Washington Multifamily End of Legislation Report #1

(This is Report #1 of the Washington Legislative Wrap Up courtesy of the Washington Multifamily Housing Association.)

Sunday marked the final day (Sine Die) of 2021, the first-ever full virtual, legislative session. Since January, the WMFHA Government Affairs team has worked tirelessly on behalf of the rental housing industry to create the best path forward towards recovery and normalcy. 

We set out the legislative session with the following priorities: 

• Create a gradual pathway out from the eviction moratorium, towards recovery that returns full managerial operations to property owners and managers. 
• Provide rental assistance to overcome the financial burdens imposed on housing providers and residents by the COVID-19 pandemic. 
• Prevent the burden of rent control from reordering the rental housing market and discouraging future investment in rental housing. 
• Advance policies that create more housing development.

Given the unprecedented nature of the pandemic, we faced often choppy, uncharted waters. The WMFHA Government Affairs team stayed the course and succeeded in obtaining some critical victories. Over the course of the next few days, we will highlight priority legislation defeated or passed during the 2021 session. 

Between January and the end of March, WMFHA landed 19 stories in local media across the state. This averages more than one placement a week in the media.  

The WMFHA team defeated two efforts to implement rent control. The first, a “short-term” COVID recovery rent control bill would have capped rents at 3 percent plus CPI, regardless of COVID impact. Senate Bill 5139 did not receive a vote in its committee of origin and was considered defeated early in the session. 

Second, a bill that would implement rent control whenever there is a state of emergency made its way to the last day of the session. Though we worked hard to carve out rental housing and succeeded in doing so, there were efforts to remove such a carve-out and return a cap on rental housing.  

The legislation billed as anti-price gouging, would have applied substantial penalties whenever the rent increased by more than 15 percent during a state of emergency. The State of Washington implements states of emergency all the time for issues that do not pose a direct economic threat to stability, and this law would have been applied to each and every state of emergency, sometimes extending for years.  

We’ve seen how rent control policies defeat the ability to provide quality, affordable rental housing: Rent Control in Berlin Fails.

Capital Gains Tax

Despite the Washington Constitution preventing a tax on income, the legislature passed a “high-earners” capital gains tax. WMFHA worked with many industry partners to preserve an exemption for real estate and the final language exempts “all real estate transferred by deed, real estate contract, judgment, or other lawful instruments that transfer title to real property and are filed as a public record with the counties where the real property is located.”

The 7 percent tax is imposed on individuals who sell or exchange long-term (<1 year) capital assets exceeding $250,000. 

Rental Assistance

WMFHA secured an enormous amount of rental assistance to support the rental housing industry and its residents:

• $140 million in State CARES Act General Relief Funds
• $920 million in federal rental assistance in Washington
• $658 million in APRA General Relief Funds for additional rental assistance
• $58 million in operations and maintenance assistance for Permanently Supportive Housing
• $11.6 million in additional investment towards the Landlord Mitigation Fund
• $220.4 million in permanent rental assistance to assist those experiencing homelessness and those at risk of becoming homeless.  

For small independent housing providers, WMFHA secured opportunities to engage in the already successful foreclosure prevention programs that exist for primary-residence homeowners. 

Senate Bill 5160 provides the off-ramp from the eviction moratorium and towards recovery. More on this tomorrow. 

Senate Bill 1236 implements requirements on housing providers to provide a reason to terminate a tenancy.  More on this on Thursday. 

Finally, the Multi-Family Tax Exemption (MFTE) was expanded and extended. Details to follow.

More Details Emerge on Washington State's New Rental-Related Legislation

Courtesy of the Warren Allen Law Firm

The more things change, the more things stay the same. Late last week, the Washington legislature passed SB 5160 and HB 1236, and Governor Inslee promptly signed them into law. These new laws radically revise Washington landlord/tenant law and throw a new wrench into dealing with COVID-era balances and the ERP process. We’ll distribute a handout in the coming days, but I’ve summarized major points below. 

I. Inslee’s Proclamation
Before we jump into the new laws, it’s important to remember that Inslee’s Proclamation is still in effect in Washington—and will be until at least July 1 (and possibly longer; more on that below). Thus, for the next two months, we’ll be operating under both Inslee’s moratorium and the new laws. In the short term, Inslee’s moratorium will continue to operate as the most expansive restriction on landlords’ options with regard to nonpayment and termination strategies, i.e. the “ significant and immediate risk” standard. Once Inslee’s moratorium expires, the sweeping changes wrought by SB 5160 and HB 1236 will come to the forefront.

II. SB 5160
SB 5160 imposes many new tenant protections related to COVID balances.  Highlights include the following: 

A. COVID Balance Repayment Plans
SB 5160 is poorly written and convoluted, so we’re still working through the details. What we know now is that landlords are required offer a repayment plan with a maximum monthly repayment amount of 1/3 the monthly rent. For example, if your tenants’ monthly rent is $1500/month, you’re required to offer a repayment plan with a maximum monthly repayment amount of $500.00. The first payment cannot occur sooner than 30 days after the landlord makes that offer. Crucially, the failure to offer the required repayment plan  is a complete defense to any Unlawful Detainer Action. 

    1. So what does that mean for tenants we currently have repayment agreements with?

Many landlords have been acting in good faith for months, engaging in discussions with tenants on payment plans within the ERP program. (Remember, the payment agreements we’ve been negotiating and implementing were based on the “requirement” in Inslee’s Proclamation that landlords offer a reasonable repayment plan as a prerequisite to treating COVID balances as enforceable debts). The effect of SB 5160 on existing repayment agreements is unclear, but it certainly appears that the legislature intended to tie our hands on that point.  Given that SB 5160 is actual law, landlords with current repayment agreements should brace themselves, as it appears that they must now offer a repayment plan consistent with SB 5160, even if it’s less favorable than the one they currently have in place. 

    2. So what does that mean for the Eviction Resolution Program?

The ERP still exists, and has in fact been codified in SB 5160. The legislature has tasked the Administration of Courts with implementing rules and regulations, which I understand are currently in the works. 

It may be prudent to pause any ERP files that you have for a least a week, as the Administration of Courts met on Friday and will hopefully be putting through guidance shortly. I am a part of a weekly group that discusses ERP in Clark County; Judge Gregerson heads that group and is a part of the Administration of Courts. Accordingly, I hope to have further information on process/next steps this Thursday.  However, given the bumpy ERP road thus far, I won’t be surprised if it continues to evolve over the coming weeks.

B. Other Covid Balance Restrictions
SB 5160 imposed the following additional restrictions:

1. No late fees for rent that became due between March 1, 2020 and six months following the expiration of the eviction moratorium (so effectively, the rest of the year). 

2. Current landlords cannot:

• Report the COVID balance to prospective landlords
• Report any UDs filed as a result of COVID balance
  

3. Prospective landlords cannot deny applicants based on COVID balance or medical history (including COVID exposure)

III. HB 1236

A. No Cause Terminations Mostly Eliminated

HB 1236 is Washington’s “perpetual tenancy” statute. With limited exceptions, no cause terminations are now prohibited, as are non-renewals of term leases. These have been prohibited under Inslee’s moratorium anyway, but now they’re permanently prohibited unless any of the narrowly defined exceptions applies. 

B. Cause-Based Termination Options. 

HB 1236 defines and expands the “cause” necessary to terminate Washington tenancies. In additional to preexisting cause-based terminations (e.g. 10-Day Notices), HB 1236 has at long last created a much needed “repeat violation” strategy for continued nuisance violations. HB 1236 also created a “4-strikes rule” for cause termination option, which largely mirror’s Oregon’s 3-strike language found in ORS 90.427. 

C. Inslee Moratorium Sunset (?)

HB 1236 affirmatively states that Inslee’s eviction moratorium ends on June 30, 2021. Notwithstanding the same, many members of the legislature have apparently opined that this doesn’t actually preclude Inslee from extending his Proclamation. So much for 3 co-equal branches of government . . . 

Only time will tell. 

IV. Next steps
You can expect further updates and a lecture handout in the coming days and weeks. Again, all of these laws are very new, and our interpretation of the nuances may change over time.  However, while our analysis of the details may evolve over time, it’s clear that SB 5160 and HB 1236 enact another gut punch to Washington landlords still reeling from the last year. We’ll be there to help you navigate the new Washington landlord/tenant landscape. 

Bradley S. Kraus | Attorney at Law
kraus@warrenallen.com

Federal Judge in Minnesota Halts Implementation of New Renter Protection Law

According to press reports, a federal judge in Minnesota has sided with landlords and stopped the City of St Paul from enforcing a new renter protection law he says is likely unconstitutional. The judge granted an injunction against the City of St. Paul while a lawsuit filed by a landlord group is pending. The landlords argue that the ordinance violates the 5th amendment. The new regulation limits the ability of landlords to consider evictions, credit histories, and criminal histories when screening applicants for housing.

The St. Paul law bears a striking resemblance to one enacted by the City of Portland in March of 2020. The Portland ordinances are also the subject of a lawsuit by Multifamily NW on the grounds that they violate the Oregon and U.S. Constitutions in multiple ways.

Washington Adjourns Legislature After Implementing 7% Capital Gains Tax, Adding $658 Million for Rental Assistance

 

Boosted by economic recovery, the Washington legislature adjourned its 105-day session after approving a $59-billion budget deal that increases taxes and boosts spending by more than $5 billion over the previous two-year cycle. 

The lawmakers added $10 billion in federal COVID-19 relief to help families and businesses recover from the pandemic and its economic fallout. The money will fund $1.7 billion to reopen schools and address learning loss and an additional $658 million for rental assistance. 

The state’s wealthiest residents will now pay a higher share of taxes, as state democratic leaders successfully pushed through a new 7% tax on capital gains of more than $250-thousand from the sale of stocks and other investments. 

The tax is expected to raise more than $400 million a year and face legal challenges. 

Oregon Landlord Compensation Fund Round 2 Opens Thursday With Another $50 Million

The second round of Oregon’s landlord compensation fund opens this Thursday – April 29th. It will include at least $50 million in assistance to pay for rent owed by eligible tenants accrued from April 1st, 2020, to April 30th, 2021. Rental owners should visit www.lcf.oregon.gov to access the website and application information. With luck, the second time will be the charm for the glitch-prone website.

Portland City Council Approves Mediation Pilot Program for Eviction Cases

Portland’s city council approved funding last Wednesday for a pilot program to divert some eviction cases to mediation. The City would pay for the mediator and provide rental assistance in some cases. The council awarded a $150-thousand contract to Resolutions Northwest to offer free mediation services for landlords and tenants in disputes that might typically lead to evictions. It’s expected that between 70 and 100 mediations will take place at the cost of roughly $1,500 to $2,100 each.

HFO Multifamily Marketwatch Podcast - April 26, 2021

This week: Jobless claims down, rental assistance up, Portland launches a pilot program for eviction mediations, and a federal judge in St. Paul, Minnesota slaps an injunction on a city screening and security deposit ordinance there.

Listen to our latest podcast.

Washington Legislators: Eviction Moratorium Ends June 30, Tenants Given Time to Pay

With an estimated 211,000 Washington renters behind in payments, the Washington House and Senate have passed two bills that are now awaiting Governor Jay Inslee's review. 

The first, Senate Bill 5160 would:

• End the eviction moratorium June 30
• Not allow landlords to collect late fees following the moratorium end
• Not allow reporting of unpaid rent to new landlords or credit reporting agencies
• Prohibit the denial of housing based on past medical history
• Require that repayment plans not require more than 1/3 of a single month's rent be added on to future payments.
• Provide tenants with the right to counsel in eviction cases - a national first
• Authorizes landlord access to state rental assistance programs

And while Washington State is estimated to receive $454 million for housing relief from the federal stimulus bill, it could take months to arrive and be distributed. 

House Bill 1236 would require landlords to provide a legitimate business reason before throwing a tenant out. This bill enacts statewide just cause eviction requirements and would eliminate the fixed-term lease. 

Broadly speaking, just cause eviction creates adversarial relationships between housing providers and tenants, pits neighbor against neighbor, and makes it more difficult to address minor nuisance issues. More importantly, just cause eviction does not prevent evictions.

Read more. 

Two Months In - Landlords Await Approval, Funding from Landlord Compensation Fund

KATU-TV in Portland reports on the state of Oregon's landlord compensation fund in its prime time newscast on Monday. The story includes links to two video segments related to the fund that aired, along with a written summary of the story.

Watch now

HFO Multifamily Marketwatch - April 19, 2021

This week: California creates 6,000 housing units in less than one year, a model that both Oregon and King County, Washington, hope to copy. Oregon and Washington legislatures continue moving forward on several bills of interest to landlords.

Listen to our latest podcast.

Oregon Senate Approves Bill Extending Tenant Rent Payback to February, 2022

 

Renters in Oregon will likely have until February of 2022 to pay back the rent owed as a result of the pandemic. The Oregon Senate approved a bill with the payback extension and it will go to the house where it will likely be approved. The legislators hope the extended payback time will give them the ability to receive and pay out $500 million in renter relief funds headed to the state from the Federal government. Read more. 

Report: Multifamily Rent Growth Shows Strong First Quarter

While some weakness remains, the multifamily market is coming out of one of the strongest first quarters in years with rent growth nationally up 0.8 percent for the quarter, according to the March Yardi Matrix National Multifamily Report. Read more.

Turn Hotels into Affordable Housing?

The real estate market has two major issues: a shortage of affordable housing for renters, and vacant hotels and office buildings due to the pandemic. Is adaptive reuse the solution? Read more in Marketwatch.

In Oregon last month, the House of Representatives approved a bill that would allow the purchase of hotels and motels for housing and shelters.  HB3261 will have a public hearing on Tuesday, April 13th at 1 pm and is set for a committee work session at 1 pm on Thursday, April 15th in the Senate Committee on Housing and Development.  Read more. 

HFO Multifamily Marketwatch - April 12, 2021

This week: Two housing bills move forward in Oregon’s legislature; downtown Portland sees increased workday activity; and an update on the Federal infrastructure plan’s $213 billion for new housing initiatives.

Listen to our latest podcast.

Portland's FAIR Ordinance: Revisiting the Requirements of the City's Screening Ordinance

It's been over a year since COVID-19 dramatically changed the lives of every American. During that time, many previously headline-grabbing regulation changes have faded from the front of landlords' minds. In a recent edition of the Rental Housing Journal, attorney Bradley Kraus revisits the requirements of the city's screening ordinance. 

Multifamily Marketwatch - April 5, 2021

The Center for Disease Control expands the federal eviction moratorium until June 30th; Tenant advocates in Seattle advocate a campaign to increase renter protections, and Oregon’s smaller towns are bouncing back faster economically than the state’s larger cities.

Listen to our latest podcast.