CD4 Councilmember David Ryu introduced a motion in City Council today seeking to relieve the growing rental and utility debt in the City of Los Angeles caused by the COVID-19 pandemic. Ryu hopes to tap into the Federal Reserve’s Municipal Liquidity Facility to fund his proposed rent and utility forgiveness plan. His plan would allow households that were unable to pay rent or utility bills to the Los Angeles Department of Water and Power (LADWP) during the COVID-19 pandemic to have their debt forgiven.
The motion asks the City to explore lending options with the Federal Reserve’s Municipal Liquidity Facility (MLF) program, established by the Federal Reserve as a part of the CARES Act passed this March, to fund the City’s debt relief proposal. The MLF was established under Section 13(3) of the Federal Reserve Act, with approval of the Treasury Secretary and offers up to $500 billion in lending to states and municipalities to help manage cash flow stresses caused by the coronavirus pandemic. The MLF has not been tapped to fund rent or debt relief programs thus far, something that Councilmember Ryu would like to see changed.
Earlier this month, the Federal Reserve Board revised pricing for its Municipal Liquidity Facility (MLF). In announcing the changes, the Federal Reserve Board said it “will ensure the MLF continues to provide an effective backstop to assist U.S. states and local governments as they weather the pandemic.” The revised pricing reduces the interest rate spread on tax-exempt notes for each credit rating category by 50 basis points, and reduces the amount by which the interest rate for taxable notes is adjusted relative to tax-exempt notes.
“Since the early days of this pandemic, I have warned of an impending debt crisis among renters,” Ryu said in a press statement today. “If we don’t deal with this crisis now, it will create an avalanche of homelessness and a generation of people buried in debt – and Los Angeles will pay the price for decades to come.”
In March, Mayor Eric Garcetti ordered a moratorium on evictions as well as water & power shutoffs for households financially impacted by COVID-19. That same month, Ryu introduced legislation to freeze all rent and utility bill increases, and called for federal rent and mortgage forgiveness on April 1st, citing the “unmanageable debt” facing working people.
1.2 million unemployment claims have been filed in Los Angeles County since the start of the COVID-19 emergency, according to the California Policy Lab, a level not seen since the Great Depression. A new report from the UCLA Luskin Institute on Inequality and Democracy estimates that about 75% of Los Angeles workers without income are renters, or about 449,000 individuals. Without action to address this growing rental debt burden, the UCLA report says that up to 120,000 households could become homeless – including 184,000 children.
Before the pandemic, Los Angeles was one of the most rent-burdened cities in the nation, with more than half of renters spending over 30% of their paycheck on rent. In 2019, 600,000 Los Angeles County households spent 90% of their income on rent.
The motion, seconded by Councilmember Marqueece Harris-Dawson, follows the City Council’s support for the Rent and Mortgage Cancellation Act, a bill introduced in Congress by Representative Ilhan Omar, with Representatives Alexandria Ocasio-Cortez, Grace Meng, Barbara Lee and 27 other co-sponsors.
“This is a national crisis that Trump and Senate Republicans could end if they gave a damn,” Ryu added. “But until they do, Los Angeles should take this debt off the shoulders of renters. At the end of the day, the City is in a much better position to manage debt than your average working family.”
Read the motion to forgive rent & LADWP debt here.
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