Endless Evictions: A Legal Loophole Threatens California Tenants - Rent Week


By Zach Schepis

Photo courtesy of Brett Lider.

It’s hard to imagine. One day, you could be living comfortably in your rent-controlled apartment. You think you secured a personal domain of refuge, a place to relax away from the stresses of your daily life, past all of the headaches and paperwork it took you to actually get in that position.

Then, the very next day it’s all over–that same blanket of housing security is just yanked away.

Unfortunately, the situation has become both a haunting reality and growing threat for California residents.

That cruel surprise is made possible by a piece of legislation called the Ellis Act. The California Supreme Court passed it in 1985 to ensure landlords a legal way to “go out of the business.”

What legislators never intended, however, was that the act would afford property owners a loophole to cash in on eviction recovery. In Los Angeles, a landlord can put the Ellis Act into effect through resigning their business or demolishing their buildings to develop new ones. Moreover, the landlord can then set the initial rent rate of the new units.

Such actions become problematic when there is no limit to the number of times a building owner can “go out of business.”

As a result, data shows some owners “Ellis”ing the same properties again and again. Some of these “out of business” buildings are even turning up for rent as illegal vacation retreats on sites like Airbnb. Luxury condos and modern mansions commonly replace former apartments.

The majority of these “out of business” places are rent controlled apartments–units where landlords don’t earn nearly as much profit. Currently, approximately 638,000 rent-controlled buildings remain in Los Angeles, but that figure that is continuing to decrease.

In San Francisco, the Ellis Act is a growing problem for tenants. Since 1997, landlords acting on part of the legislation forced nearly 4,000 local families out of their homes.

Luckily, an opposition movement exists to help protect these West Coast renters.

Larry Gross is one of the primary forces behind the movement. He is the Executive Director of the Coalition for Economic Survival (CES), an organization which helps organize low to moderate income residents around Los Angeles. The grassroots, community-based group dates back to 1973.

Over the past couple of years CES has been working to support tenants in their fight to preserve housing quality and assure that living units are both safe and affordable. Tackling the Ellis Act and all of its tricky ramifications poses the biggest challenge yet.

“If I had my wish, I would eliminate it completely,” Gross tells BTR. “But it won’t happen.”

The influence that the Ellis Act has on the real estate market, Gross explains, is what keeps it alive and well. However, given the lasting affordable housing crisis, and the prospect that the act’s implementation could create a higher homeless population, it’s clear that something needs to be done–and fast.

One popular solution that Gross proposes is to introduce a “cooling off” period for ownership before the Ellis Act can revoke a property.

“There’s a current act in Sacramento calling for a five year wait period,” says Gross. “We need more of that. Most demolitions are after less than a year, so this bill came after a kind of explosion in the San Francisco area.”

Gross explains that although we’re not seeing it quite yet in Los Angeles, the possibility is certainly on the horizon. From 2001 to 2007 the city experienced a staggering loss of rent-controlled units. The market went belly-up as leaders like Gross did everything they could to stop more demolitions from taking place. Last year alone over 1,000 of these units were lost to the Ellis Act.

CES did win an increase in relocation benefits for evicted tenants. Those that are displaced are awarded anywhere from $10,000 to $19,000 depending on factors such as seniority and disability.

Gross, however, is still skeptical.

“That’s still not a lot of money, even if it sounds like it,” he says. “You never get the rent controlled unit back. We need housing protection in LA, and until then we have to keep bracing ourselves.”

To make matters worse, tenants are being continually taken advantage of by cunning property owners who choose to cheat the system. In his experience helping these victims, Gross explains that many landlords seeking to withdraw a unit will skip the city’s process of filing rent stabilization. They end up telling the uninformed tenants to get out illegally, or the money being offered to them ends up being far less than what it should amount to.

“It’s happening more and more because tenants don’t know their rights,” he tells BTR. “If they contact us we can stop it, but there’s not always a recording of it.”

The folks at CES continue to do everything in their power to educate California renters. They run a tenants’ rights clinic on a twice-a-week basis, in which they focus on channeling efforts toward government powers at City Hall and in Sacramento.

While the Ellis Act handcuffs local governments from stopping a landlord, it doesn’t withhold the powers of local municipalities. These are the tools necessary to stir change that most local governments are afraid to use. For instance, the local government could discourage incentive by restricting what type of building can go up after the previous one gets demolished. Or, they could provide incentive for developing structures on vacant land or commercial property instead.

But are these solutions attainable?

“Sure, those are the types of options a local governing body can choose,” says Gross, “but is it in the political will? I haven’t seen it yet. It might be a response that comes too late after everything else is in full swing.”

Currently, there is a five-year holding period on Ellis evictions for San Francisco properties. Still, no indication exists of whether such a regulation will make its way to LA. Gross is keeping his fingers crossed, but doesn’t exactly have high hopes.

“In the meantime, I’m going to do everything I can to help those in need,” he says.