CAA reaffirms opposition to ‘free rent’ bill

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The California Apartment Association this week issued a letter explaining its continuing opposition to a “free rent” bill to be heard in the Senate Judiciary Committee later this month.

AB 1436 by Assemblyman David Chiu, D-San Francisco, would make rental property owners defer rent payments for tenants who are either unable — or unwilling — to pay for housing during the COVID-19 pandemic.

Assemlyman David Chiu

The rent-deferral period would last until April 1, 2021 or until 90 days after the state’s COVID-19 state of emergency is lifted – whichever comes first.

“The bill does not provide for – nor is it tied to – any funding to help tenants and landlords with the unpaid rent,” the letter says. “There is no way many rental property owners will be able to keep their buildings from foreclosure if AB 1436 were to become law.”

Although Chiu has agreed to offer mortgage forbearance to landlords in his bill, CAA contends this provision would not work.

“While we appreciate the attempt to provide forbearance for rental property owners, the Assembly Banking Committee opined in a letter on March 20, 2020, that, ‘State authority over large national banks is significantly constrained by federal law,’” the letter says. “Under the National Bank Act and related case law, courts have widely upheld federal preemption over state laws that interfere with the business of banking. Courts would likely stop any attempts by the state to force banks to limit rates or fees, demand forbearance or loan modifications, or require banks to make certain loans.”

Moreover, the forbearance provision would provide no assistance to property owners who’ve paid off their mortgages but depend on rent for their retirement income, the letter says.

The letter also explains how AB 1436 would violate both the U.S. and California constitutions by taking a landlord’s property without just compensation.

“AB 1436 transfers the COVID-19 burdens of tenants to rental housing providers and represents just the sort of action the taking clause was intended to prevent,” the letter says.

CAA sent the letter Monday, anticipating that AB 1436 would be heard by the Senate Judiciary Committee on Aug. 18. Stay tuned for ways you can help CAA stop this legislation.

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