The state Assembly Judiciary Committee advanced S.B. 1410 by a 7-3 vote Wednesday, moving it to the Assembly Appropriations Committee for consideration next week. The bill would bar property owners from evicting tenants during the COVID-19 emergency and for a period after unless certain criteria were met and also allow property owners to offer tenants eviction relief agreements, a bill summary said. COVID-19 is the respiratory ailment caused by the novel coronavirus.
The measure passed the Senate on June 26 by a 28-9 vote.
As part of the eviction relief agreements, owners would be given tax credits that could be sold and claimed for 10 years starting in 2024 to reimburse them for unpaid rent, the summary said. Tenants would be required to repay unpaid rent that was deferred under the agreements to California during the 10-year period, according to the summary.
Tenants who refused to enter into the agreements could be evicted, the summary said. Some tenants would be excused from paying the rent if they qualified under income-based exemptions, the summary said.
Personal income tax and corporate tax credits under the program could be sold on the market right away or used starting Jan. 1, 2024, and through Jan. 1, 2034, for owners that enter into agreements with tenants. The credits would be equal to the amount of unpaid deferred rent, according to the summary.
Though the bill advanced, many who weighed in Wednesday agreed that more work was needed on the measure.
Kate Bell, who represented the California Rental Housing Association, told the committee the group opposed the bill unless it was amended, saying it was overly broad because relief isn't limited to renters who have been financially harmed by COVID-19. Tenants should have to prove they've been affected financially by the coronavirus pandemic, she said.
Bell also said there's no immediate financial relief for rental housing owners, arguing that smaller owners would likely go bankrupt or lose their property when their tenants stopped paying rent. While the bill offers reimbursement to rental housing providers in the form of tax credits, waiting until 2024 would be too late for some small owners, she said.
While the tax credits could be sold, Bell said there's currently no market for them and they could be sold only once. Without the ability to bundle or repurpose the credits, the value is diminished, she said. She asked that the bill provide immediate relief for small owners and that the definition of small-business owners include small-multiunit owners.
The measure was also opposed by the San Francisco Tenants Union, which wrote to the committee last month saying the bill would unduly burden tenants because of the multiple steps in the program. Undocumented immigrants and workers, who the group said have been some of the hardest hit by the pandemic, would be unlikely to meet the bill's requirements to get relief, the union said.
In an analysis last month, the Franchise Tax Board noted many technical questions with the measure.
The board estimated the measure would cost the state in forgone revenue from 2024 to 2033 about $12.3 billion, not including an estimated $1.32 billion the state would lose in revenue from taxes on unpaid rent from 2020 through 2023, the summary said.
Assembly member Jay Obernolte, R-Big Bear Lake, a committee member, questioned a bill co-sponsor, Sen. Anna M. Caballero, D-Salinas, about the potential cost of the bill. Originally the state was to bear all of the cost of the measure, but that was changed because California is facing its own immediate fiscal challenges, Caballero said.
Obernolte said: "I think it'd be irresponsible for us to talk about the merits of this policy without at the same time talking about how we're going to pay for it, because you should know we don't have the option of borrowing that money. It has to come from somewhere."
The tax board also expressed policy concerns with the measure, including market saturation with so many tax credits available for sale and difficulty some owners could have finding buyers for credits. The tax board added that the credit could be less attractive on the market if it were nonrefundable and required to be claimed in equal installments over 10 years.
Evictions and foreclosure proceedings are expected to start again next month in California. The Judicial Council of California said Thursday that it voted 19-1 to end two temporary emergency rules staying evictions and judicial foreclosures, which will stay in effect through Sept. 1.
The office of Democratic Gov. Gavin Newsom didn't immediately respond to a request for comment.
--Additional reporting by Abraham Gross and Maria Koklanaris. Editing by Neil Cohen.
For a reprint of this article, please contact reprints@law360.com.