The COVID-19 pandemic has had major impacts on our society, including impacting a large share of renters throughout the state of California. But how did the pandemic impact landlords? On this episode, we’re joined by Elijah de la Campa, researcher with the Bloomberg Harvard City Leadership Initiative, and Viviane Nguyen, Senior Analyst with the San José Housing Department, to learn about how the pandemic impacted local landlords in San José.
Read Elijah's Working Paper: https://www.elijahdelacampa.com/research
Episode 11: How the Pandemic Impacted Landlords in San José
Welcome to Dwellings, a podcast from the City of San José Housing Department, where we talk with experts about ending homelessness, building affordable housing, and exploring housing policies at the city and state level. I'm your host Alli Rico. On today’s episode, I’m joined by Elijah de la Campa, senior researcher with the Bloomberg Harvard City Leadership Initiative, and Viviane Nguyen, Senior Analyst with the Housing Department’s Rent Stabilization Program, to talk about the City’s participation in a research study about how the COVID-19 pandemic impacted landlords in San José.
Elijah de la Campa: So my name is Elijah de la Campa, I am a senior researcher with the Bloomberg Harvard City Leadership Initiative.
Viviane Nguyen: Awesome. And my name is Viviane Nguyen, and I'm with the City of San José Housing Department, I'm senior analyst for our rent stabilization program.
Alli Rico: Elijah, can you tell us, just give me like a quick overview of what your study was about and what it focused on?
Elijah: Yeah, for sure. Um, so broadly speaking, what we were hoping to study was the impact of the pandemic on landlord's rental business. Right. And we did this through an original survey effort, which we offered to as many servers - sorry, as many, uh, landlords as we could, um, across 10 cities in the US so, uh, we sent out about 60,000 survey invites, um, and received around 3000 responses. So, um, just again, as I mentioned the goal, really to assess the impact of pandemic on landlords rental business. Which really meant asking questions, you know, about their rental collection during the pandemic, as well as their business practices. And what we were particularly keen to understand is how have these things changed during the pandemic, so a big part of our study was actually asking these sets of questions. Um, about both the 2019 time period, so pre-pandemic and the 2020 time period, so during the pandemic. Um, another sort of aspect of the study that, that I think is interesting is we asked not only about landlords overall portfolios of rental properties, but we also asked about individual rental properties in their portfolios, which really allowed us to study in greater detail, sort of, um, the impact of different types of property, characteristics, and neighborhood characteristics on rental collection and rental business practices as well.
Alli: And nd what made you decide to do this study and why did you pick San José as one of the 10 cities? 10 cities to, to involve in your study?
Elijah: For sure. Um, so, uh, definitely a good question and, um, a lot going on here. So I think basically throughout the pandemic, you know, rightfully so, we we've been very concerned with the impact of COVID and, you know, sort of the resulting economic downturn on renters. Right? And we, there, there's a variety of reasons why this is the case, but I will offer two primary reasons why this is of particular importance, right. We know that, um, you know, even before we started to sort of gather data on this fact, we knew that a disproportionate amount of renters were working in industries, like hospitality and leisure, that were again disproportionately affected by the economic downturn and sort of stay at home orders coming out of COVID, right. So, um, with a sizable share of renters in these industries and out of work, I think it raised a really natural question of, you know, how are these folks going to make rent and stay stably housed? So concerned about renters because of that, the second main point is, is really sort of related to this, but we knew that a large share of these renters already prior to the pandemic, um, already were struggling to make rent.
Right? So, um, in San José, for example, over 50% of renter households are what we call cost-burdened, meaning that they spend 30% or more of the rent on housing costs alone. Right. And those rates perhaps on surprisingly are even higher in communities of color. So, um, around 60% of households in San José, 60% of black and Latino households in San José rather, um, are what are defined as cost-burdened. So again, we knew already that tenants and particularly vulnerable tenants were really struggling. So, okay. Landlords, how does this factor in? So of course the rental housing market is exactly that: it is a market and any market in this case, the rental market has tenants. There's two agents: tenants in this one and landlords on the other side. So to me it really begged the question. We know that there's significant financial strain for renters. How are landlords responding to this strain? How are they managing this strain? Um, and you know, at the time that we sort of initiated our study, we had some information on landlord impacts coming out, uh, you know, most notably from the National Multifamily Housing Council and folks at Urban Institute.
But those results were really sort of constricted to certain segments of the rental market or segments of the landlord population. So our goal really was to just generate some more robust evidence from more diverse markets, different types of landlords. Um, so, uh, I think that's actually a pretty natural segue into the second part of your question, a bit long-winded here, but you know, how does San José get involved? So again, I mentioned we're interested in looking at the impact of the pandemic across these different markets and different landlord types. So, um, of course we were, we were trying to achieve some sort of geographic spread. You know, I had already been working, um, on a project related to landlords and the pandemic and Albany and Rochester, New York, you know, we, we, we achieved some other, some additional participation from east coast cities, Trenton, New Jersey, and Philadelphia. Um, we also achieve some participation from a tranche of Midwestern cities, like Minneapolis, Minnesota; Racine, Wisconsin; Indianapolis, and Akron, Ohio. What was missing, were west coast cities. It was a lot harder to find west coast cities, um, that, you know, for just one reason or another, we were able to participate with.
So, uh, you know, I was really excited to learn, um, early on, probably in November or December of 2020 that, uh, you know, local policy makers in San José were really keen in better understanding how, how landlords in their community were impacted and, uh, you know, how they can better serve their tenants. So we're really excited to get San José to, to sign onto the study and also, just to sort of close the loop there, Los Angeles, the final participating city in our study. Um, and, and another sort of west coast representative.
Viviane: One of our first challenges was really identifying which housing stock to best utilize and provide the information for Elijah. And so, as a result, we decided that most information that we have is with our rent registry, which our rent stabilization program, which oversees rent-stabilized apartments, meaning apartments built before 1979. We have a rent registry where landlords annually update their information and their tenant information. And as a result, we felt like that was the best starting point for Elijah to reach out to landlords. On a secondary note, we also interviewed some of the property owners and landlords of rent-stabilized units. And we, um, that was very helpful when we were returning with whether or not to extend the eviction moratorium for City Council in June. Um, we were able to use some of Elijah's findings, um, in our research, in our recommendation to extend the eviction moratorium um, before the state.
Alli: How did the pandemic, if there was a difference, how did it impact landlords on the east coast versus Midwest versus west coast? What, what, what did you see in your data?
Elijah: It's really one of the central questions of our study, one of the central sort of things that we designed for, you know, how has the impact of the pandemic very different all across these different markets? So there's a lot of different measures that we could look at. Let's look at, I think rent collection, that is an illustrative example, um, to sort of better understand this, right? So. At first blush, if we just sort of look at our 2020 rental collection rates, I think one might conclude, uh, that the, that the pandemic’s impact vary pretty significantly across markets. Right. Um, so in Philadelphia, for instance, around 50% of landlords indicated that they received at most 90% of their rent in 2020. Which means that, you know, they had some share of tenants who were behind on rent and we use that 90% threshold because even in the best of times, landlords don't necessarily collect 100% of their charged rent in a given year. So this was sort of the best threshold that, that we identified. So that number was around 50% in Philadelphia. In San José, that number was around 40%. So pretty high on these west coast and east coast markets. In Minneapolis, Minnesota, on the other hand, that number was around 20%. So, so half out of San José. Right? So, um, we're those are, those are collection rates in 2020.
And, um, you know, the issue is that this is, this is not really the full story, right? And this is again, sort of the main contribution of our work. As I see it is that we were also able to ask about 2019 and that gave us a baseline, which to compare our results against. So what we see is that in, for eight for each of these cities, and what we see is that in 2019, You know, landlords in Philadelphia, landlords in San José, they struggled a little bit more with rent collection relative to those landlords in Minneapolis, those Midwestern landlords. And what this ultimately wants a translating to, right, is that in each city we actually observe a pretty proportional increase in rental nonpayment during the pandemic. And that's an increase on the order of, a three to four-fold increase in rental nonpayment. So despite the fact that 2020 rates were different across cities, relative to 2019, those increases were actually a pretty proportional. So that's sort of the first interesting finding.
The second finding was rent collection is that, you know, that's, that's actually not, um, there's a little bit more to the story as well. Right. Because another thing we were really sort of worried about during the pandemic, I think is, you know, we've, we've all heard these stories about renters who felt seriously behind on their rental payments. Right? They fell 3 4, 5, 6 months behind on rent and that's so far down in the hole that they just stopped making payments altogether. And of course we worried about the landlords who house tenants like these and who had, you know, just outstanding rental collection bills. So what we can also look at in our, in our work is the share of landlords who collected less than 50% of their rental revenue in a given year, 2020 and 2019. Right. And this is sort of a, just an indication of a tenant who's in deep, deep arrears. And what we see when we break things out this way is that actually on the west and east coast cities of our sample, we saw a larger increase in the share of landlords who reported severe rental nonpayment relative to those Midwestern cities. So in this regard, we really did see that there were some differences across the east and west coast cities of our sample, again, relative to those Midwest.
Alli: Are there just less renters in the Midwest than here?
Elijah: That might, well, that actually might be true. Um, but I don't think that that's necessarily, uh, so my it's hard to say exactly why, right. You know, there's a million reasons to pandemic changed so many things, it changed everything about our lives. So it's hard to really pinpoint exactly why, but I will offer as, as one potential reason. You know, what we do know is that the economic downturn was more severe on the east and on the west coast relative to the Midwest. So I do think that to some degree, this might be a reflection of that more severe economic downturn in, in the east and west coast cities of our sample. I also think another important factor here is that, you know, again, prior to the pandemic housing costs were higher, in what are known as sort of these gateway regions and cities like New York and San José, and, you know, uh, the east and west coast cities, rents are, rents are higher there, typically. So when you, when you sort of, uh, double that with the fact that, um, the economic downturn was, was more severe in these places, it made it even harder for folks to actually catch up and make rent. So I think that those are probably two important factors.
Viviane: We had a chance to also interview some of the property managers of our rent-stabilized apartments, and owners. And another thing that we learned was that in these smaller mom and pop owners, that there would be a total of $40,000 in rent arrears in a given time period. But what we've learned is that really that's generally made up of one tenant. So you would assume in a complex of rent-stabilized apartments, the list, this landlord of four complexes as $40,000 of outstanding rents. What we learned is that one, a very small percentage of tenancies actually make up the largest arrears in a given complex. And so in this particular case, this, um, mom and pop landlord was willing to just even forego this outstanding rent debt, so that they could just move in a new tenant who's willing to pay because at a certain point it just becomes a losing battle for them. And they no longer can sustain continuously, um, having losses. And so that was one example that really stood out to me that there were a very large amount of rent arrears credited to a very small amount of tenancies in a given complex.
Elijah: I actually just have one thing that I would like to sort of chime in on there. Um, because I think that that's really interesting. I didn't know that you guys did that interview, Viviane. One thing that, that, uh, um, a colleague of mine, co-authored, Nat Decker out of, he's a post-doc like myself at the Terner Center at UC Berkeley. Um, he also has been studying landlords and sort of the impact of the pandemic on landlord’s rental business. And he similarly found in his, in his report that landlords with tenants in deep arrears actually did express a willingness to just move on from those tenants and, you know, sort of be done with that relationship, oftentimes, um, rather than just collecting any sort of back rent that that was due. Um, again, just to sort of move on and, and start, start a new, um, presumably with, with new tenants who, who could make those payments.
Viviane: At that time when we were doing this interview, it's around like mid of 2020, I think. And so, um, - 2021. And so we were just landlords, just unsure of how long was eviction moratorium would proceed. And of course at that time, similar to what Elijah mentioned with the findings, they simply just wanted to move on from the relationship, they wanted to have tenants who were willing to pay to recoup some of those costs. And so that was some of the dynamic that we saw. In another large property owners that we interviewed, he was overseeing a thousand rent-stabilized apartments. And what he found is that once they exceed $10,000 in rent arrears, that's really where you see the huge drop off in even making partial payments. That's kind of the leveling where they find out, that eventually will become an unlawful detainer, um, because simply it just gets too overwhelming to catch up.
Alli: I remember from reading this study, the majority of the cities that you worked with had some type of rent registry. I know this wasn't really a part of your study, but did you learn anything about how all of these different rent registries work while you were doing this study?
Elijah: Not really a focus of our study per se. Right? But we obviously did become very familiar with rental registries because this was the primary way in which we reached landlords. Um, you know, and as Viv mentioned in San José, we reached out to landlords on the rent stabilization registry. You know, other cities, uh, have registries that are, um, you know, encompass all rental properties in any given city. And we blasted out to landlords on those registries. And then that really sort of brings me to the, I guess, one thing that I really did learn right, is that there's just a lot of variation in these registries, across cities in this country. Um, and in terms of who they serve. You know, we, we talked about San José is serving, uh, properties with three or more units built before 1979? Yep people are nodding that's good, uh, built before 1979. But also in terms of things like exemptions, like in some cities, uh, you know, certain types of properties are exempt like one families, whereas they might not be in another city. Compliance rates obviously differ pretty widely across cities. You know, um, some cities have great compliance, you know, 70, 75%.
Some cities struggle a little bit more, you know, 10, 15% say. Um, just lots of variation in all of the things that really come, you know, make a rental registry. Uh, but I think sort of my last thoughts and opinions on it really are that, I think the pandemic in particular has really shown that there are lots of scenarios in which local leaders might want to have an accounting of where their rental properties are and who owns those properties and how to reach out to the owners of those properties and make sure everyone's playing by the rules. Right? I think the pandemic has really sort of made that obvious. And this is an addition to the general benefit that we think rental registries have, which is, you know, making and ensuring that renters have access to safe and healthy homes. That's the sort of primary, um, uh, importance of them to me.
Alli: San José’s registry is pretty limited. Like only apartments with three or more units. They have to be built before 1979. Like we don't include duplexes. We don't include single-family homes. So, how did that compare to the other registries you used and did that at all, like impact your results? Did you have to do some like corrections or anything to make sure that the results weren’t skewed?
Elijah: It's, it's a great point. And it's really more than anything, it's an important caveat to the San José results, right? Because, um, it is just something that we need to consider when we consider the population that we’re serving in San José. You know, one thing that I learned, um, from sort of my analysis here to really sort of assess the degree of, you know, differences between this population and the population of all other rental properties in San José, you know, the non-rent stabilization registry ones is that, you know, apartments with three or more units built before 1979, tend to be located in neighborhoods with a higher share of residents of color. They tend to be located in neighborhoods with lower median incomes relative to the city's median income as a whole. And you know, these neighborhoods, also, perhaps not surprisingly given its stabilization registry, also tend to have lower median rents, right? So there there's these differences, um, that, that are clearly there.
And what this means is that in San José, we have a disproportionate share of landlords who own bigger properties, right? Three units or more, that are older and that are lower value relative to the city median. Um, so. Of course at the same time, these landlords might actually own properties in other areas of the city. You know, that that would not be surprising. And if that were the case, we might actually be getting a relatively, sort of, even cross section of rental property owners and rental properties in San José. The thing is, is we just can't say for sure one way or another. So with that, what I think really is that our results for San José are probably an upper-bound on the pandemic's impact on landlords in, within the community. Right? And that's to say that the true impact on all of San José's landlords on average is probably some bit somewhere between what we estimate in our work and somewhere, and what the National Multifamily Housing Council estimates. Right? Because they look specifically at large, professionally managed landlord organizations, as you all well know better than I, San José is one of the most expensive rental markets in the country. There's lots of high-end, higher end units. And what we see in those higher end units is that rental collection rates during the pandemic were down only very slightly.
So I think probably again, what we're seeing in San José is somewhere between that sort of, that sort of world in which rent is down only a little bit and sort of the world of our survey where, you know, rental non-payments at 40% in 2020. And I'll just end with, of course, you know, if you, if you take a step back, I think that it's really the vulnerable tenants and landlords that we worried most about. Right. So I think I'd argue that it's, it's most important to have a good sense of what's going on in the bottom half of this market so that we can design and target programs accordingly to these, to this population who is, tends to struggle more, even in the absence of the pandemic and is perhaps more in need of supports moving forward.
Alli: Yeah. And it's, it's interesting that it was kind of like the reverse for vacancy rates because the vacancy rates in Class-A, like expensive luxury units was really high. And our vacancy rates in Class-B, lower, lower cost apartments was so low. And it's very interesting to then see that like, but the reverse was, was going on with the rent payments.
Elijah: And after a certain point, people don't have anywhere to go in between you, right? Like if people are dropping down in classes, which I think is another thing that we've seen happening broadly in rental markets across the country, you know, I was living in a Class-A, now I can't afford it. I'll move down to a Class-B we've gone to a Class-C. At a certain point, you can't drop any more. So you might stay in your home, and you're missing your rental payments. And again, San José is already an expensive rental housing market. So it's not sort of. It might not be a, you know, uh, entirely surprising that that those weights or those non collection rates are going to be going up.
Alli: How has the pandemic impacted these smaller mom and pop landlords compared to larger ones?
Elijah: You know, I'll preface with the fact that most of the respondents to our survey, if not all are, are likely individual investors. So, you know, probably not going to have a big group. I mean, it's hard to say whether or not a big group responded to our survey, but I think they tend to be more individuals than those big property management groups. That being said, there are still individuals in our survey who responded and who own many hundreds of units. Right. So, so we can indeed look at the impact of the pandemic across a landlord's portfolio sizes. So smaller landlords, you know, those who own one to five units and the larger ones, those that own 20 plus, that's sort of how we define the breakdown in our survey. Right. And, um, this was a really important question to answer, right? Because as I mentioned, we have these two different sort of, strains of research coming out prior to our work, the National Multifamily Housing Council focused on the larger landlords, the upper end of the market. And then the work with Urban Institute focused exclusively on smaller landlords, folks that own 10 or fewer properties.
What we really wanted to do was just combine these results in one common survey and one framework to really be able to assess the differences. So taking rent collection, again, as an, as an example here, what we see is, when you look at rental non-payment rates. So the rate of, of the share of landlords who collected, at most, 90% of rent in 2020. What we see is that that share is actually highest for the larger landlords, right? So around 50% of larger landlords reported collecting at most 90% of their rent in 2020. For small landlords, that was about, there was about one third. So 33, 34% of small landlords reported, you know, collecting at most 90% of rent. Right? And this might partly be a function of the fact that as you have more units, there is just a greater chance that any one of those units is going to be behind on rent. So I think that might be what's going on there, but indeed we do observe this difference, larger landlords, struggling more with sort of what I'm going to call general rental nonpayment. But again, you know, we've been looking at general rental non-payment and also sort of that deep rental nonpayment collecting at most 50% of your rent.
And this is where things get interesting. Despite the fact that the larger landlords had higher rates of general rental nonpayment, it was the smaller landlords who struggled most with that deep sort of rental non-payment. So 10% of small landlords, one in 10 small landlords reported collecting at most 50% of their rental revenue in 2020, compared to 3% of larger landlords. Right, a substantially statistically significant, um, difference between those two groups. And, uh, you know, I, I think really to sort of put a bow on this, what I think we're seeing in this survey and really from, from all this other work across the country, is that, you know, it's the nation's most vulnerable landlords, those mom and pop landlords who are more likely to be people of color, they're more likely to be lower income themselves, more likely to house vulnerable tenants. Um, it's, it's this group of landlords, in addition to the nation's most vulnerable renters, who are really disproportionately bearing the burden of the pandemic in the rental market. And I, and I think that's that that is defining to sort of really elevate here.
Viviane: Yeah. And to also to echo that in our interviews with our stakeholders in our coming back, returning to City Council on whether or not to extend the eviction moratorium, we really found around like three buckets. We have like the larger corporations who are professionally managed, who identify these tenants who owe rent by units. It's kind of like a, unit number three $30,000 worth of rent. And they really, the tenants in a way become numbers, by units. Um, and I think that becomes translated onto a spreadsheet. So knowing that there are 20% of tenancies that were most likely to move forward with evictions. And then we saw the medium-sized, who know the tenants by name and are willing to work with the tenants to encourage them to apply for state rental assistance or rental assistance to make up that. They were willing to do door knocking, to email them, to communicate.
And then we have our last bucket of the smaller mom and pop owners, who know the tenants by their stories, by their challenges. Um, one even said like he just lost their job in January. They've been making some partial payments, um, or like a family member who had just passed away from COVID. And so I think there's a lot of humanizing of the tenants in smaller mom and pop’s. And then lastly, we've had a chance to talk to some of the Law Foundation’s, um, or organizations and legal agencies that have provided assistance. And on the flip side, they found out that a lot of, um, during the eviction moratorium, more mom and pop owners were more willing to move forward with an eviction that were not non-payment of rent. They were related to issues like nuisance or maybe parking or violation of the lease, things that otherwise it would have been willing to be like, no problem, I'll let it go. They were more willing to pursue it because according to these legal agencies, they felt that it was more personal. Like, I have a personal relationship with this tenant. This tenant is personally now making me upset or they're taking advantage of this relationship. So I'm willing to move forward with this termination. And so those are some of the patterns that we found out in interviewing some of our stakeholders in this eviction moratorium period.
Alli: That is so interesting!
Elijah: I was gonna say the same thing. And just because, you know, I had not heard that story or those, the results of those interviews. And, um, it really resonates because, one of the other things that we find is that, you know, in terms of small versus large landlords in particular, you know, we find that landlords of all sizes adjusted their business practices during the pandemic. But what we find, you know, tangentially related to this is that larger landlords adjusted their practices at a greater rate. And I think that this is generally because these larger landlords are just more proactive in how they manage the rental business in general and, you know, past sort of behavior is the best predictor of future behavior in many ways. So I think that, you know, having experience with things like, you know, granting a rent waiver or evicting a tenant, whatever it is, they adjusted on the margin more because they had more experience.
But what was, is very interesting to pick up on Viv’s point again, is that for evictions. Uh, that also was true, right? That means that larger landlords, while they are more likely or were more likely to evict tenants prior to the pandemic, they also exhibited greater decreases in the rate at which they evicted tenants during the pandemic, relative to the smaller ones, which I think sort of really kind of speaks to this story there a little bit, you know, smaller landlords might be more willing in some ways to proceed with evictions under certain scenarios, if they feel they're taking, getting taken advantage of.
Alli: What are some of the conclusions that your team, you and your team on the study drew after you got through all of the data? What surprised you? What concerned you?
Elijah: I think the one that that really is, is worth mentioning above all is really the implications of our findings for affordable housing. Right? So, um, a main finding again of the study that I didn't get into, um, um, prior in our conversation, is that, the listing of rental properties for sale. So, you know, basically, I'm going to list my property and I don't want it any more. I'm going to sell it, but actually listing it, not just saying I intend to list it that increased dramatically during the pandemic, right. From 3% to 13% on average across all of the cities in our samples. So what do we make of this? Right. So, um, again, I think it helps us to start with the fact that we already had a housing affordability crisis in this country prior to the. Right? It, it was already the case that there was a large share of cost-burdened renters, particularly in coastal markets, who struggled to make rent. And you know, more, more over really what that I guess is an implication of that is that there's just far less supply of affordable housing, affordable units, than the demand for those units, right? So really, if you just take that as your basis point, any additional sale of rentals is going to have implications for housing affordability. So that in and of itself is we're already sort of starting, um, not in a good place, right?
So now we can take an additional step back, and see that the bulk of the respondents to our survey, they were small landlords, those folks that own one to five units, around 70% of all respondents to our survey, own one to five units. So it's exactly the types of individuals and properties that comprise the naturally occurring, affordable housing stock. Right? Cause these, these folks are more likely to, to offer those units, that are selling these units. That that is what we're seeing. So when small landlords shed properties or want to shed properties, again, it's going to have a direct implication, a direct impact, on tenant's ability to find affordable housing. Right? So basically any additional sales, particularly in our sample is going to be a bad thing for affordable housing. Um, but another thing to note here, I think there's some other interesting sort of threads to sort of see through, is that, you know, it was the folks who were struggling with rent collection the most that were more likely to list properties for sale in 2020, probably intuitively, right? Like my property is not making me any money anymore, I'm going to shed it. Again, to me that indicates a real intention to actually sell your property rather than just sort of test the waters, right? It's not costless to sell your property or to list your property, you know, it's a long and serious decision that, that in and of itself not great, of course, it's a real intention.
Then you add another fact, which is that deferred maintenance was also a sharply across all of the cities in our sample. Right. You know, around a third of all, landlords indicated they deferred maintenance at some point during the pandemic. Um, what this could mean is that we have a situation in which rental properties, a substantial share of rental properties, are in need of repair and are hitting the market at the same time. And folks might buy up those units and then need to cover the cost of those repairs. Right? And the way they might cover those is by increasing rents. So again, property is being shed and then rents afterwards might be increased. Um, uh, you know, just all signs point towards the affordable housing stock really shrinking, I think, as a result of what we're seeing happening to landlords during the pandemic.
Alli: Viviane, I have a question to like, kind of follow that. If we, if, if a landlord that owns an ARO unit in San José sells their building. Whoever buys that building has to keep it ARO, right?
Viviane: Correct. So one of the main disclosures that is required in our ordinance is that. Say Elijah is the old owner that wants to sell it to you, Alli. Um, Elijah has to disclose that this is an ARO property and that there are regulations and requirements that comes with this. It does not automatically become a non-ARO. I think that's one of the most common misconceptions. And then oftentimes now Alli, you have control of this and that you want to increase your rents. Well actually, our program only allows you to do 5% every 12 months. And unless there is a vacancy, so it's, um, vacancy decontrol is the term. And so I, um, have moved out. And so now Alli, you have the right on my unit to increase rents to market rate. And so that is typically what the process would look like. But I would say that is a very common question upon selling an ARO property. It does not decontrol or does not make it no longer rent control.
Alli: Okay. That's good. And just to clarify, ARO is the Apartment Rent Ordinance, which is our Rent Stabilization Ordinance.
Viviane: Absolutely.
Alli: What are your next steps now that the working paper is up?
Elijah: Basically, another thing that we found in the study that we didn't touch on much today, is that tenants in neighborhoods of color were significantly more likely to face punitive action from landlords during the pandemic, and significantly less likely to receive concessions relative to tenants in whiter communities. So that was a big finding of our study. Right? So, um, and this is again holding, but this is holding constant, the fact that rental collection rates were, were indeed lower in these communities, but even conditional on that, even holding that fact constant, basically, you know, the more residents of color in the community, the more likely evictions were to have taken place. The more likely that, uh, tenants would have been charged late rent fees. The more residents of color in the community, the less likely that tenants would have been offered rent waivers, or, um, have faced, uh, experienced rental decreases. Right? So another really sort of main finding that, that we just didn't get into much today, but in terms of next steps, we're currently working on a paper that, that really is exploring this relationship in, in further detail and, uh, you know, exploring why this might be the case, as well as how characteristics of landlords might actually factor into these findings, right? Because we also collect some basic demographics on landlords, in our surveys, such as, you know, their race and their age and, uh, how much rent they derived from the rental business. So, um, that's next on the docket, but very preliminary. So, you know, um, no, no results sadly to share on that front.
Alli: No that sounds like a great next step. Cause I think that's, that's something everybody has seen across the board with this pandemic is just how disproportionately our BIPOC communities and lower income communities have been impacted. So I am looking forward to that next step. So how does the report, like, how does, how does a study like this help cities like San José? You had mentioned at the beginning of our conversation that San José City Council members were very interested in having this type, this data available. So how does this, this study help a city like San José make future decisions, change processes?
Viviane: I think Elijah's work was absolutely vital in our inclusion when we were going, returning back to City Council. Um, we, one of the most unique things I think with our San José City Council is very diverse. And so, um, we have different council members representing different districts. I think another component, um, to supplement Elijah's findings that we shared, um, was that we also collect notices of termination during this time period, and we had a unique sense of understanding how much rent arrears was being submitted, we had an average of how much was owed. And I think that was a unique perspective of being able to provide, um, which districts had the most amount of unlawful detainers submitted, um, which districts had the most amount of rent arrears. And I think with Elijah's findings and it's going to be so important, like we were so fortunate to have Elijah’s finding and his work. Um, and I think a lot of times, returning to City Council with say an extension to the eviction moratorium, or any kind of policy, it's just so important to actually survey, um, the people who are being impacted. And I think it's definitely not an opportunity we had every time. I think it would be so amazing to. Each policy we go to, we get to survey the people impacted, but unfortunately that takes a lot of time and a lot of resources. So I think Elijah's work and his diligence and interviewing and following up and running the numbers, was just absolutely vital. And us being able to propose an extension when we did return to City Council.
Elijah: I'm always happy to hear that the work we were doing on the ground is able to sort of inform decisions in real time. That is obviously partly the goal too, you know, it's not just academic research it's to help our city partners make data informed decisions. And, you know, uh, another two other examples of that are really in Albany and Rochester, New York, where we've had a longer relationship working with the housing folks in those cities. And they at various points used this survey, and another survey that we did there to really reallocate dollars to rental assistance, um, you know, sort of early on, early days in the pandemic. Not quite enough where we're allocated to arrears programs. Um, we didn't really know the size of, of the issue. So that was our, our work was sort of instrumental in that. And then sort of what I mentioned in terms of deferred maintenance, being, uh, a big issue in those, in those communities in particular.
So they were able to carve out some money for maintenance repair programs, again, sort of pointing to, to our survey work, um, uh, as, as sort of need for that. And then finally in those cities too, um, you know, another thing we were able to do with them was really use our survey results to sort of get a sense of what was going on in all of the neighborhoods in the city and overall, right. To sort of basically predict what's happening in the rental properties that we didn't get to survey. And use that information to really sort of target information really on rental assistance programs and sort of, uh, statewide and local, um, funds, to rental properties that were, they determined to be most in need. And that's using a combination of, of my survey work in addition to some information that they had in their own data systems. So, you know, um, I think there's, there's lots of opportunities to really sort of use this data creatively and, uh, yeah, I'm just, I'm just happy anytime cities can actually do that to make data-driven decisions.
Alli: What were the benefits to the Housing Department, and particularly the Rent Stabilization Program, from participating in this study?
Viviane: I think it was just so important to really introduce Elijah's work and his methodology. I think that was the number one benefit of being able to utilize the contacts in our rent registry in a way that we haven't been before, I think before it was a very one-dimensional kind of approach of landlords, please supply us information. And, um, we haven't really been yet proactive about utilizing the data, um, in terms of providing a survey. And I think that was the number one thing that I think can be a really great resource, of being able to provide a survey, get some follow-up in questions that are beyond, how many bedrooms do you rent out, how many bathrooms are in there? And so, um, I think that was one of the number one benefits and the number two, I think, um, Elijah really opened the door for us to have these challenging conversations with the landlords of not simply, of course they were struggling and having a really hard time with rent arrears and, um, the eviction moratorium for them was constantly changing. There were new rules and regulations, and I think the survey was a great outlet of being able to provide, like, what are the challenges that they're facing? They can't do maintenance. Um, tenants are not willing to let them do maintenance because of the height of COVID issues. And I think that was really, um, a great way to highlight the issues that the landlords were facing in a way that we haven't seen before.
Alli: How will the RSP team be using the information in this study to inform your future work?
Viviane: Yeah, absolutely. I think one of the first things is that one, being able to understand the, utilizing the demographic information of landlords that we found out. I think it really puts a different perspective than just having landlords register their units and not really knowing like, who are they like, are they older? Um, what is their ethnicity? And so that demographic will really help us to provide more targeted outreach to our landlords who speak Spanish, who speak Vietnamese. Um, how can we really cater to that population? And then the second aspect, as well as just being, I think there's value of having periodic surveys, of touching base, especially as the COVID pandemic continues, like it's not going away. And so how can we better provide the services in utilizing that avenue to understand like, okay, we need more information on rental assistance. We need more information on, um, trying to get, um, utility bills down. Like the drought has kind of become an issue. So I think that's a super valuable a mechanism that Elijah's introduced to our team.
Elijah: And I'll just say that, I love to hear that because, you know, I, I do think that a lot of, uh, sort of when, uh, when I was trying to, to, to recruit cities into this study, uh, a big part of it was, you know, you have this rental registry and it's, there it is. It can be a source of so much information for you. So I'm really excited to hear that Viv and her team are taking this concept and really running with it. Um, you know, you have this information on landlords. You don't have to just collect things like bedrooms and bathrooms. You can collect a variety of other information that can give you more insight into who owns properties in your community, where they are, what types of properties they are. And, you know, this fills a huge void that we have in this country. We do not maintain data on landlords and renters. You know, landlords are there's, there's millions and millions of landlords. They're a vital small business, and we just do not really maintain data on this type of small business. So I'm really, I'm really happy to hear that that her team is sort of moving forward with this idea that, that you can use this as a source of good into the future.
Thanks so much to Elijah and Viviane for joining me on today’s episode. To read Elijah’s working paper, please visit his website at http://www.elijahdelacampa.com/research. To learn more about the City’s Rent Stabilization Program, log on to our website at www.sjhousing.org.
Thanks for listening to Dwellings, the City of San José Housing Department podcast. Our theme music is “Speed City,” composed and performed by Ettaine Charles. Thanks to San José Jazz for letting us use your music.
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You can follow the Housing Department on social media. We're on Twitter and Facebook at S J city housing. If you have questions or comments about today's episode, please send them to housingcomms@sanJoséca.gov. Our artwork is by Chelsea Palacio. Dwellings is produced by me, Alli Rico, and Jeff Scott of the Housing Department.