Need Rent Forbearance? Beverly Hills May Make it Untenable

City of Beverly Hills this month declared a state of emergency and adopted an eviction moratorium that would put the break on residential evictions for non-payment of rent (and even prevent no-fault evictions when otherwise allowed by law). This Tuesday at 2:30 pm city council will consider revising that moratorium to make it much more burdensome for tenants to qualify for forbearance. (Agenda item F-1).

Update:Beverly Hills city council on March 31st agreed to amend and expand the eviction moratorium, including not only for non-payment related to COVID-19, but to prohibit eviction under Ellis Act too for the duration of the local emergency. City council agreed to freeze rents too. Read more: City Council Extends and Enhances Emergency Tenant Protections.

City staff is recommending that city council enact higher hurdles when any residential tenant would seek forbearance on the payment of rent to the landlord. Unlike the prior urgency ordinance adopted on March 16th, the proposed draft urgency ordinance would:

  • Give the tenants 10 days after the due date to notify the landlord of an inability to pay (down from 30 days in the earlier Beverly Hills moratorium);
  • Require the tenant to file with the city and the landlord within 30 days a form with “supporting documentation” that can include a “positive COVID–19 test” (compared to the earlier moratorium that required no specific personal information provided to the landlord);
  • Require the tenant to document her claim with pay stubs and “recent statements from financial accounts” (whereas the earlier moratorium made no reference to providing detailed personal financial information — much less to provide it to the landlord); and, finally,
  • Require a tenant who asks for forbearance to declare under penalty of perjury that the information provided is true and correct (though the earlier moratorium did not contemplate a sworn declaration).

Those requirements would apply if city council agrees to adopt the short form. City staff has helpfully provided two more intrusive options: in addition to the ‘short form‘ there is an ‘intermediate form’ and a ‘long form.’ Staff is asking city council to adopt the draft ordinance and choose one of those three forms.

Intermediate Form

The short form requires the information noted above. The ‘intermediate form’ option would require the tenant to provide the city and the landlord with additional disclosures (also in a sworn declaration). These additional disclosures include:

  • Monthly gross household income from “all adult household members” itemized to include any and all compensation including but not limited to these categories: child support, workers’ compensation, disability, public assistance and cash supports, “fees, fringe benefits, commissions, tips, or bonuses,” gambling winnings, and pension income “whether or not the income exempt from federal income taxation.”;
  • Accounting of “extraordinary medical and/or other expenses or other circumstances related to COVID–19”; and,
  • The amount of rent that can be paid (and here a handy formula is provided: “Divide your current month’s total household income by your base month’s total household income to determine the percent of your rent that you are able to pay”).
Partial rent calculator from eviction moratorium form
The sample calculator from the ‘intermediate form’ for tenant disclosure of inability to pay rent. Note that it is a product of the rent stabilization office.

The ‘intermediate form’ requires the tenant to also disclose the sort of remuneration that might apply to a sophisticated investor. That includes income from annuities, life insurance, or endowment contracts, interest on dividends, capital gains from private and/or commercial property, royalty payments, income from discharge of indebtedness and even rental income!

These disclosures seem more appropriate for a mortgage application than an application for rent forbearance during a state of emergency.

The Long Form

The ‘long form’ includes all of the disclosures on the intermediate form but would require the tenant to provide to the city (and to the landlord) yet another bit of privileged information: a sworn statement disclosing assets. “Assets include, but are not limited to, not limited to cash, checking accounts, stocks, bonds, real estate, gifts and other sources of money,” says the long form instructions.

There is also an additional section that would apply when “adult members of the household have combined assets that exceed $30,000.” In section (G) Calculation of Amounts to be Added to Monthly Gross Income the tenant simply adds up the household’s cash, savings, equity in real property, stocks, bonds and gifts and then adds it to totals from section (F) Calculation of Monthly Gross Household Income. (See the handy example.)

But that’s not all. A tenant who may be subject to the asset threshold test (over $30,000) should also consult the city’s Affordable Housing Guidelines document for additional assets to disclose. From the Guidelines:

Assets include, but are not limited to, cash, all savings and checking accounts, stocks, bonds, real estate, gifts, and other sources of money. Pensions and federally approved retirement savings accounts, such as IRAs, Roth IRAs, and 401(k)s, are excluded; however, retired applicants who receive income from their retirement account must include such income as Gross Household Income on their application.

To clarify, staff’s proposed this long form to apply the very same means test that would be used to qualify an applicant in the affordable housing lottery. But tenants looking to the moratorium for protection need only defer a rent payment or two or three. In this state of emergency she’s not looking for reduced rent or forgiven rent but merely to delay the rent payment.

This is the WRONG Way to Qualify Tenants for Emergency Assistance

The state’s recent eviction moratorium (read our explainer) imposes none of the thresholds or the means test we find in the draft eviction moratorium recommended for adoption by Beverly Hills city council.  Here’s why we think that city council on Tuesday should find it is exactly the wrong approach to take in a state of emergency.

1. The state’s recent moratorium (executive order N-37-20) explicitly connects the COVID–19 stay-at-home order with a corresponding public responsibility to ensure housing stability for renting households that suffer a negative effect from emergency measures. Consequently the state moratorium takes a permissive approach to forbearance as a matter of health & safety.

In contrast the Beverly Hills proposed eviction moratorium creates thresholds and even a means test. On its face it appears that the recommended moratorium (and the accompanying forms) are constructed to dissuade tenants from pursuing relief.

2. The state’s moratorium presumes the good faith of tenant households who suffer harm from the pandemic and the related economic crisis. The state only asks tenants to affirm they need forbearance and requires they retain supporting documentation so as to provide it to the landlord (not the city) upon repayment of rent arrears.

In contrast the Beverly Hills proposed eviction moratorium seems to presume bad faith on the part of the tenant. Everything about it sends the wrong signal. For example there is the sworn declaration signed under penalty of perjury. There is the requirement to enumerate an endless list of specified income and assets for the means test. There are the forms which appear crafted by a forensic accountant. All of it seems ill-suited for qualifying tenants harmed by the COVID–19 crisis.

3. The state’s moratorium imposes no threshold like ’substantial’ loss of earnings. It identifies only “income reduction” related to COVID–19 as a qualifying criterion.

In contrast, the Beverly Hills proposed eviction moratorium does impose a ‘substantial’ qualifier. The proposed moratorium even defines it as a 20% reduction in monthly income. Consider that half of city households pay more than 30% of their household income in rent. And nearly one-third of renting households are ‘severely’ rent-burdened and pay 50% or more in rent. Should a household that barely covers the rent have to demonstrate it meets the ‘substantial’ reduction threshold?

4. West Hollywood takes a different approach: the focus is on helping tenants. The city requires a tenant-in-need to merely self-affirm that she needs forbearance on the rent payment.  That city’s rent stabilization office has provided tenants with an informative fact sheet and letter-to-the-landlord template to help tenants approach the landlord constructively.

In contrast, Beverly Hills appears to want to punish households. The forms are downright punitive. The forms even say that income lost to give care to a family member outside the household would not qualify for forbearance. Yet these forms bear the letterhead of the rent stabilization office? Who is that office serving exactly?

(It is worth noting that the rent stabilization office has provided tenants zero guidance on understanding our existing eviction moratorium. Instead the office seems to have invested considerable time in crafting a process that seems designed to turn tenants away from relief.)

Bottom Line

The deal-breaker for many households in need of forbearance will be the financial disclosure. The city’s proposed eviction moratorium would require a tenant to make public every aspect of the financial lives of the family in order to qualify for forbearance on one, two or perhaps three monthly rent payments. They are not buying a house or even qualifying for affordable housing. They will be paying full rent; they only seek to pay it later.

Why so intrusive? A couple of years ago city council considered a cash rent subsidy to tenants direct from city coffers. But councilmembers seemed reluctant to even suggest prying such such financial details from tenants. Why impose that disclosure and means test now, in an emergency?

It is outrageous that in a time of pandemic, and with our economy suffering a recession that is forecast to be worse than the last crisis, that Beverly Hills would ask so much of tenants for so little in return. The obvious question is, Who’s hand is behind this? In an upcoming post we’ll try to connect the dots.