A PLAN TO FORGIVE RENTS IN LOS ANGELES

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As we navigate our current crisis — a public health and financial emergency of biblical proportions — you’ve probably heard a lot of talk about rent forgiveness. There are a few different terms for it, like rent cancellation and #RentZero, but they all mean the same thing: policy that allows tenants to miss payments without having to make them up later. It’s not the same thing as a rent freeze, which just prevents landlords from raising rents.

You may have heard that rent forgiveness isn’t an option in Los Angeles. That we don’t have the power or the resources or the legal means to do it ourselves.

But that’s not true. We can forgive rent debt. And if we want to avoid deepening our local financial crisis and watching our already dire homelessness emergency get even worse — if we want to emerge from this pandemic a stronger and more equitable city than we entered it — we must forgive rents.

Let’s talk about rent forgiveness in Los Angeles: why we need it, and how we can get there.

WHAT’S GOING ON WITH RENT IN LOS ANGELES RIGHT NOW?

As of right now, Los Angeles has not forgiven rent payments, but has allowed tenants to postpone them. Tenants are allowed to miss rent if they present a letter to their landlord announcing that they’re unable to make a payment for that month, and they’re not compelled to pay back missed rent until a year after the emergency period has passed.

WHY IS RENT DEBT A PROBLEM?

Our city is likely to be facing an unprecedented employment crisis for a very long time -- and as the emergency period goes on, rent debt for many tenants is likely to pile up dramatically. Studies have shown that unemployment payments, even increased payments in the emergency, do not sufficiently cover rent costs for most people living in Los Angeles. And many Angelenos, including undocumented residents, won’t have access to unemployment benefits at all.

How are we expecting tenants, many of whom still won’t even have jobs, to be able to pay back their debt within a year? And what happens the day these accumulated missed payments come due? People’s credit scores will be decimated. Landlords will miss out on significant expected income. Thousands of tenants could be evicted. Many will be forced onto the streets, adding to our already unconscionable homelessness crisis.

By postponing rent without cancelling it, we are manufacturing a local debt crisis.

HOW BAD IS THE CRISIS?

That’s actually a major issue -- we don’t know. Despite the fact that we’re nearly a decade into a major housing and rent crisis, Los Angeles actually collects very little data when it comes to who landlords are or how much they’re charging. As of three years ago, we have a registry for rent-stabilized units, but those units only make up a little more than half of the rental units in Los Angeles.

We also don’t know who owns these rental properties. The registry form doesn’t ask for the name of the property’s owner, and the identities of many LA landlords are hidden behind shell companies.

This lack of data makes it nearly impossible to enforce penalties against landlords -- if we don’t know who they are or what they’re charging, the city can’t take punitive measures against landlords who demand excessively high rents or attempt to evict a tenant illegally. We place the entire burden of enforcement on tenants. Tenants must know their own rights and file complaints against landlords themselves, then take their case to court if the landlord persists. Court proceedings rarely go well for tenants in Los Angeles, and can be financially devastating -- while cities like San Francisco and New York provide free lawyers for tenants in eviction cases, LA does not.

Because of this lack of data on landlords and oversight of their activities, most of our existing rental regulations are completely unenforced. We’ve forced tenants to be their own advocates whenever a landlord violates their rights -- a dynamic where the deck is very much stacked against them.

To sum it up: LA’s rental market suffers from both too much debt and not enough data.

CAN’T WE JUST CANCEL RENTS AND CALL IT A DAY?

It may seem tempting to just call for rent forgiveness for tenants without reimbursing landlords. It would certainly be simpler! But forcing property owners to shoulder the entire burden of this crisis -- especially small landlords and those providing the affordable units that our city desperately needs -- could have disastrous ripple effects. Cutting significantly into rent revenue could push landlords to take their rental units off the market by converting into condos or selling their buildings to private equity firms.

Older, rent-controlled apartment units are especially vulnerable to condo conversion, as landlords often operate on lower profit margins with these units and any degree of uncertainty can push them to sell. Even before this crisis, LA was already losing massive amounts of rent-controlled housing this way -- last year, 657 rent-controlled units in the city were taken off the market over the course of just three months. The tenants occupying these units are often evicted, and many become homeless.

WHAT ARE OUR CITY LEADERS DOING ABOUT RENT FORGIVENESS?

Many of our city elected leaders have expressed an interest in rent forgiveness -- but not in doing it themselves. Instead of working on ways to solve the rental debt crisis locally, they’ve plead to the state and federal governments to pass rent forgiveness laws that will bail us out.

But kicking the problem to another legislative body ignores the real resources we have in the city. Moreover, the federal government is not a reliable partner right now, and our state is managing an all-time record budget deficit. We must take all of the local action that we can.

HOW ARE WE GONNA PAY FOR IT?

First, let’s ask ourselves another question: how can we afford to let more Angelenos lose their homes?

After the last financial crisis in 2008, our elected officials largely made the choice to stand by and watch as hundreds of thousands of residents lost their homes to foreclosures, skyrocketing rents and evictions. That choice has been, in addition to morally disgraceful, incredibly expensive for our city. Our local governments now spend hundreds of millions of dollars a year just managing our homelessness crisis. Had we invested resources earlier to intervene and keep Angelenos in their homes, we’d be in a much better financial position today.

As for forgiving rents in the short term, we have resources at our disposal. Through a combination of dedicated city funds, low-interest loans already made available by the federal government, and transferable tax credits, we can legally and responsibly create a municipal rent forgiveness program. Again, it would be much riskier not to.

SO WHAT SHOULD OUR RENT FORGIVENESS POLICY LOOK LIKE?

As we laid out earlier, LA is facing two big problems with its rental market right now: too much debt and not enough data. Tenants are skipping payments that they won’t be able to make up, and the city lacks the data to enforce landlord malfeasance -- or even to know who property owners are.

We can solve both problems at once.

Here’s how:

Step 1: Establish a comprehensive rental registry for all rental properties in the city.
Step 2: Allow landlords who have signed up for the registry to submit proof of missed tenant payments.
Step 3: Provide cash reimbursements to small and affordable-unit landlords up to the median rent payment in the City of LA.
Step 4: Offer larger local property owners transferable tax credits.

Let’s go into some more detail.

EXPANDING THE RENTAL REGISTRY

If we’re going to hand out rent reimbursements to landlords, it’s essential that we demand that all rental property owners in the city register all properties and property owners in a city database. If all drivers are expected to register their cars, it’s about time we did the same for rental properties.

By gathering all landlords in one database, we’ll make it much easier to keep both tenants and landlords informed about rent regulations and tenant rights. By compelling landlords to declare what they’re charging and submit the paperwork they send to their tenants, we’ll be better equipped to enforce rent gouging and eviction violations. Fees charged to bad actors will also offer a new source of desperately needed revenue.

By making a comprehensive rental registry an essential component of our rent forgiveness policy, we’re not just cleaning up the mess caused by our current crisis -- we’re creating lasting systems that will better protect tenants into the future. Finally, our city will have the data to truly understand its own rental landscape, and the means to enforce regulations we put forward.

RENT FORGIVENESS FOR TENANTS, REIMBURSEMENTS FOR LANDLORDS

Too often, we ask tenants to navigate complicated paperwork and suffer long delays to receive any kind of rental assistance. In our rent forgiveness model, all they need to do is send a letter to their landlord declaring that they’re unable to pay rent. Then it’s up to the landlord to seek reimbursement from the city. It’s only fair that the landlord do the legwork -- they’re the ones making the profit, and property management is their profession.

If small landlords join the rental registry and submit a letter from their tenant declaring inability to pay, they’ll receive a reimbursement of up to the city’s median rent for each payment missed. What constitutes a “small” or “mom and pop” landlord may vary to some, but the city defines them as owners of no more than four rental units.

TAX CREDITS FOR LARGER LANDLORDS

While the last thing any of us would like to be doing is offering money to large corporate landlords, questions have been raised as to the constitutionality of cancelling rent payments entirely for any property owner. Luckily, our city has a legal, well-precedented means of offering reimbursements to companies without paying cash up front: transferable tax credits.

The premise behind a tax credit like this is fairly simple -- it’s essentially a certificate declaring that you don’t have to pay a certain amount of tax at some point in the future. Because Los Angeles is likely to be in a much healthier financial position in a few years, we can afford to offer these tax breaks down the line, thus flattening the curve of the city’s debt. Landlords who receive these tax credits can use them to get a break on future property taxes, or sell them to other businesses that might find the credits more useful. These credits would be worth more the longer they’re held on to, incentivizing businesses to wait to cash them in until the city is farther into its financial recovery.

Providing these payments to landlords will keep tenants in their homes. There’s nothing more important than that.

WE CAN DO THIS

Rent cancellation may seem like a drastic measure, beyond the scope of a city’s powers. But it’s not. Los Angeles has a long history of spending money incentivising the health of certain kinds of properties -- just in the last few years, we handed out about nearly $1 billion in similar tax breaks for a handful of hotels downtown.

By using our resources to keep tenants in their homes, we’re making a statement about the kind of Los Angeles we want to be. A place where a pandemic beyond our control doesn’t lead to even more Angelenos becoming displaced and homeless -- because their neighbors stepped in to help them. A place where the burden of a crisis is shared, and not placed squarely on those who are least equipped to shoulder it.

In some ways, “rent forgiveness” is a deceptive term -- forgiveness implies that someone did something wrong. But the people struggling to exist in our city right now have done nothing to deserve their hardship. And they shouldn’t see their lives destroyed because our leaders declined to act.

I truly believe Los Angeles is a city of deep, joyful solidarity. That’s why, every day, we see more and more Angelenos stepping up to help others through this crisis -- we take care of each other here. We show love to neighbors we’ve never met.

It’s time our policies reflected the values of our people.