UNFINISHED BUSINESS  

Bill No: SB 644

Author: Glazer (D), et al.

Amended: 8/30/19

Vote: 21

SENATE JUDICIARY COMMITTEE: 7-0, 4/2/19

AYES: Jackson, Borgeas, Allen, Caballero, Monning, Stern, Umberg

NO VOTE RECORDED: Wieckowski

SENATE VETERANS AFFAIRS COMMITTEE: 6-0, 4/23/19

AYES: Archuleta, Hurtado, Nielsen, Roth, Umberg, Wilk

NO VOTE RECORDED: Grove

SENATE FLOOR: 38-0, 5/28/19

AYES: Allen, Archuleta, Atkins, Bates, Beall, Borgeas, Bradford, Caballero, Chang, Dodd, Durazo, Galgiani, Glazer, Grove, Hertzberg, Hill, Hueso, Hurtado, Jackson, Jones, Leyva, McGuire, Mitchell, Monning, Moorlach, Morrell, Nielsen, Pan, Portantino, Roth, Rubio, Skinner, Stern, Stone, Umberg, Wieckowski, Wiener, Wilk

ASSEMBLY FLOOR: 78-0, 9/10/19 - See last page for vote

SUBJECT: Tenancy: security deposit: active military personnel

SOURCE: Author

DIGEST:

This bill lowers the amount that a landlord can charge service members, as defined, for a security deposit on residential rental housing.

Assembly Amendments

make technical, non-substantive changes.

ANALYSIS: Existing law provides that a landlord may not demand or receive a security deposit in an amount greater than the equivalent of two months’ rent, in the case of unfurnished residential property, or three months’ rent in the case of furnished residential property, in addition to any rent for the first month paid at or before initial occupancy. (Civ. Code § 1950.5(c))

This bill:

1. Defines “service member” as:
   1. A member of the State National Guard, State Military Reserve and the Naval Militia called or ordered into active state or federal service; or
   2. A member of an active or reserve component of the Armed Forces who is ordered into active duty pursuant to federal law.
2. Prohibits landlords from demanding or receiving a security deposit from a service member who will be listed on the lease in an amount greater than the equivalent of one months’ rent, in the case of unfurnished residential property, or two months’ rent in the case of furnished residential property, in addition to any rent for the first month paid at or before initial occupancy.
3. Makes exceptions to the rule set forth in (2), above, if:
   1. The tenant has a history of poor credit or of causing damage to the rental property or its furnishings; or
   2. The property is rented to a group of individuals, one or more of whom is not a service member or the service member’s spouse, parent, domestic partner, or dependent.
4. Prohibits landlords from refusing to rent residential property to a service member on the ground that the landlord will not be able to require as large a security deposit from that service member.
5. Makes other non-substantive technical changes.

Comments

1. Example of the problem the bill is intended to address. As an example of the need for this bill, the author points out that average rents near the Parks Reserve Forces Training Area in Dublin, California, are approximately $2,800 for a two-bedroom apartment. Thus, under existing law, a soldier would need $8,400 up front to secure housing. The author notes that this would be challenging not just for new recruits; it would be a significant barrier to obtaining housing even for a sergeant with a family, who earns approximately $6,000 a month before taxes.
2. Policy rationales for lower security deposits for active duty military personnel. This bill lowers the cap on security deposits in California for active duty military personnel only. The most obvious justification for such favorable treatment is service to country. In addition, however, supporters of this bill advance at least two other arguments for why it may make particular sense to lower the amount that active duty military personnel must pay to obtain housing. First, the terms of their enlistment require active duty military personnel to move when so ordered. By contrast, while civilians often move for work, such moves are, at least technically, voluntary. Second, according to supporters of this bill, military personnel represent a lower credit risk than their civilian counterparts because of military rules that encourage soldiers not to engage in conduct that would tend to discredit the military, which might arguably include failing to meet financial obligations. (See, e.g., 134 Uniform Code of Military Justice § 60; 134 Uniform Code of Military Justice § 71)
3. Security deposits as a cash flow barrier to housing. For many Californians, including but not limited to military personnel, the need to pay a large security deposit can be a significant barrier to obtaining new housing. A tenant may have sufficient income to afford the monthly rent payment in a new place, but that tenant may very well not have two times that amount sitting around and immediately available to offer up as a security deposit even if, in theory, the tenant will one day get that deposit back.

This cash flow problem is exacerbated by two additional factors. First, there are often many other expenses associated with moving (renting a truck, deposits and fees for utility hook up and the installation of other home services, etc.). These other moving expenses eat into whatever resources the tenant might otherwise ordinarily have on hand. Second, tenants transitioning from one rental to another cannot count on their prior security deposit as the source for the security deposit for their new rental. Even if the prior landlord returns the security deposit in full, California law does not require that landlord to do so until 21 days after move-out (Civ. Code § 1950.5(g)(1)). Meanwhile the new landlord can, and usually will, demand payment of the new security deposit prior to move-in. Thus, the old security deposit is rarely of any help toward the payment of the new security deposit.

As of 2017, several other states, including Arizona, Kansas, Massachusetts, Michigan, Hawaii, Nebraska, and North Dakota, all had lower security deposit caps than California, though many other states have no cap at all.

1. Exception for “history of poor credit or causing damage.” This bill contains an exception: landlords would not be bound by this bill’s lower security deposit caps “if the tenant has a history of poor credit or of causing damage to the rental property or its furnishings.” This bill does not say what standard would apply to this determination, however, or what evidence could be used in making the assessment.
2. Enforcement concerns. The larger the security deposit, the greater financial protection a landlord has against the risk that a tenant will fail to pay the rent or damage the rental property. Landlords therefore have a reason to prefer tenants who can pay a higher deposit. By setting a lower security deposit cap for active duty military personnel, this bill creates an incentive for landlords to rent to civilians instead.

This bill anticipates this problem and seeks to resolve it by prohibiting landlords from discriminating against active duty military personnel on the basis that they would pay a lower security deposit. It is hard to see how this prohibition would ever be enforced, however. First, as in any housing discrimination situation, it will usually be very difficult to prove the true reason why a landlord rents to one party over another. Fair housing testers – dummy prospective tenants with equivalent qualifications except for the category protected by law – could potentially detect this type of discrimination, but such testing programs are rare. Second, even if such discrimination could be proven, it is not clear that the resulting damages would be sufficient to make a legal case worthwhile to the aggrieved party, nevermind an attorney considering taking on the case. As a practical matter, therefore, the bill’s prohibition on discrimination against active duty military personnel might go unenforced.

FISCAL EFFECT: Appropriation: No Fiscal Com.: No Local: No

SUPPORT: (Verified 9/10/19)

American G.I. Forum of California

AMVETS-Department of California

California Association of County Veterans Service Officers

California State Commanders Veterans Council

Military Officers Association of America, California Council of Chapters

Vietnam Veterans of America, California State Council

OPPOSITION: (Verified 9/10/19)

California Association of Realtors

Southern California Rental Housing Association

ARGUMENTS IN SUPPORT: According to the author:

Skyrocketing housing prices have made it difficult for working families to find reasonably priced housing in California. This problem is particularly troublesome for service members. Service members, who elect to serve their country by joining the military, are placed throughout different parts of the country. Upon arrival in California, they are met with the unfortunate reality of high housing costs. With military barracks becoming scarcer, the need for service members to find housing in the community where they are stationed becomes more common and necessary.

SB 644 provides much needed rental relief to service members who serve our country and find it difficult to afford the upfront costs of moving to California.

In support, the American G.I. Forum of California, AMVETS-Department of California, and the California State Commanders Veterans Council, writes:

When a service member is stationed in California and wants to find an apartment near their military base, they must be prepared to pay first month’s rent in addition to two month’s rent for security deposit. In regions like the Bay Area or Los Angeles, where housing prices are higher, service members have trouble paying the upfront costs associated with moving into an apartment. […]

Military law requires active duty service members to meet all financial obligations. Unlike civilian tenants, landlords can contact the service member’s commanding officer regarding debts in default. This normally motivates service members to fix their financial issues very quickly. Service members who fail to meet their obligations face adverse actions that will damage, and potentially end their careers.

SB 644 provides much needed and well-deserved rental relief to our men and women in uniform.

ARGUMENTS IN OPPOSITION: In opposition to this bill, the California Association of Realtors writes:

SB 644… severely limits the ability of a rental property owner to recoup losses resulting from damage done to a property by a tenant. […] [M]ilitary personnel already receive a monthly housing allowance, known as Basic Allowance for Housing (BAH), for housing expenses in addition to their base pay. In California, military personnel receive, based on the member’s rank, dependency status, and geographic location, up to $5,559 per month in 2019 for housing assistance. Military personnel may also apply for Advance BAH if they need additional housing assistance when moving into a new rental unit.

ASSEMBLY FLOOR: 78-0, 9/10/19

AYES: Aguiar-Curry, Arambula, Bauer-Kahan, Berman, Bigelow, Bloom, Boerner Horvath, Bonta, Brough, Burke, Calderon, Carrillo, Cervantes, Chau, Chen, Chiu, Choi, Chu, Cooley, Cooper, Cunningham, Daly, Diep, Flora, Fong, Frazier, Friedman, Gabriel, Gallagher, Cristina Garcia, Eduardo Garcia, Gipson, Gloria, Gonzalez, Gray, Grayson, Holden, Irwin, Jones-Sawyer, Kalra, Kamlager-Dove, Kiley, Lackey, Levine, Limón, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Muratsuchi, Nazarian, Obernolte, O'Donnell, Patterson, Petrie-Norris, Quirk, Quirk-Silva, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Salas, Santiago, Smith, Mark Stone, Ting, Voepel, Waldron, Weber, Wicks, Wood, Rendon

NO VOTE RECORDED: Eggman

Prepared by: Timothy Griffiths / JUD. / (916) 651-4113

9/10/19 22:10:21

**** END ****

SENATE THIRD READING

STR Bill Id:SB 644

Author:(Glazer)

As Amended Ver:August 30, 2019

Majority vote

SUMMARY:

Reduces the maximum security deposit that a landlord may charge an active service member to one month's rent for an unfurnished rental property and two months' rent for a furnished rental property. (The maximum that may be charged all other tenants is two months' rent for an unfurnished property and three months' rent for a furnished property.)

Major Provisions

1. Prohibits a landlord from requiring a security deposit from a prospective tenant who is a service member more than one month's rent for unfurnished rental property or two months' rent for furnished rental property – while clarifying that a landlord may separately require a tenant to pay the first month's rent on or before the tenant's initial occupancy.
2. Prohibits landlords from refusing to enter into a rental agreement for residential property with a prospective tenant who is a service member because the landlord wishes to demand or receive security in excess of the limits set forth in 1), above.
3. Conditions the limits in 1), above, on the service member residing in the property. If the property is rented to a group of individuals, each of the other members of the group must be one of the following: the service member's spouse, parent, domestic partner, or dependent
4. Permits a landlord to demand or receive as security up to two months' rent for unfurnished rental property or three months' rent for furnished rental property, and thereby exceed the limits set forth in 1), above, if the service member has a history of poor credit or of causing damage to rental property or furnishings.

COMMENTS:

This bill would prohibit landlords from requiring active service members to pay a security deposit in excess of one month's rent for an unfurnished rental property or two months' rent for a furnished rental property.

Justification for the bill. Active service members who are transferred into, or within, California are faced with the twin realities of having to rent housing while having to pay California's exorbitant rental costs. California can make this transition easier, and thereby support the important work of service members, by reducing what they can be charged as a rental security deposit.

Service members are subject to military requirements to meet financial obligations. Military law requires soldiers to meet all financial obligations. The consequences of failing to meet these obligations can be severe and career-threatening. For example, under applicable regulations, a soldier's failure to pay debts can lead to administrative discharge and/or denial of the ability to reenlist in the Army (See 32 C.F.R. Section 513.3 ("Administrative and punitive actions")). These consequences provide a powerful incentive—beyond the loss of security deposit, which all tenants face—for active service members to refrain from damaging rental property

How will this bill be enforced? While SB 644 does not specify an enforcement mechanism, it would presumably be enforced in one of two ways. First, it would arguably be an unfair business practice for a landlord to charge an active service member a security deposit in excess of one month's rent, particularly if by so doing, the landlord rendered the rental property unaffordable for the service member. Second, if SB 222 (Hill) of the current Legislative Session (adding "veteran or military status" to the protected categories under the Fair Employment and Housing Act) is enacted into law, charging an active service member more than one month's rent as a security deposit might give rise to a FEHA claim.

According to the Author:

California … is not producing enough housing to meet demand. This has caused housing prices to skyrocket, making it more difficult for working families to find reasonably priced housing in California. This problem is particularly troublesome for service members. […] When a service member is stationed in California and wants to find an apartment near their military base, they must be prepared to pay first month's rent in addition to two month's rent for security deposit. In regions like the Bay Area or Los Angeles, where housing prices are higher, service members have trouble paying the upfront costs associated with moving into an apartment.

Arguments in Support:

A coalition of veterans organizations justifies the need for this bill as follow: "[A]verage rents near the Parks Reserve Forces Training Area in Dublin are approximately $2,800 for a two bedroom apartment. A soldier there would need $8,400 upfront to secure [furnished] housing. This would not just be difficult for young new service members to meet. It would even be difficult for a sergeant with a family, who earns $6,000 a month before taxes."

Arguments in Opposition:

The California Association of Realtors seeks an amendment exempting multifamily residential rental housing complexes with fewer than 16 units from SB 644's requirements, on the grounds that such complexes are not required to have an onsite manager.

FISCAL COMMENTS:

None

VOTES:

SENATE FLOOR: 38-0-0

YES: Allen, Archuleta, Atkins, Bates, Beall, Borgeas, Bradford, Caballero, Chang, Dodd, Durazo, Galgiani, Glazer, Grove, Hertzberg, Hill, Hueso, Hurtado, Jackson, Jones, Leyva, McGuire, Mitchell, Monning, Moorlach, Morrell, Nielsen, Pan, Portantino, Roth, Rubio, Skinner, Stern, Stone, Umberg, Wieckowski, Wiener, Wilk

ASM JUDICIARY: 12-0-0

YES: Mark Stone, Gallagher, Chau, Chiu, Gabriel, Holden, Kalra, Kiley, Maienschein, Obernolte, Petrie-Norris, Reyes

ASM VETERANS AFFAIRS: 10-0-1

YES: Irwin, Voepel, Boerner Horvath, Brough, Daly, Frazier, Gloria, Mathis, Petrie-Norris, Salas

ABS, ABST OR NV: Muratsuchi

UPDATED:

VERSION: August 30, 2019

CONSULTANT: Jith Meganathan / JUD. / (916) 319-2334 FN: 0001574

SENATE THIRD READING

STR Bill Id:SB 644

Author:(Glazer)

As Amended Ver:June 13, 2019

Majority vote

SUMMARY:

Reduces the maximum security deposit that a landlord may charge an active service member to one month's rent for an unfurnished rental property and two months' rent for a furnished rental property. (The maximum that may be charged all other tenants is two months' rent for an unfurnished property and three months' rent for a furnished property.)

Major Provisions

1. Prohibits a landlord from requiring a security deposit from a prospective tenant who is a service member more than one month's rent for unfurnished rental property or two months' rent for furnished rental property—while clarifying that a landlord may separately require a tenant to pay the first month's rent on or before the tenant's initial occupancy.
2. Prohibits landlords from refusing to enter into a rental agreement for residential property with a prospective tenant who is a service member because the landlord wishes to demand or receive security in excess of the limits set forth in 1).
3. Conditions the limits in 1) on the service member residing in the property. If the property is rented to a group of individuals, each of the other members of the group must be one of the following: the service member's spouse, parent, domestic partner, or dependent
4. Permits a landlord to demand or receive as security up to two months' rent for unfurnished rental property or three months' rent for furnished rental property, and thereby exceed the limits set forth in 1), if the service member has a history of poor credit or of causing damage to rental property or furnishings.

COMMENTS:

This bill would prohibit landlords from requiring active service members to pay a security deposit in excess of one month's rent for an unfurnished rental property or two months' rent for a furnished rental property.

Justification for the bill. Active service members who are transferred into, or within, California are faced with the twin realities of having to rent housing while having to pay California's exorbitant rental costs. California can make this transition easier, and thereby support the important work of service members, by reducing what they can be charged as a rental security deposit.

Service members are subject to military requirements to meet financial obligations. Military law requires soldiers to meet all financial obligations. The consequences of failing to meet these obligations can be severe and career-threatening. For example, under applicable regulations, a soldier's failure to pay debts can lead to administrative discharge and/or denial of the ability to reenlist in the Army (See 32 C.F.R. Section 513.3 ("Administrative and punitive actions")). These consequences provide a powerful incentive—beyond the loss of security deposit, which all tenants face—for active service members to refrain from damaging rental property

How will this bill be enforced? While SB 644 does not specify an enforcement mechanism, it would presumably be enforced in one of two ways. First, it would arguably be an unfair business practice for a landlord to charge an active service member a security deposit in excess of one month's rent, particularly if by so doing, the landlord rendered the rental property unaffordable for the service member. Second, if SB 222 (Hill) of the current Legislative Session (adding "veteran or military status" to the protected categories under the Fair Employment and Housing Act) is enacted into law, charging an active service member more than one month's rent as a security deposit might give rise to a FEHA claim.

According to the Author:

California … is not producing enough housing to meet demand. This has caused housing prices to skyrocket, making it more difficult for working families to find reasonably priced housing in California. This problem is particularly troublesome for service members. […] When a service member is stationed in California and wants to find an apartment near their military base, they must be prepared to pay first month's rent in addition to two month's rent for security deposit. In regions like the Bay Area or Los Angeles, where housing prices are higher, service members have trouble paying the upfront costs associated with moving into an apartment.

Arguments in Support:

A coalition of veterans organizations justifies the need for this bill as follow: "[A]verage rents near the Parks Reserve Forces Training Area in Dublin are approximately $2,800 for a two bedroom apartment. A soldier there would need $8,400 upfront to secure [furnished] housing. This would not just be difficult for young new service members to meet. It would even be difficult for a sergeant with a family, who earns $6,000 a month before taxes."

Arguments in Opposition:

The California Association of Realtors seeks an amendment exempting multifamily residential rental housing complexes with fewer than 16 units from SB 644's requirements, on the grounds that such complexes are not required to have an onsite manager.

FISCAL COMMENTS:

None

VOTES:

SENATE FLOOR: 38-0-0

YES: Allen, Archuleta, Atkins, Bates, Beall, Borgeas, Bradford, Caballero, Chang, Dodd, Durazo, Galgiani, Glazer, Grove, Hertzberg, Hill, Hueso, Hurtado, Jackson, Jones, Leyva, McGuire, Mitchell, Monning, Moorlach, Morrell, Nielsen, Pan, Portantino, Roth, Rubio, Skinner, Stern, Stone, Umberg, Wieckowski, Wiener, Wilk

ASM JUDICIARY: 12-0-0

YES: Mark Stone, Gallagher, Chau, Chiu, Gabriel, Holden, Kalra, Kiley, Maienschein, Obernolte, Petrie-Norris, Reyes

UPDATED:

VERSION: June 13, 2019

CONSULTANT: Jith Meganathan / JUD. / (916) 319-2334 FN: 0001258

Date of Hearing: July 9, 2019

ASSEMBLY COMMITTEE ON VETERANS AFFAIRS

Jacqui Irwin, Chair

SBPCA Bill Id:SB 644

Author:(Glazer) – As Amended Ver:June 13, 2019

SENATE VOTE: 38-0

SUBJECT: Tenancy: security deposit: service members

SUMMARY: Prohibits, with certain exceptions, active service members from having to pay a security deposit of more than one month’s rent for an unfurnished rental property and two months’ rent for a furnished rental property. Specifically, this bill:

1. Defines “reside” as being listed as a tenant on a residential property lease agreement.
2. Prohibits a landlord from demanding or receiving as security from a prospective tenant who is a service member more than one month’s rent for unfurnished rental property or two months’ rent for furnished rental property, while clarifying that a landlord may separately require a tenant to pay the first month’s rent on or before the tenant’s initial occupancy.
3. Conditions the limits in 2) on the service member residing in the property. If the property is rented to a group of individuals, each of the other members of the group must be one of the following: the service member’s spouse, parent, domestic partner, or dependent.
4. Prohibits landlords from refusing to enter into a rental agreement for residential property with a prospective tenant who is a service member because the landlord wishes to demand or receive security in excess of the limits set forth in 2).
5. Permits a landlord to demand or receive as security up to two months’ rent for unfurnished rental property or three months’ rent for furnished rental property, and thereby exceed the limits set forth in 2), if the service member has a history of poor credit or of causing damage to rental property or furnishings.
6. Makes the following legislative findings and declarations:
   1. “Housing for active duty service members is of critical importance and California must make it a priority to ensure housing is affordable for active duty service members.”
   2. “Active duty service members are unique among the general population due to the nature of their commitment to serve in the armed forces. Their commitment to serve in the armed forces requires that they move to different parts of the country or abroad to advance the best interest of the United States. Their commitment to serve in the armed forces also requires a stricter standard of conduct than that of the general population.”
   3. “California’s housing crisis warrants rental relief.”
   4. “There is a precedent in granting certain privileges, exemptions, and carve-outs for service members in order to protect and advance the national interest.”

EXISTING LAW:

1. Defines “security” for the rental of residential property as a payment, fee, deposit, or charge, to be used for any purpose by the landlord, including but not limited to:
   1. Processing a new tenant.
   2. Ensuring advance payment of rent.
   3. Compensating for nonpayment of rent.
   4. Repairing damages to the property, other than ordinary wear and tear, caused by the tenant or the tenant’s guest or licensee.
   5. For tenancies beginning on or after January 1, 2003, cleaning the property upon termination of the tenancy in order to restore the same level of cleanliness the property had at the beginning of the tenancy.
   6. Cover any obligation, as established by the rental agreement, to restore, replace, or return personal property or accessories, other than due to ordinary wear and tear. (Civil Code Section 1950.5 (a).)
2. Excludes from the definition of “security” any permissible application screening fee that a landlord charges a prospective tenant. (Ibid.; Civil Code Section 1950.6.)
3. Permits a landlord to require two months’ rent as security for an unfurnished rental property or three months’ rent as security for a furnished rental property, while clarifying that a landlord may separately require a tenant to pay the first month’s rent on or before the tenant’s initial occupancy. (Civil Code Section 1950.5 (c).)
4. Permits a landlord to claim only that portion of the security necessary for the purposes set forth in 1) above. (Civil Code Section 1950.5(e).)
5. Defines “service member” as including:
   1. A member of the state National Guard, the State Military Reserve, or the state Naval Militia who is called or ordered into active state service by the Governor of California or into active federal service pursuant to federal law; and
   2. A member of an active or reserve component of the Army, Navy, Air Force, Marine Corps, or Coast Guard who is ordered into active duty pursuant to federal law. (Military and Veterans Code Section 400.)

FISCAL EFFECT: This bill is keyed non-fiscal.

COMMENTS: According to the author:

“SB 644 would grant rental relief to service members who call California their home by limiting the amount of security deposit they are required to pay in order to move into an apartment unit from two months to one month for unfurnished apartments, and from three months to two months for furnished apartments.

Skyrocketing housing prices has made it difficult for working families to find reasonably priced housing in California. This problem is particularly troublesome for service members. Service members, who elect to serve their country by joining the military, are placed throughout different parts of the country. Upon arrival in California, they are met with the unfortunate reality of high housing costs. With military barracks becoming scarcer, the need for service members to find housing in the community where they are stationed becomes more common and necessary.

When a service member is stationed in California and wants to find an apartment near their military base, they must be prepared to pay first month’s rent in addition to two month’s rent for security deposit. In regions like the Bay Area or Los Angeles, where housing prices are higher, service members have trouble paying the upfront costs associated with moving into an apartment unit.

Average rents near the Parks Reserve Forces Training Area in Dublin are approximately $2,800 for a two bedroom apartment. A soldier there would need $8,400 upfront to secure housing. This would not just be difficult for young new service members to meet. It would even be difficult for a sergeant with a family, who earns $6,000 a month before taxes.

SB 644 provides much needed rental relief to service members who serve our country and find it difficult to afford the upfront costs of moving to California.”

Military Housing. The vast majority of active duty service members live in military housing. The type of housing depends primarily upon rank, but also depends on a service member’s marital status or dependents. A junior enlisted service member, who is unmarried and has no other dependents will almost invariably be housed in a barracks or dormitory-style environment. Senior leaders, enlisted and officer alike, will have better and larger accommodations – from private dormitory rooms to apartments or even single-family residences, at the top level. Regardless of rank, once they have completed initial training married service members generally may move out of the barracks into apartments or single-family residences on-base, and when that is not available, they may seek housing off-installation and are paid an allowance, the Basic Allowance for Housing, to do so.

Basic Allowance for Housing (BAH). According to the Defense Travel Management Office (DTMO), the purpose of BAH is to provide a housing allowance for service members stationed in the United States when military housing is not available or is otherwise not provided. BAH rates are based on several factors including geographic duty location, pay grade, and dependency status. It is not designed to cover all housing costs for all members.

1) BAH is based only on rental properties, not homeownership costs like mortgage payments and property taxes.

2) BAH is broken into different rates for service members with and without dependents. The dependent rate is the same regardless of how many dependents one has. Dual-military couples without additional dependents each receive the rate for service members without dependents. If the dual-military couple has dependents, one will receive the dependents rate and the other will receive the rate for service members without dependents.

For example, an E-1 (the lowest enlisted rank) with dependents would receive $3,384 per month in BAH in the city of Dublin, but $1,956 per month in Sacramento, according to the Defense Travel Management Office’s BAH Calculator.

In some instances, a service member may choose to use all their housing allowance to rent more expensive housing close to the duty station, or have a longer commute for either a larger or less expensive house in an outlying area.

Advance BAH.

Advance BAH is similar to a pay advance, except that the funds must be requested in conjunction with a move into a new house or apartment that is not government housing, and the funds must be used to pay advance rent, security deposits, or other initial expenses. Advance BAH cannot be used by those purchasing a home; it is only available for expenses related to rental properties.

Service members must demonstrate their ability to repay the loan within their regular pay, and may take no more than 3 months of the appropriate, local BAH rate for their rank and dependency status. Advance BAH is typically repaid over 12 month, though repayment may be extended up to 24 months or the projected end of the current tour. In addition, repayment may be deferred up to three months in special circumstances.

Arguments in Support.

The author and the bill’s supporters have argued in favor of this bill that California rents are too high, and that this problem is particularly acute for active duty members of the military, who must move around the country regularly, and are not exactly richly compensated. Supporters also cite a shortage of available military housing as an exacerbating factor.

The case is being made is not less persuasive, and in some cases considerably more persuasive, when applied to the non-military population.

There is little evidence that there is a shortage of housing on military installations in California. In fact, some installations, notably Camp Pendleton, have a surplus of available housing. The cost of housing in California is an acute social problem, but it is not a particular difficulty for active-duty members of the U.S. Armed Forces, who are provided with military housing at no cost, and where none is available, are paid a substantial allowance to cover the cost of housing and may also take advances against that allowance to pay for security deposits.

While the pace and predictability of deployments is a considerable innate hardship of military life, assignments are more predictable and stable. Stateside assignments will typically last a minimum of two years. Service members also enjoy very stable employment, and for the most part have little to no health care costs.

The population of California renters, on the other hand, is more likely to experience housing instability, job insecurity, and are far less insulated from the very high cost of housing. This was noted in analysis by the Senate Judiciary Committee, whose treatment of this question is worth reading in full.

Additionally, this bill may disproportionately benefit higher-ranking service members, despite its intent to benefit lower-ranking, lower-paid personnel, who are much more likely to live in military housing.

The bill finds and declares that, “there is a precedent in granting certain privileges, exemptions, and carve-outs for service members in order to protect and advance the national interest.”

This is correct. For example, the Servicemembers Civil Relief Act (SCRA), 50 United States Code Section 3901 et seq, provides a wide range of benefits and protections to those in military service, defined as including: full-time active duty members of the five military branches (Army, Navy, Air Force, Marine Corps and Coast Guard); Reservists on federal active duty; and members of the National Guard on federal orders for a period of more than 30 days. The SCRA, which has its mirror in state law, also provides certain benefits and protections to service member dependents, and, in certain instances, to those who co-signed a loan for, or took out a loan with, a service member. It has the benefit, however, of being more directly linked to unique conditions of military service: the hardships of deployment, the fixity of income and employment, etc.

A key question for this committee, then, is: Does military service alone justify the special legal relief offered by this bill?

Arguments in opposition.

Opponents have cited the fact that military members are paid a substantial stipend to offset the cost of housing. While, the California Association of Realtors seeks an amendment exempting multifamily residential rental housing complexes with fewer than 16 units from SB 644’s requirements, on the grounds that such complexes are not required to have an onsite manager. It is difficult to discern a logical relationship between the requirement that a property have an onsite manager and the requirement that a tenant pay a certain security deposit.

Related/Previous Legislation. SB 222 (Hill, 2019) includes “military or veteran status” among the categories protected against housing discrimination under the FEHA. The bill also makes a Veterans Assistance Supportive Housing (VASH) voucher a “source of income” on the basis of which landlords may not discriminate against a tenant. SB 222 is currently pending consideration before the Senate Committee on the Judiciary.

SB 1427 (Hill, 2018) would have included “military or veteran status” among the categories protected against housing discrimination under the FEHA. The bill also would have made a VASH voucher a “source of income” on the basis of which landlords could not discriminate against a tenant. In his message vetoing SB 1427, then Governor Brown expressed his belief that landlord participation in the VASH program should be voluntary.

REGISTERED SUPPORT / OPPOSITION:

Support

American G.I. Forum Of California
Amvets, Department Of California
California State Commanders Veterans Council
Vietnam Veterans Of America, California State Council

Opposition

California Association of Realtors

Analysis Prepared by: Christian Burkin / V.A. / (916) 319-3550

Date of Hearing: June 18, 2019

ASSEMBLY COMMITTEE ON JUDICIARY

Mark Stone, Chair

SBPCA Bill Id:SB 644

Author:(Glazer) – As Amended Ver:June 13, 2019

SENATE VOTE: 38-0

SUBJECT: Tenancy: security deposit: active SERVICE MEMBERS

KEY ISSUE: SHOULD LANDLORDS BE REQUIRED TO CHARGE ACTIVE SERVICE MEMBERS LOWER SECURITY DEPOSITS THAN OTHER TENANTS DUE TO THE PUBLIC IMPORTANCE OF THEIR SERVICE, THE DIFFICULTY OF FINDING AFFORDABLE RENTAL HOUSING IN CALIFORNIA, AND MILITARY RESTRICTIONS AGAINST INDEBTEDNESS?

SYNOPSIS

This author-sponsored bill would set the maximum security deposit that a landlord can charge an active service member as one month’s rent for an unfurnished property and two months’ rent for a furnished property. However, landlords could charge active service members with poor credit histories and/or a history of damaging property the same maximums as other tenants: two months’ rent for an unfurnished property and three months’ rent for a furnished property.

This bill is supported by seven veterans’ organizations, and opposed by two rental housing industry associations.

SUMMARY: Prohibits, with certain exceptions, active service members from having to pay a security deposit of more than one month’s rent for an unfurnished rental property and two months’ rent for a furnished rental property. Specifically, this bill:

1. Defines “reside” as being listed as a tenant on a residential property lease agreement.
2. Prohibits a landlord from demanding or receiving as security from a prospective tenant who is a service member more than one month’s rent for unfurnished rental property or two months’ rent for furnished rental property, while clarifying that a landlord may separately require a tenant to pay the first month’s rent on or before the tenant’s initial occupancy.
3. Conditions the limits in 2) on the service member residing in the property. If the property is rented to a group of individuals, each of the other members of the group must be one of the following: the service member’s spouse, parent, domestic partner, or dependent.
4. Prohibits landlords from refusing to enter into a rental agreement for residential property with a prospective tenant who is a service member because the landlord wishes to demand or receive security in excess of the limits set forth in 2).
5. Permits a landlord to demand or receive as security up to two months’ rent for unfurnished rental property or three months’ rent for furnished rental property, and thereby exceed the limits set forth in 2), if the service member has a history of poor credit or of causing damage to rental property or furnishings.
6. Makes the following legislative findings and declarations:
   1. “Housing for active duty service members is of critical importance and California must make it a priority to ensure housing is affordable for active duty service members.”
   2. “Active duty service members are unique among the general population due to the nature of their commitment to serve in the armed forces. Their commitment to serve in the armed forces requires that they move to different parts of the country or abroad to advance the best interest of the United States. Their commitment to serve in the armed forces also requires a stricter standard of conduct than that of the general population.”
   3. “California’s housing crisis warrants rental relief.”
   4. “There is a precedent in granting certain privileges, exemptions, and carve-outs for service members in order to protect and advance the national interest.”

EXISTING LAW:

1. Defines “security” for the rental of residential property as a payment, fee, deposit, or charge, to be used for any purpose by the landlord, including but not limited to:
   1. Processing a new tenant.
   2. Ensuring advance payment of rent.
   3. Compensating for nonpayment of rent.
   4. Repairing damages to the property, other than ordinary wear and tear, caused by the tenant or the tenant’s guest or licensee.
   5. For tenancies beginning on or after January 1, 2003, cleaning the property upon termination of the tenancy in order to restore the same level of cleanliness the property had at the beginning of the tenancy.
   6. Cover any obligation, as established by the rental agreement, to restore, replace, or return personal property or accessories, other than due to ordinary wear and tear. (Civil Code Section 1950.5 (a).)
2. Excludes from the definition of “security” any permissible application screening fee that a landlord charges a prospective tenant. (Ibid.; Civil Code Section 1950.6.)
3. Permits a landlord to require two months’ rent as security for an unfurnished rental property or three months’ rent as security for a furnished rental property, while clarifying that a landlord may separately require a tenant to pay the first month’s rent on or before the tenant’s initial occupancy. (Civil Code Section 1950.5 (c).)
4. Permits a landlord to claim only that portion of the security necessary for the purposes set forth in 1) above. (Civil Code Section 1950.5(e).)
5. Defines “service member” as including:
   1. A member of the state National Guard, the State Military Reserve, or the state Naval Militia who is called or ordered into active state service by the Governor of California or into active federal service pursuant to federal law; and
   2. A member of an active or reserve component of the Army, Navy, Air Force, Marine Corps, or Coast Guard who is ordered into active duty pursuant to federal law. (Military and Veterans Code Section 400.)

FISCAL EFFECT: As currently in print this bill is keyed non-fiscal.

COMMENTS: This bill would prohibit landlords from requiring active service members to pay a security deposit in excess of one month’s rent for an unfurnished rental property or two months’ rent for a furnished rental property.

Justification for the bill. Active service members who are transferred into, or within, California are faced with the twin realities of having to rent housing while having to pay California’s exorbitant rental costs. California can make this transition easier, and thereby support the important work of service members, by reducing the amount that they can be charged as a rental security deposit.

The author explains the need for this bill as follows:

California is facing a housing crisis. The state is not producing enough housing to meet demand. This has caused housing prices to skyrocket, making it more difficult for working families to find reasonably priced housing in California.

This problem is particularly troublesome for service members. Service members, who elect to serve their country by joining the military, are placed throughout different parts of the country. Upon arrival in California, they are met with an unfortunate reality: not enough housing, and housing that is difficult to afford. With military barracks becoming scarcer, the need for service members to find housing in the community where they are stationed becomes more common and necessary.

When a service member is stationed in California and wants to find an apartment near their military base, they must be prepared to pay first month’s rent in addition to two month’s rent for security deposit. In regions like the Bay Area or Los Angeles, where housing prices are higher, service members have trouble paying the upfront costs associated with moving into an apartment.

For example, average rents near the Parks Reserve Forces Training Area in Dublin are approximately $2,800 for a two bedroom apartment. A soldier there would need $8,400 upfront to secure [furnished] housing. This would not just be difficult for young new service members to meet. It would even be difficult for a sergeant with a family, who earns $6,000 a month before taxes.

Service members are subject to military requirements to meet financial obligations. Military law requires soldiers to meet all financial obligations. The consequences of failing to meet these obligations can be severe and career-threatening. For example, under applicable regulations, a soldier’s failure to pay debts can lead to administrative discharge and/or denial of the ability to reenlist in the Army. (See 32 C.F.R. Section 513.3 (“Administrative and punitive actions”).)

These consequences provide a powerful incentive—beyond the loss of security deposit which all tenants face—for active service members to refrain from damaging rental property.

California’s security deposit limits are excessive, and lowering service members’ security deposit limits is an important first step to reducing these requirements for all tenants. California established its current security deposit limit, of two months’ rent for unfurnished apartments, in 1977. (AB 94 (Rosenthal, Chap. 971, Stats. 1977).) Since then, the cost of renting housing has skyrocketed compared to the cost of replacing or repairing items that a security deposit would typically cover, such as carpets, appliances, windows, and doors. In fact, adjusting for inflation, the cost of manufactured products such as furniture and appliances has decreased over time. (See, e.g., Ingraham, The stuff we really need is getting more expensive. Other stuff is getting cheaper., Wash. Post (Aug. 17, 2016).) Anchoring security deposits to monthly rents has led to a perverse situation in which tenants are paying much more in 2019 to safeguard against a situation—repairing damaged goods—that, in many instances, would cost less to address today than it would have decades ago. SB 644 is an important bill for all California tenants because it will help demonstrate that one month’s rent suffices as a security deposit for any group of tenants.

It is worth noting that a number of states set maximum security deposits at a lower level than California, including populous states such as Arizona (one-and-a-half month’s rent, Arizona Revised Statutes Section 33-1321), Massachusetts (one month’s rent, Massachusetts General Law, Chapter 186, Section 15b.), Michigan (one-and-a-half month’s rent, Michigan Compiled Laws Section 554.602), and New Jersey (one-and-a-half month’s rent, New Jersey Statutes 46:8-21.2).

Opposition arguments appear unpersuasive. The California Association of Realtors seeks an amendment exempting multifamily residential rental housing complexes with fewer than 16 units from SB 644’s requirements, on the grounds that such complexes are not required to have an onsite manager. It is difficult to discern a logical relationship between the requirement that a property have an onsite manager and the requirement that a tenant pay a certain security deposit.

The Southern California Rental Housing Association opposes the bill, alleging that military personnel are eligible for thousands of dollars in housing assistance. This may be true for high-ranking officers. However, the author’s office counters this argument with data from the Department of Defense’s website showing that a newly-enlisted service member is eligible for only up to $978 in relocation assistance. This is likely not enough to pay relocation expenses, much less two month’s rent as a security deposit. Without more data, Committee staff are unpersuaded that service members will be receiving a windfall at the expense of landlords if SB 644 is enacted.

How will this bill be enforced? While SB 644 does not specify an enforcement mechanism, it would presumably be enforced in one of two ways. First, it would arguably be an unfair business practice for a landlord to charge an active service member a security deposit in excess of one month’s rent, particularly if by so doing, the landlord rendered the rental property unaffordable for the service member.

Second, if SB 222 (Hill, 2019) (adding “veteran or military status” to the protected categories under the Fair Employment and Housing Act) is enacted into law, charging an active service member more than one month’s rent as a security deposit might give rise to a FEHA claim.

A (technical) topic for future legislation. Putting policy considerations to the side, one of the tasks of this Committee is ensuring the Codes are understandable, effective, and consistent with legislative intent. More than 30 years ago, Justice Donald B. King wrote:

I concur [with the majority opinion, which required refund of wrongfully-withheld security deposits], but cannot do so without recommending to the Legislature that it redraft Civil Code section 1950.5. The majority’s observation that this statute is “no model of clarity” is a gross understatement. As Justice Gilbert said in Granberry v. Islay Investments (1984) 161 Cal.App.3d 382…this statute “[teeters] on the brink of unintelligibility.” The only reason it still teeters is because of judicial efforts to keep it alive, and these efforts have been considerable. When Justice Gilbert must begin an opinion by saying "here we attempt to make sense out of Civil Code section 1950.5," the Legislature should realize there is a problem. When our colleague uses such language as “to further confound anyone trying to make sense out of the statute” and states that a literal reading of the statute would lead to “an absurd result,” it becomes clear the Legislature has a mandate to redraft the statute. This is not a statute that is infrequently utilized. With the possible exceptions of relationships between husbands and wives and employees and employers, no relationship occurs more frequently in California than that of landlords and tenants. For this reason, the Legislature has a duty to provide statutory language governing this relationship which can be clearly understood by the affected persons. In its present form, laymen trying to read and understand this statute must easily identify with the experiences Alice found in Wonderland. (People ex rel. Smith v. Parkmerced Co. (1988) 198 Cal. App. 3d 683, 693-94.)

Regrettably, the Legislature has to date ignored Justice King’s call for redrafting Section 1950.5. Amendments over the intervening three decades have only made its provisions more difficult to understand. While redrafting the statute is beyond the scope of this bill, this Committee may soon wish to revisit the text of this section in order to make it more comprehensible to both tenants and landlords.

Related Legislation: SB 222 (Hill, 2019) would include “military or veteran status” among the categories protected against housing discrimination under the Fair Employment and Housing Act. The bill also would make a Veterans Affairs Supportive Housing (VASH) voucher a “source of income” on the basis of which landlords could not discriminate against a tenant.

SB 725 (Rubio, 2019) would require the Department of Veterans Affairs to establish a rental housing assistance program to provide financial assistance to veterans seek rental housing, based on the needs of the veterans.

SB 1427 (Hill, 2018) was substantively identical to this year’s SB 222. In his message vetoing the bill, then-Governor Brown expressed his belief that landlord participation in the VASH program should be voluntary.

AB 2330 (Migden, Chap. 1061, Stats. 2002) clarified that the term “security” includes payments, fees, deposits, or charges imposed at the beginning of the tenancy in order to reimburse the landlord for costs to process the new tenant and/or imposed as an advance payment of rent. That portion of the bill abrogated the California Supreme Court’s holding in Kraus v. Trinity Management Services (2000) 23 Cal. 4th 116, 139-141 that these items were not security, and therefore landlords could collect them from new tenants without having to refund them at the termination of the tenancy.

AB 94 (Rosenthal, Chap. 971, Stats. 1977) established that landlords could require no more than two months’ rent as security for an unfurnished rental property or three months’ rent as security for a furnished rental property.

REGISTERED SUPPORT / OPPOSITION:

Support

American G.I. Forum of California

AMVETS, Department of California

California Association of County Veterans Service Officers

California Association of Veteran Service Agencies

California State Commanders Veterans Council

Military Officers Association of America, California Council of Chapters

Vietnam Veterans of America, California State Council

Oppose unless Amended

California Association of Realtors

Opposition

Southern California Rental Housing Association

Analysis Prepared by: Jith Meganathan / JUD. / (916) 319-2334

 THIRD READING  

Bill No: SB 644

Author: Glazer (D), et al.

Amended: 5/23/19

Vote: 21

SENATE JUDICIARY COMMITTEE: 7-0, 4/2/19

AYES: Jackson, Borgeas, Allen, Caballero, Monning, Stern, Umberg

NO VOTE RECORDED: Wieckowski

SENATE VETERANS AFFAIRS COMMITTEE: 6-0, 4/23/19

AYES: Archuleta, Hurtado, Nielsen, Roth, Umberg, Wilk

NO VOTE RECORDED: Grove

SUBJECT: Tenancy: security deposit: active military personnel

SOURCE: Author

DIGEST:

This bill lowers the amount that a landlord can charge active duty military service members, as defined, for a security deposit on residential rental housing.

Senate Floor Amendments of 5/23/19 clarify that a military service member may live with a spouse, parent, domestic partner, or dependent and still receive the discounted security deposit rate offered by the bill.

ANALYSIS: Existing law provides that a landlord may not demand or receive a security deposit in an amount greater than the equivalent of two months’ rent, in the case of unfurnished residential property, or three months’ rent in the case of furnished residential property, in addition to any rent for the first month paid at or before initial occupancy. (Civ. Code § 1950.5(c))

This bill:

1. Defines “military service member” as:
2. a member of the State National Guard, State Military Reserve and the Naval Militia called or ordered into active state or federal service; or
3. a member of an active or reserve component of the Armed Forces who is ordered into active duty pursuant to federal law.
4. Prohibits landlords from demanding or receiving a security deposit from a military service member who will be listed on the lease in an amount greater than the equivalent of one months’ rent, in the case of unfurnished residential property, or two months’ rent in the case of furnished residential property, in addition to any rent for the first month paid at or before initial occupancy.
5. Makes exceptions to the rule set forth in (2), above, if:
   1. the tenant has a history of poor credit or of causing damage to the rental property or its furnishings; or
   2. the property is rented to a group of individuals, one or more of whom is not a “military service member” or the military service member’s spouse, parent, domestic partner, or dependent.
6. Prohibits landlords from refusing to rent residential property to a military service member or the military service member’s spouse, parent, domestic partner, or dependent, on the ground that the landlord will not be able to require as large a security deposit from that military service member.
7. Makes other non-substantive technical changes.

Comments

1. Example of the problem the bill is intended to address. As an example of the need for this bill, the author points out that average rents near the Parks Reserve Forces Training Area in Dublin, California, are approximately $2,800 for a two-bedroom apartment. Thus, under existing law, a soldier would need $8,400 up front to secure housing. The author notes that this would be challenging not just for new recruits; it would be a significant barrier to obtaining housing even for a sergeant with a family, who earns approximately $6,000 a month before taxes.
2. Policy rationales for lower security deposits for active duty military personnel. This bill lowers the cap on security deposits in California for active duty military personnel only. The most obvious justification for such favorable treatment is service to country. In addition, however, there are at least two reasons why it makes particular sense to lower the amount that active duty military personnel must pay to obtain housing. First, the terms of their enlistment require active duty military personnel to move when so ordered. By contrast, while civilians often move for work, such moves are, at least technically, voluntary. Second, military personnel generally represent a lower credit risk than their civilian counterparts because of military rules that require soldiers to meet all financial obligations or face serious consequences. (See, e.g., 134 Uniform Code of Military Justice § 60; 134 Uniform Code of Military Justice § 71) The author notes that, unlike civilian tenants, landlords can contact the service member’s commanding officer regarding debts in default. This normally motivates service members to fix their financial issues very quickly.
3. Security deposits as a cash flow barrier to housing. For many Californians, including but not limited to military personnel, the need to pay a large security deposit can be a significant barrier to obtaining new housing. A tenant may have sufficient income to afford the monthly rent payment in a new place, but that tenant may very well not have two times that amount sitting around and immediately available to offer up as a security deposit even if, in theory, the tenant will one day get that deposit back.

This cash flow problem is exacerbated by two additional factors. First, there are often many other expenses associated with moving (renting a truck, deposits and fees for utility hook up and the installation of other home services, etc.). These other moving expenses eat into whatever resources the tenant might otherwise ordinarily have on hand. Second, tenants transitioning from one rental to another cannot count on their prior security deposit as the source for the security deposit for their new rental. Even if the prior landlord returns the security deposit in full, California law does not require that landlord to do so until 21 days after move-out (Civ. Code § 1950.5(g)(1)). Meanwhile the new landlord can, and usually will, demand payment of the new security deposit prior to move-in. Thus, the old security deposit is rarely of any help toward the payment of the new security deposit.

As of 2017, several other states, including Arizona, Kansas, Massachusetts, Michigan, Hawaii, Nebraska, and North Dakota, all had lower security deposit caps than California, though many other states have no cap at all.

1. Exception for “history of poor credit or causing damage.” This bill contains an exception: landlords would not be bound by this bill’s lower security deposit caps “if the tenant has a history of poor credit or of causing damage to the rental property or its furnishings.” This bill does not say what standard would apply to this determination, however, or what evidence could be used in making the assessment.
2. Enforcement concerns. The larger the security deposit, the greater financial protection a landlord has against the risk that a tenant will fail to pay the rent or damage the rental property. Landlords therefore have a reason to prefer tenants who can pay a higher deposit. By setting a lower security deposit cap for active duty military personnel, this bill creates an incentive for landlords to rent to civilians instead.

This bill anticipates this problem and seeks to resolve it by prohibiting landlords from discriminating against active duty military personnel on the basis that they would pay a lower security deposit. It is hard to see how this prohibition would ever be enforced, however. First, as in any housing discrimination situation, it will usually be very difficult to prove the true reason why a landlord rents to one party over another. Fair housing testers – dummy prospective tenants with equivalent qualifications except for the category protected by law – could potentially detect this type of discrimination, but such testing programs are rare. Second, even if such discrimination could be proven, it is not clear that the resulting damages would be sufficient to make a legal case worthwhile to the aggrieved party, nevermind an attorney considering taking on the case. As a practical matter, therefore, the bill’s prohibition on discrimination against active duty military personnel might go unenforced.

FISCAL EFFECT: Appropriation: No Fiscal Com.: No Local: No

SUPPORT: (Verified 5/23/19)

American G.I. Forum of California

AMVETS, Department of California

California Association of County Veterans Service Officers

California State Commanders Veterans Council

Military Officers Association of America, California Council of Chapters

Vietnam Veterans of America, California State Council

OPPOSITION: (Verified 5/23/19)

California Association of Realtors

Southern California Rental Housing Association

ARGUMENTS IN SUPPORT: According to the author:

Skyrocketing housing prices have made it difficult for working families to find reasonably priced housing in California. This problem is particularly troublesome for service members. Service members, who elect to serve their country by joining the military, are placed throughout different parts of the country. Upon arrival in California, they are met with the unfortunate reality of high housing costs. With military barracks becoming scarcer, the need for service members to find housing in the community where they are stationed becomes more common and necessary.

SB 644 provides much needed rental relief to service members who serve our country and find it difficult to afford the upfront costs of moving to California.

In support, the American GI Forum of California, AMVETS-Department of California, and the California State Commanders Veterans Council, writes:

When a service member is stationed in California and wants to find an apartment near their military base, they must be prepared to pay first month’s rent in addition to two month’s rent for security deposit. In regions like the Bay Area or Los Angeles, where housing prices are higher, service members have trouble paying the upfront costs associated with moving into an apartment. […]

Military law requires active duty service members to meet all financial obligations. Unlike civilian tenants, landlords can contact the service member’s commanding officer regarding debts in default. This normally motivates service members to fix their financial issues very quickly. Service members who fail to meet their obligations face adverse actions that will damage, and potentially end their careers.

SB 644 provides much needed and well-deserved rental relief to our men and women in uniform.

ARGUMENTS IN OPPOSITION: In opposition to the bill, the California Association of Realtors writes:

SB 644… severely limits the ability of a rental property owner to recoup losses resulting from damage done to a property by a tenant. […] [M]ilitary personnel already receive a monthly housing allowance, known as Basic Allowance for Housing (BAH), for housing expenses in addition to their base pay. In California, military personnel receive, based on the member’s rank, dependency status, and geographic location, up to $5,559 per month in 2019 for housing assistance. Military personnel may also apply for Advance BAH if they need additional housing assistance when moving into a new rental unit.

Prepared by: Timothy Griffiths / JUD. / (916) 651-4113

5/24/19 9:44:10

**** END ****

 THIRD READING  

Bill No: SB 644

Author: Glazer (D), et al.

Amended: 5/20/19

Vote: 21

SENATE JUDICIARY COMMITTEE: 7-0, 4/2/19

AYES: Jackson, Borgeas, Allen, Caballero, Monning, Stern, Umberg

NO VOTE RECORDED: Wieckowski

SENATE VETERANS AFFAIRS COMMITTEE: 6-0, 4/23/19

AYES: Archuleta, Hurtado, Nielsen, Roth, Umberg, Wilk

NO VOTE RECORDED: Grove

SUBJECT: Tenancy: security deposit: active military personnel

SOURCE: Author

DIGEST:

This bill lowers the amount that a landlord can charge active duty military service members, as defined, for a security deposit on residential rental housing.

Senate Floor Amendments of 5/20/19 clarify that the discounted security deposit rate applies to any lease on which a military service member will be listed as a tenant. Prior to the amendment, the bill could have been construed to provide the discounted rate to the family of military service members regardless of whether the military service member is on the lease or not.

ANALYSIS: Existing law provides that a landlord may not demand or receive a security deposit in an amount greater than the equivalent of two months’ rent, in the case of unfurnished residential property, or three months’ rent in the case of furnished residential property, in addition to any rent for the first month paid at or before initial occupancy. (Civ. Code § 1950.5(c))

This bill:

1. Defines “military service member” as:
2. a member of the State National Guard, State Military Reserve and the Naval Militia called or ordered into active state or federal service; or
3. a member of an active or reserve component of the Armed Forces who is ordered into active duty pursuant to federal law.
4. Prohibits landlords from demanding or receiving a security deposit from a military service member who will be listed on the lease in an amount greater than the equivalent of one months’ rent, in the case of unfurnished residential property, or two months’ rent in the case of furnished residential property, in addition to any rent for the first month paid at or before initial occupancy.
5. Makes exceptions to the rule set forth in (2), above, if:
6. the tenant has a history of poor credit or of causing damage to the rental property or its furnishings; or
7. the property is rented to a group of individuals, one or more of whom is not a “military service member” or the military service member’s spouse, parent, domestic partner, or dependent.
8. Prohibits landlords from refusing to rent residential property to a military service member or the military service member’s spouse, parent, domestic partner, or dependent, on the ground that the landlord will not be able to require as large a security deposit from that military service member.
9. Makes other non-substantive technical changes.

Comments

1. Example of the problem the bill is intended to address. As an example of the need for this bill, the author points out that average rents near the Parks Reserve Forces Training Area in Dublin, California, are approximately $2,800 for a two-bedroom apartment. Thus, under existing law, a soldier would need $8,400 up front to secure housing. The author notes that this would be challenging not just for new recruits; it would be a significant barrier to obtaining housing even for a sergeant with a family, who earns approximately $6,000 a month before taxes.
2. Policy rationales for lower security deposits for active duty military personnel. This bill lowers the cap on security deposits in California for active duty military personnel only. The most obvious justification for such favorable treatment is service to country. In addition, however, there are at least two reasons why it makes particular sense to lower the amount that active duty military personnel must pay to obtain housing. First, the terms of their enlistment require active duty military personnel to move when so ordered. By contrast, while civilians often move for work, such moves are, at least technically, voluntary. Second, military personnel generally represent a lower credit risk than their civilian counterparts because of military rules that require soldiers to meet all financial obligations or face serious consequences. (See, e.g., 134 Uniform Code of Military Justice § 60; 134 Uniform Code of Military Justice § 71) The author notes that, unlike civilian tenants, landlords can contact the service member’s commanding officer regarding debts in default. This normally motivates service members to fix their financial issues very quickly.
3. Security deposits as a cash flow barrier to housing. For many Californians, including but not limited to military personnel, the need to pay a large security deposit can be a significant barrier to obtaining new housing. A tenant may have sufficient income to afford the monthly rent payment in a new place, but that tenant may very well not have two times that amount sitting around and immediately available to offer up as a security deposit even if, in theory, the tenant will one day get that deposit back.

This cash flow problem is exacerbated by two additional factors. First, there are often many other expenses associated with moving (renting a truck, deposits and fees for utility hook up and the installation of other home services, etc.). These other moving expenses eat into whatever resources the tenant might otherwise ordinarily have on hand. Second, tenants transitioning from one rental to another cannot count on their prior security deposit as the source for the security deposit for their new rental. Even if the prior landlord returns the security deposit in full, California law does not require that landlord to do so until 21 days after move-out (Civ. Code § 1950.5(g)(1)). Meanwhile the new landlord can, and usually will, demand payment of the new security deposit prior to move-in. Thus, the old security deposit is rarely of any help toward the payment of the new security deposit.

As of 2017, several other states, including Arizona, Kansas, Massachusetts, Michigan, Hawaii, Nebraska, and North Dakota, all had lower security deposit caps than California, though many other states have no cap at all.

1. Exception for “history of poor credit or causing damage.” This bill contains an exception: landlords would not be bound by this bill’s lower security deposit caps “if the tenant has a history of poor credit or of causing damage to the rental property or its furnishings.” This bill does not say what standard would apply to this determination, however, or what evidence could be used in making the assessment.
2. Enforcement concerns. The larger the security deposit, the greater financial protection a landlord has against the risk that a tenant will fail to pay the rent or damage the rental property. Landlords therefore have a reason to prefer tenants who can pay a higher deposit. By setting a lower security deposit cap for active duty military personnel, this bill creates an incentive for landlords to rent to civilians instead.

This bill anticipates this problem and seeks to resolve it by prohibiting landlords from discriminating against active duty military personnel on the basis that they would pay a lower security deposit. It is hard to see how this prohibition would ever be enforced, however. First, as in any housing discrimination situation, it will usually be very difficult to prove the true reason why a landlord rents to one party over another. Fair housing testers – dummy prospective tenants with equivalent qualifications except for the category protected by law – could potentially detect this type of discrimination, but such testing programs are rare. Second, even if such discrimination could be proven, it is not clear that the resulting damages would be sufficient to make a legal case worthwhile to the aggrieved party, nevermind an attorney considering taking on the case. As a practical matter, therefore, the bill’s prohibition on discrimination against active duty military personnel might go unenforced.

FISCAL EFFECT: Appropriation: No Fiscal Com.: No Local: No

SUPPORT: (Verified 5/21/19)

American G.I. Forum of California

AMVETS, Department of California

California Association of County Veterans Service Officers

California State Commanders Veterans Council

Military Officers Association of America, California Council of Chapters

Vietnam Veterans of America, California State Council

OPPOSITION: (Verified 5/21/19)

California Association of Realtors

Southern California Rental Housing Association

ARGUMENTS IN SUPPORT: According to the author:

Skyrocketing housing prices have made it difficult for working families to find reasonably priced housing in California. This problem is particularly troublesome for service members. Service members, who elect to serve their country by joining the military, are placed throughout different parts of the country. Upon arrival in California, they are met with the unfortunate reality of high housing costs. With military barracks becoming scarcer, the need for service members to find housing in the community where they are stationed becomes more common and necessary.

SB 644 provides much needed rental relief to service members who serve our country and find it difficult to afford the upfront costs of moving to California.

In support, the American GI Forum of California, AMVETS-Department of California, and the California State Commanders Veterans Council, writes:

When a service member is stationed in California and wants to find an apartment near their military base, they must be prepared to pay first month’s rent in addition to two month’s rent for security deposit. In regions like the Bay Area or Los Angeles, where housing prices are higher, service members have trouble paying the upfront costs associated with moving into an apartment. […]

Military law requires active duty service members to meet all financial obligations. Unlike civilian tenants, landlords can contact the service member’s commanding officer regarding debts in default. This normally motivates service members to fix their financial issues very quickly. Service members who fail to meet their obligations face adverse actions that will damage, and potentially end their careers.

SB 644 provides much needed and well-deserved rental relief to our men and women in uniform.

ARGUMENTS IN OPPOSITION: In opposition to the bill, the California Association of Realtors writes:

SB 644… severely limits the ability of a rental property owner to recoup losses resulting from damage done to a property by a tenant. […] [M]ilitary personnel already receive a monthly housing allowance, known as Basic Allowance for Housing (BAH), for housing expenses in addition to their base pay. In California, military personnel receive, based on the member’s rank, dependency status, and geographic location, up to $5,559 per month in 2019 for housing assistance. Military personnel may also apply for Advance BAH if they need additional housing assistance when moving into a new rental unit.

Prepared by: Timothy Griffiths / JUD. / (916) 651-4113

5/21/19 17:49:36

**** END ****

 THIRD READING  

Bill No: SB 644

Author: Glazer (D), et al.

Amended: 4/9/19

Vote: 21

SENATE JUDICIARY COMMITTEE: 7-0, 4/2/19

AYES: Jackson, Borgeas, Allen, Caballero, Monning, Stern, Umberg

NO VOTE RECORDED: Wieckowski

SENATE VETERANS AFFAIRS COMMITTEE: 6-0, 4/23/19

AYES: Archuleta, Hurtado, Nielsen, Roth, Umberg, Wilk

NO VOTE RECORDED: Grove

SUBJECT: Tenancy: security deposit: active military personnel

SOURCE: Author

DIGEST:

This bill lowers the amount that a landlord can charge active duty military service members, as defined, for a security deposit on residential rental housing.

ANALYSIS: Existing state law provides that a landlord may not demand or receive a security deposit in an amount greater than the equivalent of two months’ rent, in the case of unfurnished residential property, or three months’ rent in the case of furnished residential property, in addition to any rent for the first month paid at or before initial occupancy. (Civ. Code § 1950.5(c))

This bill:

1. Defines “military service member” as:
2. a member of the State National Guard, State Military Reserve and the Naval Militia called or ordered into active state or federal service; or
3. a member of an active or reserve component of the Armed Forces who is ordered into active duty pursuant to federal law.
4. Prohibits landlords from demanding or receiving a security deposit from a “military service member” or the military service member’s spouse, parent, domestic partner, or dependent, in an amount greater than the equivalent of one months’ rent, in the case of unfurnished residential property, or two months’ rent in the case of furnished residential property, in addition to any rent for the first month paid at or before initial occupancy.
5. Makes exceptions to the rule set forth in (2), above, if:
6. the tenant has a history of poor credit or of causing damage to the rental property or its furnishings; or
7. the property is rented to a group of individuals, one or more of whom is not a “military service member” or the military service member’s spouse, parent, domestic partner, or dependent.
8. Prohibits landlords from refusing to rent residential property to a military service member or the military service member’s spouse, parent, domestic partner, or dependent, on the ground that the landlord will not be able to require as large a security deposit from that military service member.
9. Makes other non-substantive technical changes.

Comments

1. Example of the problem the bill is intended to address. As an example of the need for this bill, the author points out that average rents near the Parks Reserve Forces Training Area in Dublin, California, are approximately $2,800 for a two-bedroom apartment. Thus, under existing law, a soldier would need $8,400 up front to secure housing. The author notes that this would be challenging not just for new recruits; it would be a significant barrier to obtaining housing even for a sergeant with a family, who earns approximately $6,000 a month before taxes.
2. Policy rationales for lower security deposits for active duty military personnel. This bill lowers the cap on security deposits in California for active duty military personnel only. The most obvious justification for such favorable treatment is service to country. In addition, however, there are at least two reasons why it makes particular sense to lower the amount that active duty military personnel must pay to obtain housing. First, the terms of their enlistment require active duty military personnel to move when so ordered. By contrast, while civilians often move for work, such moves are, at least technically, voluntary. Second, military personnel generally represent a lower credit risk than their civilian counterparts because of military rules that require soldiers to meet all financial obligations or face serious consequences. (See, e.g., 134 Uniform Code of Military Justice § 60; 134 Uniform Code of Military Justice § 71) The author notes that, unlike civilian tenants, landlords can contact the service member’s commanding officer regarding debts in default. This normally motivates service members to fix their financial issues very quickly.
3. Security deposits as a cash flow barrier to housing. For many Californians, including but not limited to military personnel, the need to pay a large security deposit can be a significant barrier to obtaining new housing. A tenant may have sufficient income to afford the monthly rent payment in a new place, but that tenant may very well not have two times that amount sitting around and immediately available to offer up as a security deposit even if, in theory, the tenant will one day get that deposit back.

This cash flow problem is exacerbated by two additional factors. First, there are often many other expenses associated with moving (renting a truck, deposits and fees for utility hook up and the installation of other home services, etc.). These other moving expenses eat into whatever resources the tenant might otherwise ordinarily have on hand. Second, tenants transitioning from one rental to another cannot count on their prior security deposit as the source for the security deposit for their new rental. Even if the prior landlord returns the security deposit in full, California law does not require that landlord to do so until 21 days after move-out (Civ. Code § 1950.5(g)(1)). Meanwhile the new landlord can, and usually will, demand payment of the new security deposit prior to move-in. Thus, the old security deposit is rarely of any help toward the payment of the new security deposit.

As of 2017, several other states, including Arizona, Kansas, Massachusetts, Michigan, Hawaii, Nebraska, and North Dakota, all had lower security deposit caps than California, though many other states have no cap at all.

1. Exception for “history of poor credit or causing damage.” This bill contains an exception: landlords would not be bound by this bill’s lower security deposit caps “if the tenant has a history of poor credit or of causing damage to the rental property or its furnishings.” This bill does not say what standard would apply to this determination, however, or what evidence could be used in making the assessment.
2. Enforcement concerns. The larger the security deposit, the greater financial protection a landlord has against the risk that a tenant will fail to pay the rent or damage the rental property. Landlords therefore have a reason to prefer tenants who can pay a higher deposit. By setting a lower security deposit cap for active duty military personnel, this bill creates an incentive for landlords to rent to civilians instead.

This bill anticipates this problem and seeks to resolve it by prohibiting landlords from discriminating against active duty military personnel on the basis that they would pay a lower security deposit. It is hard to see how this prohibition would ever be enforced, however. First, as in any housing discrimination situation, it will usually be very difficult to prove the true reason why a landlord rents to one party over another. Fair housing testers – dummy prospective tenants with equivalent qualifications except for the category protected by law – could potentially detect this type of discrimination, but such testing programs are rare. Second, even if such discrimination could be proven, it is not clear that the resulting damages would be sufficient to make a legal case worthwhile to the aggrieved party, nevermind an attorney considering taking on the case. As a practical matter, therefore, the bill’s prohibition on discrimination against active duty military personnel might go unenforced.

FISCAL EFFECT: Appropriation: No Fiscal Com.: No Local: No

SUPPORT: (Verified 4/25/19)

American G.I. Forum of California

AMVETS, Department of California

California Association of County Veterans Service Officers

California State Commanders Veterans Council

Military Officers Association of America, California Council of Chapters

Vietnam Veterans of America, California State Council

OPPOSITION: (Verified 4/25/19)

California Association of Realtors

Southern California Rental Housing Association

ARGUMENTS IN SUPPORT: According to the author:

Skyrocketing housing prices have made it difficult for working families to find reasonably priced housing in California. This problem is particularly troublesome for service members. Service members, who elect to serve their country by joining the military, are placed throughout different parts of the country. Upon arrival in California, they are met with the unfortunate reality of high housing costs. With military barracks becoming scarcer, the need for service members to find housing in the community where they are stationed becomes more common and necessary.

SB 644 provides much needed rental relief to service members who serve our country and find it difficult to afford the upfront costs of moving to California.

In support, the American GI Forum of California, AMVETS-Department of California, and the California State Commanders Veterans Council, writes:

When a service member is stationed in California and wants to find an apartment near their military base, they must be prepared to pay first month’s rent in addition to two month’s rent for security deposit. In regions like the Bay Area or Los Angeles, where housing prices are higher, service members have trouble paying the upfront costs associated with moving into an apartment. […]

Military law requires active duty service members to meet all financial obligations. Unlike civilian tenants, landlords can contact the service member’s commanding officer regarding debts in default. This normally motivates service members to fix their financial issues very quickly. Service members who fail to meet their obligations face adverse actions that will damage, and potentially end their careers.

SB 644 provides much needed and well-deserved rental relief to our men and women in uniform.

ARGUMENTS IN OPPOSITION: In opposition to the bill, the California Association of Realtors writes:

SB 644… severely limits the ability of a rental property owner to recoup losses resulting from damage done to a property by a tenant. […] [M]ilitary personnel already receive a monthly housing allowance, known as Basic Allowance for Housing (BAH), for housing expenses in addition to their base pay. In California, military personnel receive, based on the member’s rank, dependency status, and geographic location, up to $5,559 per month in 2019 for housing assistance. Military personnel may also apply for Advance BAH if they need additional housing assistance when moving into a new rental unit.

Prepared by: Timothy Griffiths / JUD. / (916) 651-4113

4/26/19 13:43:48

**** END ****

SENATE COMMITTEE ON VETERANS AFFAIRS

Senator Bob Archuleta, Chair

2019 - 2020 Regular

Bill No: SB 644 Hearing Date: 4/23/19

Subject: Tenancy: security deposit: active military personnel

DESCRIPTION

Summary:

This bill prohibits a landlord from demanding an excess amount of security deposit from active duty military service members or their families on residential rental housing, as defined. The bill also prohibits a landlord from entering into a rental agreement for residential property with a military service member or their families, as defined.

Existing law:

1) Provides that a landlord may not demand or receive a security deposit in an amount greater than the equivalent of two months’ rent, in the case of unfurnished residential property, or three months’ rent in the case of furnished residential property, in addition to any rent for the first month paid at or before initial occupancy.

2) Prohibits a person, in connection with the collection of any obligation, including any debt or payment, from a member of the active militia, as defined in Section 120 of the MVC or a member of an active or reserve component of the Armed Forces, contact the member’s military unit or chain of command without the written consent of the member given after the obligation becomes due and payable.

This bill:

1) Defines “military service member” as:

a) a member of the State National Guard, State Military Reserve and the Naval Militia called or ordered into active state or federal service; or

b) a member of an active or reserve component of the Armed Forces who is ordered into active duty pursuant to federal law.

2) Prohibits landlords from demanding or receiving a security deposit from a “military service member” in an amount greater than the equivalent of one months’ rent, in the case of unfurnished residential property, or two months’ rent in the case of furnished residential property, in addition to any rent for the first month paid at or before initial occupancy.

3) Makes exceptions to the rule set forth in (2), above, if:

a) the tenant has a history of poor credit or of causing damage to the rental property or its furnishings; or

b) the property is rented to a group of individuals, one or more of whom is not a “military service member.”

4) Prohibits landlords from refusing to rent residential property to a military service member on the ground that the landlord will not be able to require as large a security deposit from that military service member.

5) Makes other non-substantive technical changes.

BACKGROUND

As an example of the need for this bill, the author points out that average rents near the Parks Reserve Forces Training Area in Dublin, CA, are approximately $2,800 for a two-bedroom apartment. Thus, under existing law, a soldier would need $8,400 up front to secure housing. The author notes that this would be challenging not just for new recruits; it would be a significant barrier to obtaining housing even for a sergeant with a family, who earns approximately $6,000 a month before taxes.

Active Duty personnel. This bill would lower the cap on security deposits in California for active duty military personnel only. The most obvious justification for such favorable treatment is service to country. In addition, however, there are at least two reasons why it makes particular sense to lower the amount that active duty military personnel must pay to obtain housing. First, the terms of their enlistment require active duty military personnel to move when so ordered. By contrast, while civilians often move for work, such moves are, at least technically, voluntary. Second, military personnel generally represent a lower credit risk than their civilian counterparts because of military rules that require soldiers to meet all financial obligations or face serious consequences (See, e.g., 134 Uniform Code of Military Justice § 60; 134 Uniform Code of Military Justice § 71).

Basic Allowance for Housing (BAH). According to the Defense Travel Management Office (DTMO), the purpose of BAH is to provide a housing allowance for service members when military housing is not available or is otherwise not provided. BAH Rates are based on several factors including geographic duty location, pay grade, and dependency status. It is not designed to cover all housing costs for all members.

1) BAH is based only on rental properties, not homeownership costs like mortgage payments and property taxes.

2) BAH is broken into with and without dependents rates. The Dependent Rate is the same regardless of how many dependents you have. Dual-military couples without additional dependents each receive the Without Dependents rate. If the dual-military couple has dependents, one will receive the With Dependents rate and the other will receive the Without Dependents rate.

In some instances, a service member may choose to use all their housing allowance to rent more expensive housing close to the duty station, or have a longer commute for either a larger or less expensive house in an outlying area.

Advanced BAH. Advance BAH is similar to a pay advance, except that the funds must be requested in conjunction with a move into a new house or apartment that is not government housing, and the funds must be used to pay advance rent, security deposits, or other initial expenses. Advance BAH cannot be used by those purchasing a home; it is only available for expenses related to rental properties.

Service members must demonstrate their ability to repay the loan within their regular pay, and may take no more than 3 months of the appropriate, local BAH rate for their rank and dependency status. Advance BAH is typically repaid over 12 month, though repayment may be extended up to 24 months or the projected end of the current tour. In addition, repayment may be deferred up to three months in special circumstances.

Rental Partnership Program (RPP). The RPP is an agreement between the Housing Services Center (HSC) and community housing landlords and is designed to provide service members with suitable and affordable off-base housing and in defraying some of the costs incurred by relocation (ie. provide discounts on monthly rent, waive security/rent deposits and/or waive fees for credit checks). Landlords also agree that the units will be inspected by the service branch to ensure they meet acceptable standards. In return, the landlord reaps the benefits of the RPP. Most importantly to the landlord, the service member agrees to pay rent by military allotment. This greatly reduces the landlord’s risk of receiving late payments. The rent is deposited directly into the landlord’s account on the first of every month. In some cases, the landlord may receive free advertising leading to increased revenue and lower vacancy rates. This program encourages landlords to take advantage of the unique benefits of working with the military and to pass the savings on to military families.

COMMENT

Author’s statement. According to the Author, “Skyrocketing housing prices has made it difficult for working families to find reasonably priced housing in California. This problem is particularly troublesome for service members. Service members, who elect to serve their country by joining the military, are placed throughout different parts of the country. Upon arrival in California, they are met with the unfortunate reality of high housing costs. With military barracks becoming scarcer, the need for service members to find housing in the community where they are stationed becomes more common and necessary.”

“SB 644 provides much needed rental relief to service members who serve our country and find it difficult to afford the upfront costs of moving to California.”

Committee comments. This committee shares the same concerns raised in the Senate Judiciary Committee related to potential housing/rental discrimination against active duty military personnel and their families. Although the bill prohibits landlords from discriminating against active duty military personnel and their families, enforcement could prove to be problematic. Additionally, this may deter landlords from engaging in the RPP or similar programs within military communities. As noted in the previous committee, the Author may wish to consider adding civil penalties or fee shifting provisions to the discrimination prohibition, so that landlords face a more significant penalty for violating it and aggrieved parties have a greater incentives and resources with which to try to vindicate their rights. Alternatively, the discrimination prohibition could be tied to existing enforcement mechanisms, such as those set forth in the Fair Employment and Housing Act (FEHA) or the Unruh Act.

Double-referred. This bill passed the Senate Judiciary Committee (7-0) on 4/02/19.

Related/Previous Legislation. SB 222 (Hill, 2019) includes “military or veteran status” among the categories protected against housing discrimination under the FEHA. The bill also makes a Veterans Assistance Supportive Housing (VASH) voucher a “source of income” on the basis of which landlords may not discriminate against a tenant. SB 222 is currently pending consideration before the Senate Committee on the Judiciary.

SB 725 (Rubio, 2019) requires the Department of Veterans Affairs to establish a rental housing assistance program to provide financial assistance to veterans seeking rental housing.

AB 694 (Irwin, 2019) enacts the Veterans Housing and Homeless Prevention Bond Act of 2019 to authorize the issuance of bonds in an unspecified amount to provide additional funding for the Veterans Housing and Homeless Prevention Act.

SB 1427 (Hill, 2018) would have included “military or veteran status” among the categories protected against housing discrimination under the FEHA. The bill also would have made a VASH voucher a “source of income” on the basis of which landlords could not discriminate against a tenant. In his message vetoing SB 1427, then Governor Brown expressed his belief that landlord participation in the VASH program should be voluntary.

POSITIONS

Sponsor: Author.

Support:

American G.I. Forum of California

AMVETS, Department of California

California Association of County Veterans Service Officers

California State Commanders Veterans Council

Military Officers Association of America, California Council of Chapters

Vietnam Veterans of America, California State Council

Oppose:

California Association of Realtors – unless amended

Southern California Rental Housing Association (SCRHA)

-- END --

SENATE JUDICIARY COMMITTEE

Senator Hannah-Beth Jackson, Chair

2019-2020 Regular Session

Bill No: SB 644 (Author:Glazer)

Version: February 22, 2019

Hearing Date: April 2, 2019

Fiscal: No

Urgency: No

Consultant: TSG

SUBJECT

Tenancy: security deposit: active military personnel

DIGEST

This bill lowers the amount that a landlord can charge active duty military service members, as defined, for a security deposit on residential rental housing.

EXECUTIVE SUMMARY

Obtaining residential rental housing in California is difficult. The challenge is particularly straining for active duty military personnel, who must also juggle the demands of military service. One barrier to obtaining housing is the common demand that tenants pay a security deposit to the landlord. While the security deposit is theoretically refundable shortly after the end of the tenancy, the need to pay a security deposit up front means that tenants must have and pay a significant amount of money before they can move in. Existing California law caps the amount that landlords can charge prior to move-in. For unfurnished properties, a landlord can charge the first month’s rent and up to two times the amount of the monthly rent as a security deposit. In the case of furnished properties, landlords may charge the first month’s rent and up to three times the amount of the monthly rent as a security deposit. This bill, with specified exceptions, would lower the amount that landlords could charge active duty military personnel for a security deposit. The maximum allowed security deposit charge to active duty military personnel would be the amount of the monthly rent, for unfurnished property, and two times the amount of the monthly rent for furnished property.

The bill is author-sponsored. Support is from military and veterans advocates. Opposition is from the California Association of Realtors who assert that the bill would undermine landlords’ ability to recover for damages to their rental property.

PROPOSED CHANGES TO THE LAW

Existing state law:

1. Provides that a landlord may not demand or receive a security deposit in an amount greater than the equivalent of two months’ rent, in the case of unfurnished residential property, or three months’ rent in the case of furnished residential property, in addition to any rent for the first month paid at or before initial occupancy. (Civ. Code § 1950.5(c))

This bill:

1. Defines “military service member” as:
2. a member of the State National Guard, State Military Reserve and the Naval Militia called or ordered into active state or federal service; or
3. a member of an active or reserve component of the Armed Forces who is ordered into active duty pursuant to federal law.
4. Prohibits landlords from demanding or receiving a security deposit from a “military service member” in an amount greater than the equivalent of one months’ rent, in the case of unfurnished residential property, or two months’ rent in the case of furnished residential property, in addition to any rent for the first month paid at or before initial occupancy.
5. Makes exceptions to the rule set forth in (2), above, if:
6. the tenant has a history of poor credit or of causing damage to the rental property or its furnishings; or
7. the property is rented to a group of individuals, one or more of whom is not a “military service member.”
8. Prohibits landlords from refusing to rent residential property to a military service member on the ground that the landlord will not be able to require as large a security deposit from that military service member.
9. Makes other non-substantive technical changes.

COMMENTS

1. Example of the problem the bill is intended to address

As an example of the need for this bill, the author points out that average rents near the Parks Reserve Forces Training Area in Dublin, California, are approximately $2,800 for a two-bedroom apartment. Thus, under existing law, a soldier would need $8,400 up front to secure housing. The author notes that this would be challenging not just for new recruits; it would be a significant barrier to obtaining housing even for a sergeant with a family, who earns approximately $6,000 a month before taxes.

2. Policy rationales for lower security deposits for active duty military personnel

This bill would lower the cap on security deposits in California for active duty military personnel only. The most obvious justification for such favorable treatment is service to country. In addition, however, there are at least two reasons why it makes particular sense to lower the amount that active duty military personnel must pay to obtain housing. First, the terms of their enlistment require active duty military personnel to move when so ordered. By contrast, while civilians often move for work, such moves are, at least technically, voluntary. Second, military personnel generally represent a lower credit risk than their civilian counterparts because of military rules that require soldiers to meet all financial obligations or face serious consequences. (See, e.g., 134 Uniform Code of Military Justice § 60; 134 Uniform Code of Military Justice § 71) The author notes that, unlike civilian tenants, landlords can contact the service member’s commanding officer regarding debts in default. This normally motivates service members to fix their financial issues very quickly.

3. Paying high security deposits is a barrier to housing for civilians as well

It is worth noting, however, that this bill points to a problem that is not at all unique to active duty military personnel. For many low-income Californians, the need to pay a large security deposit is a significant barrier to obtaining new housing. If you are living paycheck to paycheck, you may have sufficient income to afford a monthly rent payment in a new place, but you may very well not have two times that amount sitting around and immediately available to offer up as a security deposit even if, in theory, you can one day get that deposit back.

This cash flow problem is exacerbated by two additional factors. First, there are often many other expenses associated with moving (renting a truck, deposits and fees for utility hook up and the installation of other home services, etc.). These other moving expenses eat into whatever resources the tenant might otherwise ordinarily have on hand. Second, tenants transitioning from one rental to another cannot count on their prior security deposit as the source for the security deposit for their new rental. Even if the prior landlord returns the security deposit in full, California law does not require that landlord to do so until 21 days after move-out (Civ. Code § 1950.5(g)(1)). Meanwhile the new landlord can, and usually will, demand payment of the new security deposit prior to move-in. Thus, the old security deposit is rarely of any help toward the payment of the new security deposit.

In sum, if the exclusive thrust of this bill is to assist active duty military personnel to obtain housing, it seems likely to achieve that aim. If the ultimate aim is to lower barriers to housing in California generally, however, the bill could have a much more substantial impact if it applied not just to active duty military personnel, but to all residential tenants in California. The concept would not be unprecedented: as of 2017, several other states, including Arizona, Kansas, Massachusetts, Michigan, Hawaii, Nebraska, and North Dakota, all had lower security deposit caps than California, though many other states have no cap at all.^[1]

4. Exception for “history of poor credit or causing damage” is vague

The bill in print contains an exception: landlords would not be bound by the bill’s lower security deposit caps “if the tenant has a history of poor credit or of causing damage to the rental property or its furnishings.” The bill does not say what standard would apply to this determination, however, or what evidence could be used in making the assessment. Would a single late payment constitute a “history of late payment?” What if it was five years ago? On what basis could a landlord claim that the tenant had a history of causing damage to rental property or furnishings? A letter from the tenant’s prior landlord? What if the tenant denies causing the damage?

Because the exception is so vague, it is susceptible to abuse and likely to lead to unnecessary legal disputes. As the bill moves forward, the author may wish to consider amending the exception to provide both landlords and active duty military personnel with greater clarity about when the exception could be invoked and what evidentiary support the landlord would need to have to do so.

5. Coverage of active duty military personnel living with their families

As currently drafted, the bill appears only to apply to active duty service members living alone or with other active duty service members. That would seem to mean that active duty service members moving with their families would not qualify, except in the rare circumstance that every member of the family, including spouses and children, are soldiers on active duty. Assuming that it is not the author’s intent to exclude soldiers with families from the benefits of this bill, the author may wish to consider amending the bill to address this issue.

6. Enforcement concerns

The larger the security deposit, the greater financial protection a landlord has against the risk that a tenant will fail to pay the rent or damage the rental property. Landlords therefore have a reason to prefer tenants who can pay a higher deposit. By setting a lower security deposit cap for active duty military personnel, the bill would create an incentive for landlords to rent to civilians instead.

The bill anticipates this problem and seeks to resolve it by prohibiting landlords from discriminating against active duty military personnel on the basis that they would pay a lower security deposit. It is hard to see how this prohibition would ever be enforced, however. First, as in any housing discrimination situation, it will usually be very difficult to prove the true reason why a landlord rents to one party over another. Fair housing testers – dummy prospective tenants with equivalent qualifications except for the category protected by law – could potentially detect this type of discrimination, but such testing programs are rare. Second, even if such discrimination could be proven, it is not clear that the resulting damages would be sufficient to make a legal case worthwhile to the aggrieved party, nevermind an attorney considering taking on the case. As a practical matter, therefore, the bill’s prohibition on discrimination against active duty military personnel might go unenforced.

With this in mind, as the bill progresses the author may wish to consider adding civil penalties or fee shifting provisions to the discrimination prohibition, so that landlords face a more significant penalty for violating it and aggrieved parties have a greater incentives and resources with which to try to vindicate their rights. Alternatively, the discrimination prohibition could be tied to existing enforcement mechanisms, such as those set forth in the Fair Employment and Housing Act (FEHA) or the Unruh Act.

7. Proposed amendments

In order to address the issues set forth in the Comments, above, the author proposes to incorporate amendments into the bill that would:

• clarify that active duty military personnel proposing to live with their families would still be eligible for the lower security deposit cap.

The specific amendments are as follows:

Amendment 1

On page 3, in line 17, strike out “member” and insert:

member, or their spouse, parent, domestic partner, or dependents

Amendment 2

On page 3, in line 24, strike out “member” and insert:

member, or with the spouse, parent, domestic partner, or dependent of a military service member,

Amendment 3

On page 3, in line 31, strike out “member” and insert:

member, or their spouse, parent, domestic partner, or dependents

8. Arguments in support of the bill

According to the author:

Skyrocketing housing prices have made it difficult for working families to find reasonably priced housing in California. This problem is particularly troublesome for service members. Service members, who elect to serve their country by joining the military, are placed throughout different parts of the country. Upon arrival in California, they are met with the unfortunate reality of high housing costs. With military barracks becoming scarcer, the need for service members to find housing in the community where they are stationed becomes more common and necessary.

SB 644 provides much needed rental relief to service members who serve our country and find it difficult to afford the upfront costs of moving to California.

In support, the American GI Forum of California, AMVETS-Department of California, and the California State Commanders Veterans Council, writes:

When a service member is stationed in California and wants to find an apartment near their military base, they must be prepared to pay first month’s rent in addition to two month’s rent for security deposit. In regions like the Bay Area or Los Angeles, where housing prices are higher, service members have trouble paying the upfront costs associated with moving into an apartment. […]

Military law requires active duty service members to meet all financial obligations. Unlike civilian tenants, landlords can contact the service member’s commanding officer regarding debts in default. This normally motivates service members to fix their financial issues very quickly. Service members who fail to meet their obligations face adverse actions that will damage, and potentially end their careers.

SB 644 provides much needed and well-deserved rental relief to our men and women in uniform.

9. Arguments in opposition to the bill

In opposition to the bill, the California Association of Realtors writes:

SB 644… severely limits the ability of a rental property owner to recoup losses resulting from damage done to a property by a tenant. […] [M]ilitary personnel already receive a monthly housing allowance, known as Basic Allowance for Housing (BAH), for housing expenses in addition to their base pay. In California, military personnel receive, based on the member’s rank, dependency status, and geographic location, up to $5,559 per month in 2019 for housing assistance. Military personnel may also apply for Advance BAH if they need additional housing assistance when moving into a new rental unit.

SUPPORT

American GI Forum of California

AMVETS-Department of California

California Association of Veteran Service Agencies

California State Commanders Veterans Council

OPPOSITION

California Association of Realtors

RELATED LEGISLATION

Pending Legislation:

SB 222 (Hill, 2019) includes “military or veteran status” among the categories protected against housing discrimination under the FEHA. The bill also makes a Veterans Assistance Supportive Housing (VASH) voucher a “source of income” on the basis of which landlords may not discriminate against a tenant. SB 222 is currently pending consideration before the Senate Committee on the Judiciary.

SB 725 (Rubio, 2019) requires the Department of Veterans Affairs to establish a rental housing assistance program to provide financial assistance to veterans seeking rental housing.

AB 694 (Irwin, 2019) enacts the Veterans Housing and Homeless Prevention Bond Act of 2019 to authorize the issuance of bonds in an unspecified amount to provide additional funding for the Veterans Housing and Homeless Prevention Act.

Prior Legislation: SB 1427 (Hill, 2018) would have included “military or veteran status” among the categories protected against housing discrimination under the FEHA. The bill also would have made a VASH voucher a “source of income” on the basis of which landlords could not discriminate against a tenant. In his message vetoing SB 1427, then Governor Brown expressed his belief that landlord participation in the VASH program should be voluntary.

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1. See Chart: Security Deposit Limits, State by State (Nov. 2017) Nolo Press https://www.nolo.com/legal-encyclopedia/chart-security-deposit-limits-state-29020.html (as of Mar. 16, 2019). ↑