By Derek Barnes–
Most Californians know that the state has a severe housing problem. We see it everywhere. Over a decade of under-development with a rapidly growing population has created a housing shortage that we’ve never seen before. By some estimates, the state is short as much as two million housing units, and it’s not likely that we can build our way out of this gap any time soon without significant transformative vision.
This piece isn’t about California’s housing shortage or affordability issues. I’d like to challenge how we think about housing as a service and who actually provides over 12M rental units in California. Through the pandemic, these spaces were critical when continued shelter-in-place mandates were imposed. Workspaces and homes were instantly merged and continue to function this way for those who are able to work remotely—allowing workers to preserve their income.
When people think of the owners or operators of rental properties, it’s easy to overlook or take for granted those who provide this essential service. Hint: It isn’t just big investors or corporate conglomerates that have million or billion-dollar portfolios. They aren’t the stereotypical “greedy landlords” who make money hand over fist by overcharging renters to provide basic shelter, evict tenants (the consumer) to chase more profit and drive down affordability.
It may be a big surprise for some, but many rental property owners/operators in the Bay Area own less than ten (10) rental units. The vast majority are small family businesses, women, people of color, and are often retirees who rely on income from their rental property investments. Any disruption to rental income, inequitable or unbalanced legislative mandates, gaps in insurance coverage, or higher material and labor expenses (costs of doing business) have devasting consequences for small rental housing businesses. Many have seen all of these scenarios due to COVID-19’s lingering impact on our economy. And now they also face impending threats from lenders to foreclose or call in a note due to rent nonpayment.
As last year revealed, shocks and stresses to the system impact communities and business sectors differently. Some businesses like online retailers thrived during the pandemic, while others like hospitality and travel were decimated. The same is true for areas of rental housing, which is a tale of two cities. Thankfully, most people could pay their rent or work out terms with property owners/operators if there was a legitimate loss of income due to COVID-19. However, a significant number of property owners/operators are suffering economically as their renters couldn’t or wouldn’t pay rent in some instances. One in 5 households needed/need some form of rental assistance through this pandemic.
The ongoing eviction moratorium mandates and inadequate Emergency Rent Assistance Program (ERAP) funds in hard-hit municipalities, coupled with the slow distribution of ERAP relief, subject the community of housing providers in desperate need of relief to continued economic stress and keep them on high alert.
Additionally, what if business environments are too obstructive or burdensome? It can feel like the deck is stacked against rental business owners. Nothing has been made this more apparent than seeing legislative priorities unfold over the last 16 months. They revealed real vulnerabilities for those who provide housing. Who’s fighting for them (or not) in this struggle?
Miraculously, many small rental housing owners/operators have adapted well since the onset of the pandemic, and most residents have been able to pay rent; some, though, with great sacrifice. But many owners/operators have also decided to divest entirely to get out of the rental business or sell to reinvest in more business-friendly geographies.
There will always be a cycle of incoming and outgoing investors in desirable markets like the Bay Area. If you are a housing provider, there are two key questions you must ask yourself in determining your risk tolerance. What are you willing to let go of and adopt as market conditions continue to change? What are you ready to fight for to protect your business and property rights?
One thing is clear. Rental property owners have played an instrumental role in keeping people sheltered, safe, and productive, even when it hasn’t been in their economic interest. A renter’s loss of income has a severe impact on the entire housing ecosystem. It’s time for our legislators and municipal leaders to fix what is clearly broken to get these rent assistance programs functional so renters and housing providers can emerge successfully in the wake of this terrible pandemic.
Derek Barnes is CEO of East Bay Rental Housing Association
(www.EBRHA.com ). He currently serves on the boards of Horizons Foundation and Homebridge CA. Follow him on Twitter @DerekBarnesSF or on Instagram at DerekBarnes.SF
Published on July 15, 2021
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