Pandemic Back Rent Becomes Revenue Stream for L.A. Landlords

The end of pandemic eviction protections for renters is beginning to lower the amount of bad debt, in the form of unpaid rent and overdue fees, on the balance sheets of apartment landlords throughout Southern California.

In Los Angeles, which adopted some of the strongest pandemic-related protections, the final phased deadline to pay back rent accumulated from 2020 through 2023 arrived on February 1.

A wave of evictions that were blocked by renter protections during the COVID outbreak now are making their way through the county courts. An estimated 46,000 legal evictions were processed in Los Angeles County in 2023, the largest total since 2016, according to a report in the Los Angeles Times.

Between February 2023, when the evictions ban on tenants who owed back rent expired, and November, the Los Angeles Housing Department signaled its intention to evict more than 71,000 households, with 96% of those evictions based on nonpayment of rent, the newspaper report said.

Although L.A. ended its evictions ban a year ago, the city phased in its deadlines for when back rent is due to be repaid.

In August, the city required tenants to repay rent debt from the first year-and-a-half of the pandemic. The final deadline of February 1, 2024 requires tenants to pay back everything they owe from October 2021 through January 2023.

However, the City Council granted a last-minute extension at the end of January to 3,200 applicants who had been approved to receive as much as six months’ back rent from the United to House L.A. Emergency Renters Assistance Program but had not yet received disbursements from the $30M fund.

Local non-profits say they’re running out of lawyers to represent tenants facing evictions, warning that the current wave of evictions will exacerbate the homelessness emergency in Los Angeles County.

According to a new study from the University of Pennsylvania that was commissioned by the Los Angeles Housing Department, an estimated 93,000 city households had pandemic-era rent due as of the beginning of this month, with 17,000 households more than a year behind on rent payments.

Several REITs that specialize in multifamily cited the back-rent situation as a primary reason for underperformance in Southern California markets in recent earnings reports, adding that they expect an influx of back rent to lower their exposure to bad debt in 2024.

Houston-based Camden Property Trust, a publicly traded REIT that owns interests in 171 apartment communities encompassing nearly 60K units, reported that its properties in Los Angeles and Orange County “underperformed mainly for reasons related to bad debt, skips and evictions, and fraud,” Keith Oden, Camden’s president, said during a call with investors.

Regarding the outlook for 2024, Oden said “we anticipate the improvement in L.A. (and) Orange County will come primarily from a reduction in bad debt as we repopulate many of our vacant units with residents who actually pay their rent.”