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Merced, California, Community’s Grassroots Victory over Unfair Evictions

By Dean Preston

Michelle Dirickson and Angela Fragulia never dreamed that they would start a movement. But neither did they expect to be evicted unjustly from their homes.

When Dirickson’s landlord was foreclosed upon in the summer of 2010Angela Fragulia and Michelle Dirickson, Dirickson and her family went through hell. Although they had paid rent for years, the landlord failed to pay the mortgage. After foreclosure, a realtor working for the bank pressured the family to vacate on short notice. As Dirickson explained to the local newspaper, “[i]t was very stressful, it was very traumatic; they were posting notices on our door from the attorneys every day saying we were going to be evicted even though we were in contact with them and doing everything we were supposed to do.”

Forced to move quickly, the Diricksons incurred moving costs and ended up in a smaller home with a higher rent. Their displacement was totally unnecessary.

Fragulia also became a victim of foreclosure in 2010. The bank that acquired her home in Merced after her landlord’s foreclosure refused to make necessary repairs at the property; instead the bank forced Fragulia to move from her home and refused to return her security deposit. 

These stories are typical of millions. Having done nothing wrong, renters are forced from their homes when owners go into foreclosure. What was different about Dirickson and Fragulia is that they turned their misfortune into activism, galvanizing a local renters’ rights movement that continues to grow.

In less than a year a determined group of tenants in this small California city, Merced, mobilized to stop bank evictions after foreclosure. They successfully advocated for the city to pass a just-cause-for-eviction ordinance (Merced, Cal., Mun. Code ch. 8.52 (2011)), the first tenant protection law ever passed in California’s Central Valley. Now banks and investors may not evict Merced renters simply because the landlord went into foreclosure. Instead banks and investors must have a valid cause, such as nonpayment of rent or breach of the rental agreement, and where an owner lacks good cause, tenants have grounds for contesting the eviction in court.

Merced’s Struggling Economy and Bank Evictions

Located in the middle of California, Merced is a city of approximately 80,000 residents. In 2010, according to census data, the median household income was $36,269 and 26.2 percent lived under the poverty line. In 2011 unemployment was estimated at 18 percent, notices of default were filed on more than 800 properties in the city, and 720 properties were sold at foreclosure auctions. Merced has been pummeled by foreclosures and unemployment to such an extent that Forbes labeled it one of the nation’s “most miserable cities” in 2011

The housing and economic crisis in Merced is largely caused by the reckless practices of national banks. The massive displacement of homeowners and renters after foreclosure has destabilized the community. Whether due to greed, incompetence, or some combination thereof, banks have pursued an evict-first strategy when acquiring foreclosed homes. That approach has led to unnecessary displacement, homelessness, prolonged vacancies, and community blight. 

In California more than one-third of foreclosed units are renter-occupied. Approximately 60 percent of Merced’s residents are tenants; many rent from landlords who collect rent but do not pay the mortgage. Tenants are innocent and hidden victims of the foreclosure crisis. 

Banks’ and investors’ practice to move to displace renters immediately after foreclosure is irrational, but it remains the norm. In one year in California alone banks missed out on more than $1 billion in rental income by forcing tenants out of foreclosed properties rather than renting to them. Why banks do not simply hire property management companies, keep homes occupied, and collect rent remains one of the great mysteries of the foreclosure crisis.

When challenged on these practices, most banks assert that they “don’t want to be landlords,” even though, under the federal Protecting Tenants at Foreclosure Act, signed by President Obama in 2009, they become landlords when they acquire renter-occupied properties. 

Not all financial institutions are equal on this front. Fannie Mae, Freddie Mac, and JP Morgan Chase improved their tenant polices in response to tenant advocacy. Fannie Mae, which offers tenants one-year leases, has the most progressive rental policy, while Freddie Mac and JP Morgan Chase offer month-to-month rentals. Although plagued by implementation problems, these policies are a significant step forward for renters in foreclosed properties.

A Legislative Option: Ban Arbitrary Evictions After Foreclosure

Just-cause-for-eviction laws are a simple, no-cost protection for tenants after foreclosure. Massachusetts and New Jersey have statewide just-cause protections, but California does not, leaving the adoption of such laws up to local jurisdictions. Since the foreclosure crisis began, city councils from Los Angeles to Richmond to Ridgecrest to San Francisco have extended protections to thousands of tenants in foreclosed properties, helping stabilize these communities and giving tenants a shield to fight off postforeclosure evictions. Merced has joined that list of “just cause” cities as a result of a campaign that Tenants Together and our allies launched.

Sixteen California cities now have just-cause-for-eviction laws that prevent postforeclosure evictions of tenants. While the laws vary, all provide that foreclosure alone is not grounds for eviction. 

Anatomy of a Campaign

Tenants Together, California’s statewide organization for renters’ rights, has been at the forefront of illuminating the plight of tenants after foreclosure and helping tenants learn and expand their rights. We run a Tenant Foreclosure Hotline, a free resource for California renters in foreclosed properties. Callers from across the state, especially hard-hit counties such as Merced, have flooded the hotline with calls since it was launched in March 2009. The hotline connected us to Merced renters who were directly affected by bank practices after foreclosure. Our research showed that thousands of Merced renters have been directly affected by home foreclosures.

Responding to a wave of calls and new members in Merced, Tenants Together mailed educational material to every renter-occupied Merced household that was heading into foreclosure. We notified tenants of their rights and urged them to call our hotline. Our members, many of whom had lost their homes due to their landlords’ foreclosure, tabled, canvassed, and helped organize tenant meetings. They became the core of the Merced campaign and held the first tenant meeting there in the fall of 2010.

Our organizer, Giti Dadlani, and a committed law student, Gary Lewis, built strong relationships with these key Merced member-activists to educate tenants about their rights and stop the devastating mass displacement caused by banks in their community. Tenants Together provided the tools and the training, but it was the strong grassroots mobilization that changed things in Merced.

Our organizer and members began appearing at city council meetings. They presented our 2010 tenants-in-foreclosure report and explained the plight of tenants in foreclosed properties. Council members seemed moved by the presentations and welcomed suggestions of how to solve the problem without spending city funds.

Tenants Together proposed a just-cause-for-eviction law as a cost-free way for the city to stop postforeclosure evictions of tenants. While Tenants Together members made their voices heard at council hearings, our staff was working behind the scenes with city officials. We educated decision makers about similar ordinances adopted in other cities. We briefed officials on the well-settled California legal precedents allowing for local antieviction laws, thus rebutting their initial concerns about preemption. We built credibility with the city staff members by forcefully advancing our proposal but also incorporating their comments and suggestions. We were flexible about the form the ordinance took as long as it stopped postforeclosure evictions of innocent renters. 

The local media covered the plight of tenants in foreclosed properties and, more specifically, our efforts. We focused on not only the unfair displacement and the effect on displaced renters but also the impact on the entire community. We tied our efforts to antiblight concerns that had attracted so much media attention in the area, and we pointed out that homes occupied by tenants after foreclosure were preferable to vacant homes.

Coming Together Around a No-Cost, Community-Minded Solution

Tenants Together proposed a draft ordinance in early 2011. Getting the issue on the city council’s agenda took until August 2011, and even then the ordinance itself was not on the agenda. Instead, after a grueling budget season, city staff put on the agenda an item asking the council whether the city should redirect time and resources from other projects, such as flood control, to draft the ordinance.

The consensus that developed around the proposed just-cause-for-eviction law early on was one of the most encouraging aspects of the Merced experience. In August 2011 six of seven council members voted to prioritize the law, with only the council member who was a realtor opposing it. The others spoke passionately in favor of the law, describing it in hearings as “a good public law to protect citizens,” “a way to keep homes occupied,” “a very proactive approach to protecting our residents,” and “the right thing to do.” Some of the votes later shifted after the local realtor association weighed in against the measure, but the comments from the council were telling, particularly in a relatively conservative region of the state.

We developed a powerful message that contrasted the interests of local residents on the one hand and national banks on the other. Forcing national banks and investors to keep renters housed and neighborhoods occupied was seen as a win for both the city and its residents. Equally important for this city with major economic woes was that the proposed just-cause-for-eviction law would cost the city nothing. The law gives tenants a defense to eviction but does not require any government intervention in the eviction proceeding in court. Tenants Together was offering the city a cost-free solution to a problem caused by outsiders who were harming local community members. 

Council members Bill Blake, John Carlisle, Noah Lor, and Mary-Michal Rawling bravely affirmed their determination to protect their constituents from arbitrary evictions after foreclosure. The council’s early discussions of the proposed ordinance were refreshingly well informed and fact-based; members devoted time and analysis to the proposed law and embraced it despite the lack of precedent in the region. A fair-minded city attorney also helped provide unbiased legal guidance on the law.

I listened to one Tenants Together member sum it up before the council: “This law doesn’t cost anybody anything. It doesn’t hurt anybody, and it helps families and it stabilizes communities.” Apparently convinced, the council voted 6-to-1 in August 2011 to move forward with drafting a final ordinance.

Realtors Trying to Undermine the Law

Banks, investors, and landlords did not weigh in much on the law. Instead, as often happens in California, vehement opposition came from realtor associations, which repeatedly misrepresented the law and turned out realtors to speak against it. They attempted to intimidate local officials into voting against the measure, falsely claiming that the ordinance was “rent control,” would “promote fraud,” and was unnecessary.

At a hearing on November 7, 2011, community members packed the Merced city council chamber. Tenants Together members, as well as students from the University of California at Merced, a contingent from Occupy Merced, leaders of Central Valley Journey for Justice, and other allies, turned out, and dozens spoke eloquently about the need for the law. The Merced city council voted 4-to-3 in favor of passing the just-cause-for-eviction law. Two council members who had spoken in favor of the law in August now voted against it, clearly having been influenced by realtor pressure.

Two days later the local newspaper published an editorial endorsing the proposed just-cause-for-eviction ordinance. Accustomed to antitenant bias in many local papers, Tenants Together welcomed the Merced Sun-Star’s objective analysis. 

On November 21, 2011, the matter was heard on second reading—the final barrier to the ordinance becoming law. Realtors unleashed a stream of agents to misrepresent the ordinance with well-crafted, though wildly inaccurate, talking points. Four council members were not swayed and again voted to approve the measure. Each spoke about the need for the law.

Mayor Pro Tem Bill Blake, former undersheriff of Merced, was a passionate defender of the law from the start. He called it the “moral thing to do” and praised the proposed law as “good public policy.” He also took on the realtors who opposed it. At the final hearing, he noted that realtors were prioritizing their economic interests (commissions from vacating units and selling vacant units) over the well-being of innocent renters. He challenged the realtor misrepresentations and gave the kind of no-nonsense critique of special-interest politics that is all too rare from elected officials these days.

On December 22, 2011, the just-cause-for-eviction law took effect. Starting on that date, banks and investors no longer held all the cards when acquiring foreclosed properties occupied by renters.

Merced’s Just-Cause-for-Eviction Law

The just-cause-for-eviction law succinctly describes its purpose:

The purpose of this Chapter is to limit adverse impacts on residential tenants that occur as a result of foreclosure and to promote stability in the Merced rental housing market. This Chapter protects the rights of residential tenants by limiting the substantive grounds for their eviction, while allowing owners to evict for good cause [(Merced, Cal. Mun. Code ch. 8.52 (2011) (Just Cause for Eviction))].

The law requires postforeclosure landlords to specify the cause for eviction—e.g., nonpayment of rent or breach of the lease—in the notice to terminate tenancy; foreclosure alone is not a valid basis. 

The local ordinance adds to existing state and federal protections. Tenants with long-term rental agreements continue to have the right to stay through the lease in most cases under the federal Protecting Tenants at Foreclosure Act. The new law makes the biggest difference for month-to-month tenants, who now do not have to vacate unless the owner has cause for eviction.

The new law applies to most tenancies in Merced after foreclosure, with some limitations: for example, the law does not apply to a new owner who buys the property as a principal place of residence. This exception helped neutralize opposition arguments that the law would interfere with buyers who wanted to buy foreclosed properties to live in themselves.

Defending Hard-Won Rights

Passage of the law was just the first step, albeit a major one. Banks and investors are notorious for violating tenant protection laws. The realtors and eviction lawyers whom banks and investors dispatch to purge foreclosed properties of occupants have financial incentives to misrepresent tenants’ legal rights. With a new law in effect, the adage “knowledge is power” became central to Tenants Together’s outreach efforts.

Tenants Together developed bilingual materials, and our members took to the streets or, more accurately, the houses. Teams of members canvassed foreclosed properties and informed tenants of their new rights. 

Realtor opponents of the law attempted to cast Tenants Together as a “San Francisco” organization that was meddling in Merced’s affairs; that Merced tenants were reaching out to their neighbors door-to- door belied these claims, however. Merced tenants have been key participants in the effort to protect and expand tenant rights in their community. In fact, at Tenants Together we view the experience in Merced as validating our decentralized approach to tenant organizing across the state. 

Timing

Local elections in November 2011 reshaped the balance of power on the city council. Fortunately the ordinance had passed at the last council hearing before the new members were sworn in. 

Once in power, the new mayor and council wasted no time trying to dismantle the law. What had taken months to get on the agenda for passage was quickly placed on the new council’s agenda for repeal.

Due to potential conflicts of interest uncovered by Tenants Together (the mayor and a new council member are local landlords), the matter was referred to the Fair Political Practices Commission and the repeal vote delayed. In the meantime, tenants continue to enjoy the protections of the law.

With the new mayor and at least two council members backing repeal, the law could be reconsidered as early as May 2012. The possibility of losing hard-won rights has injected even more vigor into Tenants Together’s Merced members. Tenants are mobilizing to preserve the law and will likely take the issue to the ballot if the council votes to repeal the ordinance. The law remains overwhelmingly popular with Merced residents and provides crucial protections for innocent victims of the foreclosure crisis.

Lessons Learned

The antidisplacement struggle in Merced is by no means over. The just-cause-for-eviction law is under attack already; even if it survives, renters need to learn about and assert their rights. Several lessons have already emerged from this struggle. 

First, never underestimate the extent to which the opposition will lie about grassroots efforts to achieve housing justice. Opponents have misrepresented the new Merced law at every step. They repeatedly mischaracterized the antieviction law as a rent control law, which it is not. They insisted that a California city had no power to pass this kind of law, despite decades of clear judicial precedent. They claimed that federal and state foreclosure laws preclude additional local tenant protections, ignoring the fact that both state and federal law say the opposite (see Protecting Tenants at Foreclosure Act §§ 702–703, 12 U.S.C. § 5220 note (“Nothing under this section shall affect the requirements … of any State or local law that provides longer time periods or other additional protections for tenants.”); S.B. 1137 § 7 (Cal. 2008) (“Nothing in this act is intended to affect any local just-cause eviction ordinance. This act does not, and shall not be construed to, affect the authority of a public entity that otherwise exists to regulate or monitor the basis for eviction.”)). Driven by economic self-interest and ideological opposition to any restrictions on property rights, opponents will go to great lengths to prevent popular antieviction laws from taking effect.

Second, do not assume that you know what position local lawmakers will take. We learned this lesson in 2009 in Ridgecrest, California, where the city council in that ultraconservative region of the state voted 3-to-2 to pass a just-cause-for-eviction law to stop bank evictions of tenants. Where local residents are being displaced by out-of-state bankers and investors, the politics may have more to do with populism and localism than big money. Regardless of their political leanings, local elected officials may be more open than one would expect to innovative and cost-free solutions to problems plaguing their communities. 

Third, as Margaret Mead is reported to have said, “never doubt that a small group of thoughtful, committed citizens can change the world. Indeed, it is the only thing that ever has.” There is no better example of this than Merced, where a small group of local tenants united a community and passed a law that stops banks and investors in their tracks from evicting innocent renters. We expect to see other cities follow in Merced’s footsteps and pass just-cause-for-eviction laws to protect tenants from arbitrary evictions.

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