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HomeMy WebLinkAboutItem 7 Staff Report v . 0 01 P a g e | 1 September 22, 2020 File ID: 20-0401 TITLE PRESENTATION FROM STAFF REGARDING RECENT FEDERAL AND STATE COVID-19 EVICTION PROTECTION LAWS AND REGULATIONS, CITY COUNCIL CONSIDERATION OF ITS REMAINING OPTIONS TO EXTEND OR MODIFY CITY’S OWN COVID-19 EVICTION PROTECTIONS, AND POSSIBLE CITY COUNCIL DIRECTION TO STAFF TO BRING BACK FOR CITY COUNCIL CONSIDERATION ONE OR MORE SPECIFIC ACTIONS TO FURTHER PROTECT CITY RESIDENTIAL OR COMMERCIAL OWNERS AND/OR TENANTS FROM COVID-19 RELATED DISPLACEMENT OR HARDSHIP RECOMMENDED ACTION Council hear the presentation. SUMMARY On March 17, 2020, Chula Vista City Council adopted Emergency Ordinance No. 3483A (the “Eviction Moratorium”) and subsequently amended as Ordinance No. 3489-A as a temporary measure during this state of emergency to help stabilize and avoid unnecessary displacement of financially impacted residential and commercial tenants and homeowners in the interests of protecting the public health and preventing transmission of the coronavirus. In light of continuing health and economic impacts leaving tenants and homeowners vulnerable to eviction and foreclosures, Council has extended the Eviction Moratorium until September 30, 2020. At the State level, Governor Newsom signed into law Assembly Bill (AB) 3088, known as “The Tenant, Homeowner and Small Landlord Relief and Stabilization Act of 2020" (the “Act”), effective September 1, 2020, that provides ongoing protections for residential tenants and a noticing process related to forbearance for those qualified homeowners and small landlords of no more than four dwellings. City Council is requested to consider and provide direction on any further actions that may be necessary for the further protection of residential and/or commercial tenants and/or homeowners. ENVIRONMENTAL REVIEW The activity is not a “Project” as defined under Section 15378 of the California Environmental Quality Act State Guidelines; therefore, pursuant to State Guidelines Section 15060(c)(3) no environmental review is required. BOARD/COMMISSION/COMMITTEE RECOMMENDATION Staff will endeavor to communicate with the Ad Hoc Subcommittee for their input on this item prior to the City Council Meeting P a g e | 2 DISCUSSION Existing City Moratorium The City of Chula Vista approved an Eviction Moratorium (Emergency Ordinance 3468-A and subsequently amended as Ordinance No. 3489-A) for tenants and homeowners, consistent with California Governor Newsom's Executive Order N-28-20, which authorizes local governments to halt rental and foreclosure related evictions when the eviction is based on nonpayment of rent because of documented and substantial decrease in income caused by layoffs or reduction in paid work hours as a result of the COVID -19 pandemic or by any local, state, or federal government response to COVID-19. On June 30, 2020, the Governor issued Executive Order N-71-20 extending local government’s ability to provide such protection through September 30, 2020. Effective March 18, 2020, the City’s Eviction Moratorium halts residential/commercial tenant evictions and suspends foreclosure for nonpayment of mortgage when a tenant's or homeowner's income has been substantially impacted by the unprecedented COVID-19 pandemic and that impact can be adequately documented. Consistent with the Governor’s subsequent Executive Order N-71-20, the Moratorium has been extended by the City Council through September 30, 2020. Through September 30th, the City’s Eviction Moratorium applies to all residential properties, including single-family homes, rooms rented in single-family homes, duplexes, condominiums, income-restricted apartments (i.e., affordable housing), market-rate apartments, and mobile-homes. It affords similar protections to commercial tenants. The Moratorium only applies to limit evictions where the inability to pay rent or a home mortgage can be demonstrated as resulting from financial impacts of the COVID-19 pandemic. The City Moratorium does not prevent otherwise lawful evictions for other just causes, like unlawful conduct or damages to the premises. Ultimately, tenants or homeowners are still obligated to pay lawfully due rent, lease, or mortgage payments to the landlord or mortgagor. Such payments are not forgiven during the Moratorium period, they are just deferred. Under the City’s Moratorium existing guidelines, all unpaid rent and housing payments would need to be paid no later than March 31, 2021 (six (6) months after its expiration date of September 30, 2020). Recent State Enactments Protecting Residential Tenants and Small Residential Property Landlords On August 31, 2020, California Governor Newsom signed into law urgency bill AB 3088, which is also known as “The Tenant, Homeowner and Small Landlord Relief and Stabilization Act of 2020" (the “Act”). The Act protects renters, homeowners, and small landlords of four or fewer properties from March 2020 through January 2021. Going forward, the Act effectively preempts and replaces local moratoria with respect to residential tenants and homeowners, including those elements of the City’s Eviction Moratorium. There are two main components of the Act: 1. COVID-19 Tenant Relief Act of 2020 – adds a new chapter to California Code of Civil Procedure §1179.01 et seq. a. Covers residential tenant evictions from March 1, 2020 through January 31, 2021. P a g e | 3 i. From March 1, 2020 through August 31, 2020, those tenants signing a “Declaration of COVID-19 related financial distress” are not required to make payment on rents due during this period and are protected from evictions for non-payment of rent based upon execution and submittal of the required Declaration. Landlords are required to provide tenants with a notice of their rights under AB 3088 and a copy of the Declaration. ii. From September 1, 2020 through January 31, 2021, those tenants signing a Declaration and making payment of 25 percent of rent due during this period by January 31, 2021 are protected from evictions for non-payment of rent due to COVID-19 until March 1, 2021. If tenant does not make payment of 25 percent of rent due by January 31, 2021, they are subject to eviction on February 1, 2021 and collection of unpaid rent due on or after March 1, 2021. Landlords are required to provide tenants with a notice of their rights under AB 3088 and a copy of the Declaration, if not previously provided. iii. All unpaid rent and payments due to COVID-19 financial distress is termed “COVID-19 Rental Debt” and considered consumer debt to be pursued through civil or small claims court through February 1, 2025 (not subject to the $5,000 limitation). Collection of this debt cannot be pursued through unlawful detainer (“eviction”) action. b. No supporting documentation is required to verify a Declaration of COVID-19 Financial Distress, unless the tenant is considered a “High Income” tenant, defined as having over $100,000 household income or over 130% of median household income, whichever is higher. c. All evictions for “failure to pay rent or other charges” are on a one month hold until October 5, 2020 to provide the Judicial Council and Courts time to prepare and implement AB 3088. d. Evictions for all other just causes not related to non-payment COVID-19 financial distress, may pursue “unlawful detainer” eviction actions as of September 2, 2020. 2. COVID-19 Small Landlord and Homeowner Relief Act of 2020 – adds a new title to California Civil Code §3273.01 et seq. a. Applies to homeowners or “small landlords” owning four or less dwellings units. b. Effective August 31, 2020 through April 1, 2021. c. Process to allow those eligible for forbearance to be provided with written notices of denial with specific reasons and notices if there are any corrections needed to request for forbearance and allow for borrower to make needed corrections to their request, with the intent that a borrower is offered a post-forbearance loss mitigation option. Further information and guidance from the California Department of Business, Consumer Services and Housing Agency (BCSH), along with DSD Housing’s summary of the eviction pro tection process and when evictions can occur is attached for your information as Attachments 1 and 2. Interrelationship Between the City’s Eviction Moratorium and State Law. An additional goal of AB 3088 was to provide statewide consistency on eviction protections and to pause local measures. Accordingly, under the Act, local jurisdictions are restricted from enacting, extending, or expanding local measures between August 19, 2020 and January 31, 2021. While the Act states that existing local ordinances may remain in place through their expiration, such ordinances should not undermine the framework of the Act. Much of the City’s Eviction Moratorium Ordinance related to protection of residential P a g e | 4 tenants is consistent with the Act. The Act provides prescriptive deadlines and processes beyond the City’s Ordinance and its implementing regulations for residential tenants. Chula Vista’s Eviction Moratorium provides a guideline for repayment of unpaid rent within six months of expiration of the Moratorium or by March 31, 2021. However, in accordance with AB 3088, the repayment period is deemed to begin on March 1, 2021. Residential tenants and homeowners should follow the requirements of both the City’s Moratorium and those requirements imposed by the Act in order to be afforded the all available protections. CARES Act Protections for Homeowners In considering further actions by the City related to homeowners, it is important to consider that protection is still available to homeowners under the CARES Act. Currently, homeowners with federally backed mortgages and who have experienced financial hardship may enter a forbearance program and be saved from foreclosure. Federal mortgages include Fannie Mae, Freddie Mac, FHA, VA, and USDA. These borrowers may delay monthly payments for three months. They can then extend to six months , and then request up to a year of forbearance. While mortgage payments are not forgiven, they may be made up either when the home is sold or by refinancing. CDC Order Restricting Evictions; No Practical Application in California Lastly, on September 4, 2020, the Centers for Disease Control and Prevention (CDC) issued an Order under Section 361 of the Public Health Service Act calling for a “Temporary Halt in Residential Evictions to Prevent Further Spread of COVID-19”, effective September 4, 2020 through December 31, 2020 (see Federal Register Document 2020-19654). However, given the States enactment of The Tenant, Homeowner and Small Landlord Relief and Stabilization Act of 2020, the CDC’s Eviction Moratorium has no practical impact for California residential tenants as the Order does not apply in any State, local, territorial, or tribal area with a moratorium on residential evictions that provides the same or greater level of public-health protection. The CDC’s Order requires the execution of a Declaration Under Penalty of Perjury declaring an inability to pay due to financial distress, best efforts to obtain government assistance, best efforts to make partial payments, acknowledgment of the obligation to pay rent or housing payment and if evicted, would become homeless . The Order does not relieve a tenant of any obligation to pay rent or make a housing payment. Commercial Tenant Protections and Assistance While the State’s enactment of the Act extends eviction protections for residential tenants, no additional actions have been taken to date at the State level to extend protections to COVID-19 impacted commercial tenants. Therefore, commercial tenants and homeowners, may still rely on the City’s Eviction Moratorium until September 30, 2020. While the City cannot further extend its Eviction Moratorium as it relates to residential tenancy, it may consider further protections to be afforded to commercial tenants and/or homeowners. In the first few months of the pandemic, many programs were developed to assist small businesses with surviving the initial required closures; however, most, if not all, of these resources have been exhausted and future federal relief has been stalled in Congress. Businesses continue to be impacted with on-going closures and limitations placed on occupancy. Some of the resources provided to businesses have included: Economic Injury Disaster Loan Program P a g e | 5 The Small Business Administration’s (SBA) Economic Injury Disaster Loan program provided small businesses, including non-profits with working capital loans of up to $2 million that provided vital economic support to small businesses to help overcome the loss of revenue they are experiencing. The loans could be used to pay fixed debts, payroll, accounts payable and other bills that can’t be paid because of the disaster’s impact. The interest rate was 3.75% for small businesses and 2.75% for non-profits. Reduced Work Hours If an employer had reduced employee hours or shut down operations due to COVID-19, employees could file an Unemployment Insurance (UI) claim. UI provided partial wage replacement benefit payments to workers who lost their job or had their hours reduced. Loans to Local Restaurants The South County Economic Development Council offered one-time, zero interest loans up to $5,000 to South Bay restaurants to assist them to stay open Free Re-opening Resources Re-opening Resources Re-opening resources to help businesses adapt to the new COVID-19 environment are still available through the Small Business Development Center and County of San Diego. These resources include free online training (live and recorded) and free one-on-one business advertising. Free online trainings include general information trainings, as well as industry specific trainings for: retail; food services; child-care businesses; human resources; marketing and sales; and cybersecurity industry sectors. City of Chula Vista Support to Small Businesses The COVID-19 Economic Recovery Plan was adopted by the City Council on May 5, 2020. It was subsequently updated on August 19, 2020 to extend the plan an additional 90-days until November 2, 2020. The cities assistance to the small business community are outlined below: Financial Assistance - Small Business Relief Fund loans (with City of San Diego) - On-the-Job Training Program - Direct Financial Assistance Grant Program – Chula Vista CARES o On July 14, 2020 the Chula Vista City Council approved a $1.5 million dollar grant program to assist small businesses who experienced business interruption caused by the required closures due to the COVID-19 Pandemic. The grant program will provide direct financial assistance to small businesses, the core of Chula Vista's economy. To-date, 247 grant awards have been processed and staff anticipates being able to fund all eligible applicants. - TechHire Job Training Program - SCEDC Restaurant Loan Program Technical Assistance P a g e | 6 - Communication on assistance from federal, state and local authorities - Business assistance and concierge services - Technical assistance for federal and state program - Economic recovery surveys (SCEDC regional survey and City’s summer resident and business owner survey - Industry working groups Marketing and Promotion - Community-wide business support marketing campaign Business Friendly City Policies - Prioritize all Tenant Improvement Permits - No proactive enforcement of sign ordinance - Business encroachment into the Right-of-Way - Free parking on Third Avenue and along commercial corridors - Coordination with utility providers on payment plans Business Outreach Survey Results (July 24, 2020) Four months into the pandemic, the City, in partnership with Harvard, crafted and administered a small businesses survey aimed at gauging the impact COVID-19 was having on our small business community. Over 600 survey responses were received of which the majority of respondents were grant applicants in need of funding. Key findings from the survey are summarized below. - 50% of respondents are wellness/beauty, food services and retail trade businesses - Most businesses earn ~$200k or less - 20% of businesses are solely employee run and 50% have less than 10 employees - Most business owner are 40 years old+ and have been in business for 10+ years - As of July 24, 2020, only half of businesses were currently open and many had to decrease their workforce; this likely increased over the last few months especially with the return of personal care services to indoor operations - Nearly all businesses have seen a decline in revenues and have limited cash reserves - Of the businesses open in June, 60% saw a decrease in sales of 25% or more - Less than 10% of businesses have 4 months+ to operate in cash reserves as we are now in month 6 of COVID - 90%+ of businesses have made changes to their products/services to stay afloat (e.g. offering online sales, home delivery, curbside/takeout services, moving outdoors, new products) - As of July 2020, most businesses have depleted 50% or more of their reserves - 60% of businesses anticipate closing permanently in six months (July-December 2020) given current projections. P a g e | 7 - Uses of capital vary across demographics and very few business owners access institutionalized finance. Most businesses rely on their own personal savings, business profits and credit cards to fund their business. Based on the survey results, businesses continue to be impacted by State mandated closures and restrictions on operations. Businesses have exhausted their cash reserves and are having to try and survive with limited occupancy and additional closing requirements. In contemplating an extension to the commercial moratorium, consideration could be to limit an extension of the moratorium to only those businesses who are being asked to operate under limited occupancy or continued closure of indoor activities. In consideration of the landlord, there could be a provision to provide for partial payment of rent that would be aligned to the percentage of occupancy allowed for that business. For example, if a business is limited to 25% occupancy then they would be required to make rent payments equal to their occupancy. While an extension of a commercial moratorium could provide some continued relief to the businesses, their liabilities continue to accrue and without additional financial support and the likelihood of another round of State mandated closures and restrictions, many of our small businesses may not survive through the Fall. Conclusion/Recommendation Staff is seeking City Council’s consideration and direction for future actions to extend or modify the City’s Eviction Moratorium for residential or commercial owners and/or tenants from COVID-19 related displacement or hardship not currently covered under the State law or Federal Orders. At this time, staff is inclined to recommend the following: 1. Residential Tenants and Homeowners. At this time, given the new State law offering residential tenant protection, staff does not recommend any further protections be enacted by the City with respect to residential tenancy or homeowners. Staff will continue to monitor the situation and report back to City Council as further developments warrant. 2. Commercial Tenants. Commercial tenants remain vulnerable to COVID-19 impacts, and after September 30th, without further action at the City level, such tenants would be subject to eviction proceedings for failure to pay rent, even where such inability to pay rent is the result of mandated closures or other impacts of the COVID-19 pandemic. Staff is currently analyzing the legal and policy P a g e | 8 parameters in which the City may be able to act to extend protections in Chula Vista for commercial tenants. Staff’s current thinking is to consider extending the City’s moratorium for another 30 days in order to allow for outreach to the Commercial real estate community, both landlords and tenants, to better understand their issues and needs and to design a more specific policies to address such issues/needs. This could be done by Emergency Order of the City Manager/Director of Emergency Operations Order in the short term, with a return to Council for ratification and/or more definitive action(s) at the next City Council meeting, currently scheduled for October 6th. DECISION-MAKER CONFLICT Staff has reviewed the decision contemplated by this action and has determined that Councilmember McCann has a disqualifying conflict of interest under the Political Reform Act (Cal. Gov't Code § 87100, et seq.) due to his ownership of rental properties that may be foreseeably impacted by the proposed extension of the Eviction Moratorium. Accordingly, staff is recommending that Councilmember McCann recuse himself from deliberating or voting on this item. Staff is not independently aware and has not been informed by any City Council member of any other fact that may constitute a basis for a decision-maker conflict of interest in this matter. CURRENT-YEAR FISCAL IMPACT All costs associated with preparing this staff report are included in the fiscal year 2020-21 operating budget. ONGOING FISCAL IMPACT There is no ongoing fiscal impact as a result of this action. ATTACHMENTS 1. State of California Business, Consumer Affairs and Housing Agency Information on Rights and Responsibilities and Protections under the Tenant, Homeowner, and Small Landlord Relief and Stabilization Act of 2020 2. Chula Vista Summary of AB 3088 Tenant Protections and Evictions Staff Contacts: Leilani Hines, Housing Manager, Eric Crockett, Deputy City Manager, Glen Googins, City Attorney