Beverly Hills OKs $1M Rent Subsidy Program

Beverly Hills tenants who have been affected by COVID–19 may find relief in a new city rent subsidy program. First proposed two years ago as a general subsidy for rent-burdened tenants, the refashioned program is scoped-down in reach but scaled-up in benefit. City council at this September 15th meeting agreed to throw as much as $1 million toward rent-relief to provide $1,000 for each of three months to tenants who are affected by COVID–19 health measures. Tenants seeking relief will likely have to wait a month to get it. In the meantime here are the program particulars.

Update:Beverly Hills has announced the availability of a residential tenant rent subsidy for COVID-19 affected tenants. Details including the rent subsidy application are posted to the rent stabilization website. Priority is given to senior tenants (65+ years old) and households with children enrolled in the Beverly Hills School District.

City council first discussed a COVID–19 rent subsidy back in July. We were then four months into the coronavirus emergency declaration and there was broad concern among councilmembers that affected tenants may be unable to pay their rent. There was also concern that landlords will face financial hardship if the emergency continues to roll on.

That latter concern — specifically landlord solvency — has shaped council’s notion of a subsidy. It is every bit a landlord benefit as a tenant benefit. In fact this subsidy will be paid directly to the landlord. While the good news is that help for qualifying tenants is on the way, the less-good news is that not all tenants will qualify — even if they are COVID-affected.

Tenant Need: How Large is This Problem?

In March city council adopted a moratorium on eviction for non-payment that allowed tenants 12 months to pay back rent once the local emergency period ends. But among the many unknowns is how many tenants have been affected by COVID–19 to a degree that they could not pay full rent.

In July the rent stabilization office reported receiving relatively few applications (116) for rent forbearance. That is a small proportion of the more than 8,000 renting households in Beverly Hills. Two months later that number has risen to 197 applications — still less than 2.5% of all renting households in the city.

How many tenants are unable to pay? Nobody knows but maybe fewer than we think. Data from firms that process rent payments show that most tenants do pay most or all of their rent. But that is nationwide and we live in an expensive housing market.

Another unknown is when the local emergency will come to an end. The longer the emergency roll on, the greater will be the pain for both COVID-affected tenants and their landlords. However once the emergency ends, says the moratorium ordinance, the ability to delay rent ends, and at that point the cash subsidy may become more important.

A third but key unknown is the proportion of tenants who may have cut a deal with the landlord to delay the rent but never filed an application for rent forbearance. They don’t show up among the official tally of 197 applications filed to date, of course. Which leaves staff to guesstimate the demand for the subsidy program and inspired city council to go bigger with the program.

Go big on money, said council…

The staff report presented to city council today recommended a $715k rent subsidy program that would be largely federally-funded through federal block grant funds and CARES ACT funds.

Staff identified current funds in the total amount of $442,935 for the rent subsidy program and anticipates another $272,000 will be available within the next several months. The monthly subsidy may consist of a payment of the balance of unpaid rent up to $1,000, for a maximum period of three (3) months. Using the maximum subsidy of three thousand dollars ($3,000), the City would be able to assist an estimated 238 eligible households. — Staff report, September 15, 2020

City council opted to go higher than $715k and found broad agreement on a $1 million program. City council OK’d that amount should funds became available.

…But go smaller on eligibility

The staff report provided city council with nine decision points for the purpose of qualifying tenants and landlords (the program is intended to assist both). Councilmembers were able to quickly agree on the following qualifying criteria for tenants:

  • The subsidy is available to COVID-affected rent-stabilized tenants only (not households that rent condominiums, single-family homes or post–1978 units);
  • Eligible tenants must earn less than HUD’s qualifying income for ‘affordable’ housing which is 80% of area median income (for example about $80k total from all sources for a family of three);
  • Eligible tenants must demonstrate “viability moving forward,” which means the ability to make rent payments after the subsidy ends;
    Assistance received from any other rent subsidy program (like Los Angeles County) would disqualify an otherwise eligible tenant from the local subsidy;
  • Preferential consideration for families with children in schools based on proof of enrollment of one or more BHUSD students; and,
  • Preferential consideration for households with at least one member aged 65 or older or that may fall into CDC guidelines for COVID vulnerability.

After lengthy discussion (view the discussion on demand) city council agreed on a couple of more criteria for qualifying for the subsidy:

  • The rent ceiling will be $4,000 per month which is lower than the proposed $5,000 — which means that a household paying rent above that amount would not qualify;
  • Tenants and landlords will be required to meet (in a format that was not defined) in order to discuss an acceptable partial rent payment amount or payment schedule; however,
  • An asset-test will not be needed to qualify but all income from assets and any other source will be counted towards the monthly household income threshold for eligibility.

Also discussed was whether a tenant who has paid no part of the rent in the past months would even qualify. It was not clear what council directed, but councilmembers were more sympathetic to tenants who had at least paid partial rent (a sign of good faith). Rent stabilization office Deputy Director Helen Morales, when asked, said the majority of forbearance recipients paid half or more of the rent while one-quarter of forbearance recipients delayed all of the rent.

In a nutshell, COVID-affected rent-stabilized households that pay a rent of $4,000 or less, that earn 80% or less of the area median income (from all sources), and which are able to continue to pay the rent going forward will be eligible with perhaps some kind of preference given to BHUSD-student households and vulnerable-tenant households.

The timetable? Unknown. City council showed an interest to move the program forward ASAP,  however it is unclear when staff will work-up an implementation framework for the program. Rent relief is likely not to reach tenants before the next regular city council on October 13th.

Landlords Must Qualify

Landlords have called for some kind of financial assistance to tenants at the local, state and federal levels. That suggests the rent subsidy is every bit a landlord subsidy. With that in mind, city council was keen to attach some qualifying conditions.

‘Bad actor’ landlords should not receive city assistance, councilmembers agreed. “We have had experience with some landlords, one of whom made the paper last week for his bad behavior,” said Councilmember Gold, referring to the arrest of Beverly Hills landlord Stephen Copen. “Do we want to hand somebody like that money?” he asked. “Maybe we need a bad actor exclusion.”

Council also agreed to help smaller landlords rather than larger and/or corporate landlords. After some discussion it was agreed that the subsidy program should only reach tenants resident in properties of 10 units or fewer. What that implies is that tenants in a property of 11 or more units would not be eligible for the subsidy.

Councilmember Bob Wunderlich, however, argued against any landlord exclusion on that basis. Why disqualify an otherwise eligible tenant?

Council meeting 2020-9-15
City council discusses the proposed rent subsidy program on September 15, 2020. Clockwise from top: Councilmember Julian Gold, Mayor Les Friedman, City Manager George Chavez, City Attorney Larry Wiener, Councilmember Lili Bosse, Councilmember John Mirisch, Vice-Mayor Bob Wunderlich, Community Development Director Susan Healey Keene, and RSO Deputy Director Helen Morales.

Exclusion by Property Size: What it Means

How would a proposed condition that extends a subsidy to qualified tenants who live only in properties of 10-units or fewer? City staff did not come prepared with data to explain the reach of that condition. We do it for you!

Rental unit registry data provides a distribution of properties by unit-count. That is the essential information council needs when deciding where, or whether, to impose a property-size ceiling on subsidy eligibility. And the data show that 11-unit and larger properties account for only 15% of all rent-stabilized properties in Beverly Hills. However those properties house 40% of all rent-stabilized households.

169 11-units and over properties
15% RSO properties are 11+ units
40% RSO households in 11+ unit properties
3,113 RSO households may not qualify under the landlord exclusion

The data show that excluding 11-or-more units properties from subsidy eligibility would categorically disqualify more than 3,000 households that live in those properties. So Councilmember Wunderlich was correct to caution about a landlord exclusion because any excluded landlord could represent one or more excluded households only because they live in a larger building.

How did this slip by in the discussion? Well, there was a lot to cover. And Deputy Director Helen Morales noted that the “majority” of RSO properties in Beverly Hills consist of 15 units or fewer, which is generally helpful. But the relevant figure is the number of households otherwise qualified that could be excluded, and for that there was no data presented. But city council should have had the figure. (For that reason alone I believe city council will have to meet again to re-think the landlord exclusion.)

There is another reason to eliminate the landlord exclusion: no such exclusion exists today for landlords who benefit from our longstanding housing rehabilitation program also funded by community development block grant (CDBG) funds. This proposed subsidy program draws on those same funds. And like the rehabilitation program, tenants could qualify at 80% or less of area median income. It seems inconsistent to apply an exclusionary criterion under the subsidy program where none exists for the housing rehabilitation program.

’Viability Moving Forward’

After some discussion city council agreed on a key qualifying criterion that may prove problematic in implementation. It’s called ‘viability moving forward.’ Council touched on the concept in July and again at greater length during this meeting. The concept: Why help a landlord or a tenant when his business, or her tenancy, may not be sustainable over the longer term?

If they were in foreclosure before COVID, they’ll be in foreclosure afterward. And if a tenant has not paid before COVID, they probably won’t be paying after COVID. — Councilmember Julian Gold

That ‘viability’ criterion was also included in West Hollywood’s $700,000 emergency rental assistance program. Staff provided no information on how it was operationalized there, however. Beyond foreclosure, which indicates the landlord’s business is not viable, ‘viability going forward’ may be a difficult qualifying test.

For example how would a tenant demonstrate viability? The staff report provided two general options for council to consider:

  • OPTION NO. 1: Tenant provides a viable plan to pay rent after rental assistance has stopped.
  • OPTION NO. 2 Tenant provides a statement under penalty of perjury that the tenant will be able to make the rental payments after the rent subsidy is paid.

We raised a concern about those options in our written comment to city council:

Either a tenant can actually document earnings and/or assets and thus support a claim of ‘viability going forward,’ or the tenant will attest under penalty of to anticipated income which may or may not materialize simply to keep a roof over her head. (At a time when uncertainty abounds, who wouldn’t?) — Comment, Mark Elliot

For council the viability concern represented an effort to balance the city’s interest to extend assistance to as many eligible households as possible while not providing assistance to tenants or landlords who may not be able to continue on after the subsidy ends. So it’s not clear how this very important criterion will be addressed in the implementation framework. Watch the council’s discussion on video. Renters Alliance is your best source for tenant news in Beverly Hills. But a close second is the Beverly Press. Find their recap of the rent relief program at the Beverly Press website.

A Few Takeaways

City council agreed on the broad contours of the subsidy program and indicated a clear interest that bigger is better. But now it’s up to staff to integrate the agreed-upon elements into a framework for implementation and that will determine exactly how the program operates and who it reaches. We don’t expect to see that framework for a month — and probably when council next meets in October.

Qualifying eligibility by property size will greatly shape the reach of the subsidy program. Be prepared for another city council discussion on this point. I suspect once councilmembers see that 40% of households could be potentially excluded they may revisit it.

‘Viability going forward’ will be challenging to implement. So expect a low threshold for establishing viability and, even then, expect that more than a few subsidy applications will be negotiated to slip under this possibly fuzzy qualifying criterion. (We may also see the Deputy Director afforded discretion to waive a tenant into subsidy eligibility.)

The subsidy program will reach a relatively small proportion of households in Beverly Hills. The staff report provides a rough estimate of fewer than 250 although implementation may expand or restrict eligibility. But consider there are about 7,800 rent-stabilized households.

The program will not reach most of the one-third of households that were ‘rent-burdened’ before COVID–19. Others have experienced ancillary hardships as a result of COVID-19 health measures for which there has been no local or state assistance. For example, long-term unemployed seeing employment in a decimated jobs market were not eligible for the expanded unemployment benefit and won’t benefit from this subsidy.

So why pay so much attention to a program that will reach so relatively few households? Two reasons. First, any subsidy will benefit needy households. It may make the difference between a home and homelessness. Second, city council discussed this program as a precursor to a general subsidy program for rent-burdened tenants. That program was proposed two years ago but not taken up.

How this program rolls out, and the benefit it provides tenants and landlords, will suggest the merit of a broader future subsidy for qualified tenants.

Have you been affected by COVID–19 and may find yourself excluded under these proposed criteria? Have you reached an agreement with your landlord outside of the city’s forbearance application process? Renters Alliance wants to hear from you. Get in touch!