California may become a ground zero for a homelessness crisis, as the end of the state's temporary halt to evictions — which officially expired on Thursday — means renters in arrears face the prospect of being forced from their homes.

Until September 30, state law automatically banned landlords from evicting people for unpaid rent. However, beginning Friday, tenants with unpaid rent can only be protected from evictions if they have applied for assistance. Tenants are still responsible for unpaid rent, but can’t be evicted for it if they meet this threshold.

As a result, Friday officially marked the countdown for the Golden State to insulate tenants against what one advocate called a looming “tsunami” of forced dislodging of renters, a microcosm of what indebted renters are facing nationwide after the Supreme Court invalidated a federal moratorium.

California is scrambling to make sure tenants with unpaid rent know they can still stay in their homes after that date—but only if they have applied for assistance from the state, which has a total of $5.2 billion of federal dollars to help pay back rent owed by tenants who lost jobs or income.

As of Monday, more than 309,000 households have applied for assistance, asking for nearly $3 billion.

The state has paid nearly $650 million to about 55,000 households so far, and they have approved another $950 million in assistance that is in the process of being paid. Yet it's unclear how many applications are still pending.

“There are absolutely a very high number of pending applications where the paperwork has been submitted to the state, but the funds have not yet been released,” Ora Prochovnick, director of litigation and policy at the Eviction Defense Collaborative (EDC), told Yahoo Finance Live this week. The nonprofit organization helps low-income tenants respond to eviction lawsuits.

According to state officials, rent relief will be available to tenants and residents in need of financial assistance until the funding runs out. However, Prochovnick doesn’t believe the state’s allotment is enough to cover all those in need of help.

“Absolutely not. It sounds like a huge number and it's simply not going to touch the problem and there will need to be additional funds,” Prochovnick added.

A recent analysis of California’s rental debt from Policy Link, an Oakland-based research firm, found that over 724,000 homes are behind in rent, with residents owing a cumulative $2.46 billion.

‘Tsunami of evictions’

The state’s Housing is Key emergency rental assistance program can cover 100% of back rent dating to April 2020, as well as three months of future payments. The state had previously covered 80% of a tenant’s rent debt but now anyone approved for aid under the earlier program will automatically have the remaining 20% paid as well.

With the state’s eviction moratorium set to end, it’s vital that funds are quickly distributed. But Prochovnick says challenges in applying still remain.

“There is a great deal of documentation and then you layer on top of that language barriers,” she said, referring to non-English speakers.

“There are attempts to have adequate translation services, but they're not all working as well as they could be. And then there's the digital divide,” she added. “The entire system was set up to operate online, not all tenants who need the assistance, have email or internet access, or even cell phones.”

A University of Pennsylvania survey of California renters who applied for rental assistance also found that the majority had about $3,050 in “shadow debt” they borrowed to pay their rent that is not covered by relief programs.

While the pace of disbursements has improved since June, low-income tenants will still have some protections in place following the end of the state’s eviction ban.

However, landlords who have foregone payment for more than a year — many of them small and medium-sized property owners — are eager to either collect payment or get paying occupants.

“I know that it's been reported, there's going to be this huge tsunami of evictions and I don't think that's going to happen,” Lucinda Lilley, president of the San Diego-based Southern California Rental Housing Association, told Yahoo Finance in an interview.

State law now prohibits landlords from getting a court order for eviction unless they show that “ they have made every effort” in giving tenants the opportunity to apply for rent relief through March 2022.

“I hesitate to say who has the upper hand and who doesn't,” Lilley added.

“The majority of housing providers have been educating their residents and helping them through the process, which is not an easy process to go through in order to get those funds,” she said.

But with many of these emergency policies passed in response to the pandemic, the eviction ban has had disparate effects on small landlords, known as “mom-and-pop landlords,” struggling to pay their bills. Some are beginning to get the money they are owed.

“We have a client who owns five apartments, she had one renter, the last time the renter paid was April of 2020,” Lilley added.

“Not a dime more until about four weeks ago when the renter finally decided: 'Okay, I'll participate in the rental assistance program,' and we ended up being able to collect over $20,000 for her,” Lilley said.

As different regions across the country continue to disperse relief money to both tenants and landlords, housing advocates are still expecting a large spike in evictions. even after a month from the Supreme Court’s decision to strike down the federal eviction moratorium.

“We didn't see a wave of evictions after the Supreme court's ruling [though] there were a number of local moratoriums in place.” Prochovnick said. “We are going to be in a very different picture come October 1st.”

Several progressive lawmakers introduced a bill last week that would reimpose a nationwide eviction moratorium at a time where coronavirus cases have surged due to rapidly spreading Delta variant.

While many tenants are at risk of eviction, the pressure to reinstate the federal moratorium persists.

The Treasury Department said only $7.7 billion in emergency rental aid was distributed between January and the end of August. Meanwhile, roughly $2.3 billion in assistance was spent on rent, utilities and missed payments in August, compared to $1.7 billion in July. That means more than 420,000 households were helped in August, which increased from 340,000 in July.

However, chief economist at Moody’s Analytics, Mark Zandi, doesn’t believe extending the federal moratorium is “necessary” at this time.

“We're now at a place where I don't think I'd suggest extending the moratorium again, because the renter’s program is working well enough that if it's landlords and tenants aren't taking advantage of it, there's other reasons,” Zandi said.

According to a study by Moody Analytics, economists expect in the next six months, roughly 3.4 million distressed renters will have received assistance, or more than 80% of those eligible for it, but could leave close to 800,000 of those eligible for help facing eviction through the start of next year.

Yet it's still unclear if Congress will take action and reimpose the federal eviction moratorium.

“There is no slam dunk solution here,” Zandi said. “But when you add up the debits and credits, putting moratoriums in place” — particularly in states like New York and California, where the eviction process is long and costly — “it winds up being a net positive for the state's economic situation.”

Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter: @daniromerotv

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