Los Angeles County Sees 50,000 Eviction Filings Since Covid Eviction Moratorium Expired

In the months since Los Angeles County's COVID-era eviction restrictions expired in March, landlords have filed an estimated 50,000 eviction lawsuits, according to the Los Angeles Controller's Office. 

This news comes at a difficult time for a city that's already struggling with a homelessness crisis. If even half of the current suits are resolved in the landlord's favor, there could be another 25,000 displaced households.

Versions of this are playing out in cities across the country, where measures taken to keep people from becoming homeless during the pandemic are expiring. The situation in greater Los Angeles is especially troubling. In total, the landlords are seeking more than $180 million in back rent from delinquent tenants.

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Few Options For Tenants

According to the controller's office, over 96% of the evictions filed are for nonpayment of rent. The problem with these cases is that the tenants don't have the rent. In a limited number of cases, residents are withholding rent over a dispute with the landlord about repairs. But most of these actions have been filed against tenants who owe months of rent to their landlords.

Tenants who owe less than one full month's rent may find some relief under L.A. County's Just Cause Ordinance, which prohibits landlords from filing evictions against tenants who owe less than the equivalent of one full month's rent. As for tenants who are several months, and sometimes tens of thousands of dollars, in arrears, the path to avoiding eviction is much narrower.

Los Angeles had an emergency assistance program for the most at-risk tenants, but the enrollment deadline passed on Oct. 2. In the meantime, some neighborhoods have seen between 2,500 and 3,500 cases filed in the last few months. These areas include neighborhoods like Hollywood, downtown and Koreatown, which were all hot rental markets before COVID. Now, they could be facing a flood of new units on the market.

It’s Not Just Tenants Who Need Assistance

In most public health crises like COVID-19, the aim of city governments is to protect as many people as possible. To that end, a ban on evictions during a period when the local government had imposed a shutdown/stay-at-home order made perfect sense. Unfortunately for landlords, the question of how they were going to be taken care of remains largely unanswered.  

Their bills didn't just stop coming in during the eviction moratorium, and many landlords have been paying expenses out of pocket. It doesn't matter whether the landlord is a mom-and-pop operation or part of a real estate investment trust (REIT) — paying expenses out of pocket while tenants aren't paying rent is a losing proposition.

As tempting as it may be to think of landlords as the bad guys, the truth is that $186 million in back rent is an eye-popping amount of money. Most of the cases are for total back rent of over $2,000. If you were a landlord, you would likely take steps to get it. At a minimum, you'd have to take legal action to get your rental property back so you could find a new tenant.

The Ugly Truth for Landlords

As much as the $186 million in back rent is, the landlords in the eviction cases have almost all accepted an ugly truth: They are unlikely to ever see a penny of the back rent owed by their tenants. Eviction actions in Los Angeles County are two-step affairs where landlords sue tenants for both possession of the unit and the back rent the tenant owes.

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If the judge rules in the landlord's favor, the landlord can get a writ of execution, which is a court order enforcing the judge's decision to remove the tenant from the property. Once this writ is secured, the L.A. County Sheriff's Department will schedule the eviction. On the day of the eviction, the landlord, or their agent, must show up at the property with a locksmith (at the landlord's expense) to change the locks.

Only then does the landlord get their property back. The process can take months under the best of circumstances. In a system overloaded by tens of thousands of new eviction cases, it could take years for some landlords to get their property back. During the time between the judgment for possession and the eviction, the tenant is living rent-free.

What Happens To The Back Rent Owed To Landlords?

The second portion of an eviction case is the civil suit for the back rent owed by the tenant. In most cases, landlords sue for both possession and money, meaning they want the property back in addition to being paid the back rent. But even if the judge rules in the landlord's favor and gives them a judgment for the back rent, the landlord is unlikely to see it because the judgment is just a piece of paper entitling landlords to seek payment through legal means such as collection agencies and wage garnishments.

Most collection agencies charge fees between 30% and 50% of what they collect, assuming they collect anything. Someone who has been evicted for nonpayment of rent is unlikely to come back and repay their former landlord at a future date.

Most landlords will end up writing off unpaid rent as a loss. The landlord will also likely absorb the cost of court fees, legal fees and renovation costs on their unit before writing those expenses off. This worst-case outcome is a risk landlords take every time they rent a property.

Being A Landlord Is Still A Good Business

Losing $186 million in rental income is never a good thing. The pain will be spread among thousands of Los Angeles-area landlords, both big and small. It will likely be the smaller, independent landlords with portfolios of less than 10 units who suffer the most. This is going to set a lot of them back financially.

The $186 million in back rent is a drop in the bucket compared to the rents collected on all the apartments in Los Angeles. Despite this rocky period, you would still probably be better of being a landlord than a renter in Los Angeles. The COVID crisis caused unprecedented challenges, but renting properties will remain a good business long into the future.

You Can Be A Landlord, Too

That also makes it a good investment sector. Even if you don't have deep enough pockets to buy a building yourself, you can still get a piece of the action as a landlord. REITs, real estate crowdfunding platforms and fractional ownership are just one of many ways you can begin building an investment portfolio for less than $100. Yes, there are risks, but that's true of any investment.

By starting small, you can begin building your portfolio and go as fast or slowly as you want. The key is to realize that even in a down year, landlords and property owners may take losses, but the passive income generated by their investments makes it much more likely that they will bounce back stronger from unforeseen crises. Just remember that Rome wasn't built in a day.

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