Thomas Bannon has spent the past 30 years as the leading advocate for California’s multifamily landlords, and he has never dealt with any problem bigger than the coronavirus.
“Even with the financial meltdown (of 2008) you had a number of folks who saw that coming,” said Bannon, CEO of the California Apartment Association since 1990.
For years the Sacramento-based trade and lobbying group has threaded the needle between representing the varied interests of billionaires and mom-and-pop landlords alike, while doing business in a state “where you have to be receptive to environmental and fair housing laws, and treat residents fairly, and have a social conscience.”
Bannon is calling on Sacramento and Washington for a multi-billion dollar bailout of California landlords, and blanket foreclosure relief far beyond homeowners whose loans are guaranteed by Fannie Mae and Freddie Mac, which Bannon said helps about 30-40 percent of his membership.
In an interview with The Real Deal Tuesday, Bannon expressed deep concern about the present and future of California’s residential landlords.
Here is an edited version of that conversation:
TRD: Los Angeles Mayor Eric Garcetti and other local government leaders have ordered a moratorium on evictions, which your organization supports. Is it frustrating, though, that there hasn’t been accompanying foreclosure relief for property owners?
Bannon: Absolutely. There has to be foreclosure relief for property owners. The industry will not sustain otherwise, and it will deter future investment in housing. It’s a three-layer problem. The tenant can’t afford to pay the rent, and then the owner can’t afford to pay the mortgage, and if the owner can’t pay the mortgage, that ruins the banks.
The association has taken a position. Let’s give this 60 days where we’re not going to evict people for nonpayment of rent. Now our assumption is going to be because of that there’s going to be a significant loss of income for landlords.
TRD: How much of a loss of income?
Bannon: Well, if you have 100 units paying $1,500 a month in rent and 30 percent of the tenants have lost their jobs because of coronavirus and can’t pay rent, you do the math. You add up all the missing rent payments across the state and it’s going to be billions of dollars.
TRD: State lawmakers last week earmarked up to $1 billion for Gov. Gavin Newson to spend at his discretion on coronavirus emergency measures. Do you expect landlords to see any of that money?
Bannon: I think so, but I don’t know how much. It’s just a very difficult situation. That’s why we need emergency money from the feds.
One thing that is very interesting is that if landlords don’t collect rent, they’re not going to pay property taxes or seek adjustments to their property taxes. Under the state constitution (as set under the fabled anti-tax Prop 13 of 1978) a landlord can go to the assessor’s office and ask them to reassess the property if they believe their property values are actually declining.
In that situation, everybody suffers, the state government suffers.
TRD: Has that ever happened since Prop 13 passed — that property values actually decline, and landlords go en masse to county assessors?
Bannon: It happened some during the dot-com boom and bust of the 90s. Property values soared and then plummeted.
TRD: I’m interviewing you from my apartment, where I spend about 23 hours of my day inside now, like most Californians. Is all the time people are spending in their apartments putting a strain on landlords?
Bannon: Well, basic maintenance stuff now is simply not taking place. There is emergency maintenance stuff only. Also, our tenants often don’t want to let anyone come inside their units.
I do know that leases that expire March 31 are being renewed digitally, and that’s working well. And I haven’t heard about anybody getting too cranky — yet. [laughs]
TRD: Before anyone heard of coronavirus, a statewide housing shortage was easily the no. 1 political issue in California. Are you concerned that housing measures enacted because of the coronavirus will tilt the debate too far against landlords?
Bannon: We worked on AB 1482 [Assembly Bill 1482 passed last year, and enacted state rent control measures. The California Apartment Association voiced reservations with the law, but ultimately helped shepherd its passage.] I am hopeful we have an opportunity to kick that into gear, and that there is not additional legislation that comes out regarding tenant protection.
But I’m very concerned about it. You can pile on at this time, but it will write off addressing the California housing crisis because no one will invest in housing.