Landlord Mitigation Program Report to the Legislature, December 2020 (Washington Department of Commerce)

Summary

The Landlord Mitigation Program Report to the Legislature, issued in December 2020 by the Washington State Department of Commerce under Director Lisa Brown as a review and evaluation of the program per RCW 43.31.605(13). It describes the program, created by Chapter 66, Laws of 2018 (ESSB 2578), and the Tenancy Preservation Program created by Chapter 356, Laws of 2019 (ESSB 5600), and reports funding from document recording fees averaging $145,000 per month. The report states that landlords have recovered over $4 million for repairs, that only five claims were flagged as potentially fraudulent, and that no unit inspections were required. It outlines the claim process, finds expansion to zero-interest loans not feasible without more funding, and presents stakeholder and Commerce recommendations, including amending RCW 43.31.605(2)(a).

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 Landlord Mitigation
 Program Report



A REVIEW AND EVALUATION OF THE LANDLORD MITIGATION PROGRAM PER RCW 43.31.605(13)




                                                                    December 2020

      LANDLORD MITIGATION PROGRAM                                   REPORT TO THE LEGISLATURE

                                                                    Lisa Brown, Director
2.3
Acknowledgments

Washington State Department of Commerce
Lisa Brown, PH.D., director
Washington State Department of Commerce

Diane Klontz, assistant director
Community Services and Housing Division

Tedd Kelleher, senior managing director
Housing Assistance Unit

Jeff Spring, director
Office of Supportive Housing

Nicholas Yuva, administrator
Landlord Mitigation Program




Washington State Department of Commerce
Nicholas Yuva, administrator
Landlord Mitigation Program
nicholas.yuva@commerce.wa.gov
(360) 725-2949

HOUSING ASSISTANCE UNIT
OFFICE OF SUPPORTIVE HOUSING

1011 Plum St. SE
P.O. Box 42525
Olympia, WA 98504-2525

www.commerce.wa.gov

For people with disabilities, this report is available
on request in other formats. To submit a request,
please call 360.725.4000 (TTY 360.586.0772)




 LANDLORD MITIGATION PROGRAM REPORT
Table of Contents
Introduction ................................................................................................................................................. 2

Program Effectiveness................................................................................................................................. 4

Appendix A: Program Metric Snapshots ....................................................................................................... 7




  LANDLORD MITIGATION PROGRAM REPORT                                                                                                                        1
Introduction
Overview
The 2018 Washington State Legislature passed Chapter 66, Laws of 2018 (ESSB 2578), codified under RCW
43.31.605, and commonly referred to as the Landlord Mitigation Program. The program encourages landlords
to rent to tenants receiving rent subsidies, reimburses landlords for unit damage and other costs, and reducing
the property debt carried by the tenants that assisted by the program.

Real-time metrics are available for the Landlord Mitigation Program on the Commerce webpage:
https://www.commerce.wa.gov/serving-communities/homelessness/landlord-fund-programs/landlord-
mitigation-program/. Appendix A provides a snapshot of those metrics.

Authorizing Legislation
RCW 43.31.605 requires Commerce to report on the Landlord Mitigation Program:

    (13)(a) A report to the appropriate committees of the legislature on the effectiveness of the program and
    recommended modifications shall be submitted to the governor and the appropriate committees of the legislature by
    January 1, 2021. In preparing the report, the department shall convene and solicit input from a group of stakeholders
    to include representatives of large multifamily housing property owners or managers, small rental housing owners in
    both rural and urban markets, a representative of tenant advocates, and a representative of the housing authorities.
    (b) The report shall include discussion of the effectiveness of the program as well as the department's
    recommendations to improve the program, and shall include the following:

    (i) The number of total claims and total amount reimbursed to landlords by the fund;

    (ii) Any indices of fraud identified by the department;
    (iii) Any reports by the department regarding inspections authorized by and conducted on behalf of the department;

    (iv) An outline of the process to obtain reimbursement for improvements and for damages from the fund;
    (v) An outline of the process to obtain reimbursement for lost rent due to the rental inspection and tenant screening
    process, together with the total amount reimbursed for such damages;

    (vi) An evaluation of the feasibility for expanding the use of the mitigation fund to provide up to ninety-day no interest
    loans to landlords who have not received timely rental payments from a housing authority that is administering
    section 8 rental assistance;
    (vii) Any other modifications and recommendations made by stakeholders to improve the effectiveness and
    applicability of the program.

History of the Landlord Mitigation and Tenancy Preservation
Program
The Landlord Mitigation Program soft-launched on Aug. 15, 2018 and received its first claim on Oct. 7, 2018.
The program benefits tenants by reducing property debt, which can result in denying tenancy in application
screening. Through a series of aggressive marketing and outreach campaigns, the program has grown well
beyond expectations with nearly 2,000 claims submitted by Dec. 31, 2020.

In 2019, Chapter 356, Laws of 2019 (ESSB 5600) extended the Landlord Mitigation program and created the
Tenancy Preservation Program (TPP). The TPP is designed to prevent evictions by providing tenants zero-

 LANDLORD MITIGATION PROGRAM REPORT                                                                                        2
interest loans to pay judgment amounts for non-payment of rent and failed court-approved repayment plans.
The Tenancy Preservation Program received only 63 claims before the eviction moratorium took effect during
the COVID-19 pandemic. The eviction moratorium prevents landlords and tenants from proceeding in a non-
payment of rent hearing, a requirement for the Tenancy Preservation Program.

Program Funding
Document recording fees fund the Landlord Mitigation and Tenancy Preservation Programs. These fees
average $145,000 per month in program revenue. With the continued growth in the state's housing market
even during the COVID-19 pandemic, funding has remained steady but insufficient to maintain the programs
alone. In both 2019 and 2020, the Legislature appropriated $1 million in additional funding to stabilize the
program and allow continued claim payment with little or no delay. These appropriations are nearly exhausted
and additional funding will be required to keep these programs operational.

Average claims have remained consistent during the COVID-19 pandemic as more landlords seek relief options
during the economic crisis in Washington. Many claims are historical claims that landlords are finding as
eligible for the program. Before the eviction moratorium, the average monthly expenses totaled $225,000.
Currently, the average monthly expense is $165,000, with a steady increase in recent months. November
claims have matched the previous averages.

Figure 1: LMP and TPP Income and Expense Reports - July 2018 to Oct. 2020
 $450,000.00

 $400,000.00

 $350,000.00

 $300,000.00

 $250,000.00

 $200,000.00

 $150,000.00

 $100,000.00

  $50,000.00

         $-




                                                Income     Expense




 LANDLORD MITIGATION PROGRAM REPORT                                                                       3
Program Effectiveness
The Landlord Mitigation Program has become a highly effective tool in reducing the stigma associated with
renting private rental units to subsidized tenants and reducing monies owed to a landlord by the tenants. The
program benefits tenants by reducing property debt that is often considered a reason for denying tenancy
during application screening. The benefit of removing property debt from low-income households reduces
strain on the homelessness crisis Washington is experiencing. Over 1,500 claims have been awarded and a
similar number of low-income renters are not burdened with property debt from the landlord claimants.

Landlord Mitigation Program
Since the initial claim has come into the Landlord Mitigation Program:
     Landlords have recovered over $4 million in reimbursement for repairs

     Over 1,400 tenants can seek new housing without property debt creating barriers in the screening
     process

Tenancy Preservation Program
While the Tenancy Preservation Program has only received claims for a short period due to the limitation
brought by the eviction moratorium, landlords have received over $300,000 to maintain tenancy for over 50
households.

Claims Reimbursed
Post-move in claims have outpaced pre-move in claims at a prodigious rate. Ninety-six percent of all claims
submitted are related to damages caused during tenancies. Overall performance is:

     Pre-Move In Claim Awards: $117,916 over 1,650 claims

     Post-Move In Claim Awards: $3,903,144 over 94 claims

The Tenancy Preservation Program ramped up slowly due to the complex process of qualifying for this relief. A
court must find the tenant eligible during a non-payment of rent eviction. In most cases, landlords request a
judgment (Writ of Restitution) to protect their interest during the claim review period. This writ requires an
action staying the motion while the filing proceeds. Commerce has made the filing process as efficient as
possible. When all documents are in order, claims are often processed and paid within two weeks.

In the eight months preceding the initial eviction moratorium, Commerce approved 54 of 63 claims
received. The average payment to tenants is $4,832.

Fraud
Out of the over 1,600 claims submitted, only five have been flagged as potentially fraudulent. Each of the
claims had what appear to be signature manipulation on the move-in condition reports, which are often
missing in claims. The tenancy is not in question, and in each instance, the on-site or property manager
admitted to having manipulated the document as they did not have an executed copy on hand. Each landlord
was prohibited from using the program for a period of six-months as they cooperated once questioned. There
have been no other overt or obvious attempts of fraud noted.


 LANDLORD MITIGATION PROGRAM REPORT                                                                           4
Inspections
The Landlord Mitigation Program reimburses landlords for repairs made to rental units. Coupled with the low
amount of detectable fraud, Commerce has found no cases requiring unit inspections.

Claim Process
The Landlord Mitigation Program offers two distinct claim types for reimbursement to landlords:

     Pre-Move In Claims: Landlords can claim up to $1,000 for modifications or repairs made to pass a
     subsidy provider's inspection before tenant occupancy. This claim can include up to 14 days of unpaid
     rent in addition to the repair costs.

     Post-Move In Claims: Landlords can claim up to $5,000 toward reimbursement for repairs to damages
     caused by a subsidized tenant. Unpaid rent and other lease charges can be claimed following
     termination of tenancy.

Filing a claim for either the Landlord Mitigation or Tenancy Preservation Programs can be done easily on the
Commerce website through a web portal. Documents required for each program are minimal to evidence the
qualifications required for each claim. Claims are typically reviewed within three business days. When a claim
does not meet the claim requirements, communication between Commerce and the landlord begins to help the
landlord understand the claim process and provide the landlord the ability to provide any missing documents
or information to approve their claim. Once the claim is approved, a warrant for payment is issued, and most
approved claims receive a payment within four to five weeks from the claim approval date.

Feasibility of Expanding the Landlord Mitigation Program
To date, no claims have been submitted for a zero-interest loan for untimely HUD payments. Due to funding
limitations, no expansion is recommended for the Landlord Mitigation Program for this purpose. Additional
funding of the base programs will be required before any program expansion.

Stakeholder Recommendations
A stakeholder review panel met on Oct. 6, 2020, to review and discuss the policies and procedures for the
Landlord Mitigation and Tenancy Preservation Programs. The panel consisted of representatives from the
Rental Housing Association of Washington, Northwest Justice League, and landlords familiar with the claim
filing process. This panel discussed experiences with the programs and key concerns that include a limit of no
more than three months' unpaid rent as reimbursable, the requirement for a move-in condition report on all
Landlord Mitigation claims, and access to Tenancy Preservation funds during the Eviction Moratorium.

To benefit landlords by providing access to more relief and tenants by reducing the debt and stigma
associated with low-income households, the group agreed that the following recommendations would improve
the program.

Remove the Three-Month Limit on Unpaid Rents
The $5,000 cap already limits the value of claims and unpaid rent limitations are unnecessary. The removal of
the three-month limit on unpaid rents will be done internally at Commerce as this is a policy and no rule change
is required.




 LANDLORD MITIGATION PROGRAM REPORT                                                                          5
Clarify the Move-In Condition Report requirement
Language in RCW 43.31.605(2)(a)) suggests any landlord attempting to claim a reimbursement in situations
when a security deposit was not charged or collected would not be required to provide a move-in condition
report.

Commerce Recommendations
Before the COVID-19, the greatest risk to the Landlord Mitigation Program's continuation and success was the
need for additional funding. Projections showed that a minimum increase of $3 million per biennium would be
required to maintain the then current rate of growth of claims.

COVID-19 and the Eviction Moratorium directly affect the performance of the Landlord Mitigation and the
Tenancy Preservation Programs. Commerce anticipates an exceptionally high volume of claims for the
Tenancy Preservation Program upon expiration of the State and Federal Eviction Moratoriums. Projections
suggest that if the Tenancy Preservation Program does not establish a separate fund or set limitations on the
monthly fund availability or individual claim amounts, both Landlord Mitigation Programs will be extremely
limited. Tenancy Preservation claims will likely average $20,000 per tenant. Five or six claims through the
Tenancy Preservation Program will exhaust available funds for both programs each month. Any COVID relief
package for this program must also consider that one FTE will be required for every 200 claims processed
each month in both programs to ensure expedient payment to landlords.

Commerce recommends that the legislature amend RCW 43.31.605(2)(a) to remove the clause "as required in
RCW 59.18.260" in RCW 43.31.605. The clause creates confusion on the requirement for move-in condition
reports when the landlord does not collect security deposits.




 LANDLORD MITIGATION PROGRAM REPORT                                                                         6
Appendix A: Program Metric Snapshots
Landlord Mitigation Program
Real-time metrics are available for the Landlord Mitigation Program on the Commerce webpage:
https://www.commerce.wa.gov/serving-communities/homelessness/landlord-fund-programs/landlord-
mitigation-program/

Figure 2: Landlord Mitigation Metrics




 LANDLORD MITIGATION PROGRAM REPORT                                                             7
Tenancy Preservation Program
Real-time metrics are available for the Tenancy Preservation Program on the Commerce webpage:
https://www.commerce.wa.gov/serving-communities/homelessness/landlord-fund-programs/tenancy-
preservation/

Table 3: Tenancy Preservation Metrics




 LANDLORD MITIGATION PROGRAM REPORT                                                             8


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