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Americans laid off due to COVID-19 want to know how landlords expect them to pay. We asked some

Renters whose jobs have disappeared because of the pandemic simply have no way to make more income. Landlords say their bills are coming due, too, and it will be worse if their properties are bought up by hedge funds. What’s the solution?

Americans laid off due to COVID-19 want to know how landlords expect them to pay. We asked some
[Image: vicnt/iStock]

With many workplaces still closed, hundreds of thousands of jobs already lost, and the $600 unemployment benefit over (for now), tens of millions of renters across the country are trying to do the impossible math of paying rent despite their income disappearing into the pandemic. Americans barely had savings before COVID-19 hit. For someone who lost their job because of the COVID-19 crisis and now has to pay $1,200 in rent when they’re getting less than $300 a week on unemployment, what does their landlord honestly expect them to do, especially when its a problem hitting so many millions of tenants, at the same time, through no fault of their own?

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“In many cases, we’ve been encouraging our owners to work out payment plans,” says Jay Martin, executive director of the Community Housing Improvement Program (CHIP), a New York City trade organization that advocates on the behalf of primarily small building owners. “A tenant who’s willing to pay half the rent is better than no tenant not paying any money,” he says. A wave of evictions would hurt landlords, too. With vacancy rates already up and rent prices down in New York City, there’s no guarantee a landlord will find a new tenant. Plus, housing court is an expense. “What is the purpose of taking the tenant to court over four or five months of back rent when a lawsuit is probably going to cost that much?” Martin says. “Try to work with the tenant and see what they can afford at the time, work out a long-term plan, keep that tenant in place.”

To some property owners, that collaboration with renters is key. Bob Pinnegar, president and CEO of the National Apartment Association, says they’ve been encouraging their 85,000 member companies to talk to their residents, and for tenants to talk to their landlords. “If there’s people in their units that are having conversations with [you], that are working things out, you’re not going to evict that person,” he says. “If there’s somebody who has not contacted you and refused to interact with you, and you don’t know what’s going on because there’s an unknown factor, that’s where you have more of a problem.”

According to CHIP’s self-reported surveys of its membership, an average of 8% of renters don’t pay rent in normal times. During the coronavirus crisis to date, that share has gone up to 15 to 20% of renters not paying. In California, the total rent collected from Class C renters (those in properties typically more than 20 years old, which are often in need of updating) dropped 35% from June to July alone—from 59% in June to 24% in July—according to a recent LeaseLock report. Those figures are down from 85% in January, showing that these renters, who are already more vulnerable, are seeing the deepest financial strain. A National Association of Hispanic Real Estate Professionals survey looked at how small landlords were struggling from this drop in rent income; only 61% of respondents said they were confident they could cover their operating costs over the next quarter. This crisis is already having an affect on the market: New York City rent prices are already down 6%, per real estate site Localize. Pinnegar says that nationwide, we could see see vacancy rate peak at 7% nationally, and rents drop by about 8%.

Despite the advice to compromise, there are still evictions happening around the country, sparking concerns about a homelessness crisis on the horizon. People in New York protested outside of a Brooklyn brownstone when a landlord evicted his tenants in July. In New Orleans, protestors blocked court entrances in a hope of preventing evictions from taking place. There may not yet be data on how evictions have increased, but housing experts predict we may see as many as two million evictions in September alone—the amount the U.S. usually sees over an entire year.

And not every landlord agrees that that keeping a tenant in place is the best move, economically. Paul Howard, president of the Florida Landlord Network, which provides education and business tools to landlords, including an eviction service, says filling a vacancy in Florida won’t be a problem. Still, he’s advising his members to get a written payment plan with their tenants in place as a way to avoid eviction.

Howard can understand that it’s not a renters fault they lost their job during COVID, but as a property owner in a state with a months-long moratorium for evictions but none for property bills, he has an issue with paying his bills while his renters don’t. (The wording of that moratorium was recently change.) Of his 16 properties, he says probably half aren’t paying rent. “It’s one thing to have compassion for the tenants—and we do—but it’s another for the government to come to me as a single individual taxpayer and say, ‘You have to pay the freight,’ and that strikes me as at least not fair.”

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Housing advocates have argued that during this time of hardship, especially when public health guidance relies on people having a safe place to stay, rent should be fully canceled. Most property owners counter that renting out a unit is a business, and they’re still on the hook for taxes, bank payments, maintenance fees, and salaries for building workers. “It isn’t simply just, ‘Okay, I’ll cancel the rent for you,’ because if [owners] cancel the rent, they have no ability to pay their mortgage and taxes,” says CHIP’s Martin. In New York, that means less of a tax intake for a city already struggling, and “eventually the hedge funds and banks being the largest owner of housing in the city.”

Eviction moratoriums, without further aid, are only delay the inevitable, property owners add, Pinnegar argues. A tenant who didn’t have rent in July won’t suddenly have enough to cover three months of rent in September. If small landlords are pushed to insolvency, that could have consequences on the housing stock. Single family rentals may sell to someone who will live there rather than rent it out. If the owner of a townhouse with three units gets bought out by someone who converts those apartments into condos, that limits who can afford to live in those units.

“I’m looking at how do we minimize the erosion of our existing housing stock as we go through the pandemic and the economic downturn, and that’s why the next stimulus package and direct rental assistance is very important,” says Pinnegar. Enhanced unemployment alone won’t be enough. “There are many factors competing for those unemployment benefits—shelter, food, healthcare, all of those things,” he adds.

Martin says there are certainly landlords who are acting like their who received that extra unemployment should be able to afford their full rent. “But generally, I think we need a better approach instead of just pitting owners versus tenants,” he says. Bot the tenants and landlords need some larger, holistic fix from the government that acknowledges that there just isn’t as much money flowing through the system as there should be. As we wait for the next round of stimulus, though, the challenge is “how will we survive next month without a safety net?” says Pinnegar. “That’s something everyone is trying to figure out how to do.”

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