There’s no doubt that the COVID-19 pandemic affected everyone dramatically. David Malcolm, San Diego real estate expert, acknowledged that many people suffered a loss or a reduction in their income, making it challenging for some tenants to pay rent.
In the depths of the pandemic, many well-intentioned renter protection initiatives were passed on both the local and federal levels. Various individuals and organizations are still proposing similar measures.
For instance, San Diego City Council proposed “no fault” eviction protection early in 2023 that would help struggling renters by allowing them to stay in their homes.
However, sometimes, even the most well-intentioned ideas have unintended consequences.
“In this case, many landlords suffered immensely due to the unfair burdens placed upon them,” says San Diego real estate expert David Malcolm. “Landlords didn’t get any relief for the costs they were still incurring, including payments for mortgages, utilities, insurance, taxes, and maintenance and repairs, while their tenants were protected.”
Malcolm further explains that some renter protection initiatives even reduced landlords’ ability to evict bad actors. He describes an experience with a tenant of Cal West Apartments who effectively destroyed a unit and impacted adjacent neighbors, who had to be relocated.
Many lawmakers acted quickly to protect tenant rights without thinking about landlord rights. The question many real estate experts, including Malcolm, wish lawmakers would have asked is, “What is an equitable balance?”
How Landlords Were Affected
Most landlords — including the company of which Malcolm is president, Cal West Apartments — needed to figure out how to compensate for a reduction in rental income. This might have included anything from deferring maintenance to even selling properties.
“Landlords’ missed mortgage payments and/or deferred maintenance are simply ticking time bombs … especially when combined with an overall reduction in rental income,” says Malcolm.
The issue is that most of the market is not large corporations owning and renting properties that can afford a dip in their revenue — or have a better ability to compensate for it; it’s small- to mid-sized landlords who depend on rental income for their survival.
Consider the Landlord’s Perspective
During challenging economic times, there are almost always certain groups of business owners who get the short end of the stick, Malcolm says.
During the pandemic, the federal government created multiple programs to support small businesses struggling to get by. These programs helped the companies to stay above water and to continue paying their workers — even if they were completely shut down.
Many landlords, though, didn’t qualify for these programs. And even the larger landlords who did qualify couldn’t adequately offset the extra costs they were incurring because their tenants did not all continue to pay rent.
Many lawmakers rushed to the aid of tenants when the pandemic hit, but they left landlords in the lurch. But that can have unintended consequences and negative effects on tenants. For example, deferring maintenance or repairs could make rental units less livable.
Policymakers need to assess two conflicting imperatives. One is that during a homelessness crisis, which is taking place right now, Malcolm notes, it is important not to do anything to make the situation worse. Hence the desire to protect tenants. However, the other consideration is that, during an economic downturn, landlords simply cannot afford to provide “free rent.”
How to strike a balance, according to David Malcom, is the crux of the matter. He cites a column in the Times of San Diego that said private property rights help set the “foundation for a successful economy,” while eviction mandates … “chip away at private property rights.”
“As Bill Clinton’s advisor said, ‘It’s the economy, stupid.’” Malcolm adds.
Find the Right Balance
Government-funded programs that help tenants in challenging economic times are, of course, noble and, in some cases, even necessary. But any programs that help tenants must also consider the potential effects on landlords.
Although most people would like to believe that the COVID-19 pandemic is over, it’s apparent that “we are not yet out of the woods” as far as the pandemic and overall economic challenges are concerned.
In other words, this balance needs to be found now, not put off until the next big economic downturn.
“Both tenants and landlords need to be considered when it comes to policy decisions based on financial need,” says Malcolm. “If both sides are not considered, then well-intentioned efforts could well make the problem worse.”
About David Malcolm
David Malcolm is based in San Diego and serves as a respected real estate professional, entrepreneur, and community leader. With a wealth of experience spanning over five decades, he takes pride in graduating from Harvard Business School’s Presidents Program and holds licenses as a real estate agent, broker, and Certified Commercial Investment Member (CCIM). Throughout his journey, David has been privileged to advise multiple public and private companies and gratefully served in various municipal and statewide public offices. His dedication to real estate, entrepreneurship, and community leadership drives him to learn and grow continuously.
