With tenants refusing to pay or to leave, small landlords face their own challenges

Jennifer Collins of Lahaina, Hawaii, lost her job as a restaurant waitress during the pandemic, but hoped to stay afloat on the rent she collects in three small condos she owns.

Things did not go as planned. Collins, 61, said one of his tenants largely abandoned Collins ‘condo for another house and bought a new automobile, but refused to pay rent or leave Collins’ property, even changing the locks so Collins can’t access it.

Collins attempted to evict the tenant, but said she has so far failed. She’s back at the waiting tables now, but said she was trying to sell two of the condos.

“My stomach is just starting to roll over talking about it.” I’m nervous, I’m like a deer in the headlights, ”she said. “I’m overwhelmed and I just want to be done with this.”

Tenant advocates celebrated last week when the Biden administration effectively extended the Centers for Disease Control and Prevention’s ban on most evictions. But for some small homeowners – who are struggling to pay their mortgages and taxes – it was the last straw.

The CDC’s ban only legally protects tenants who have suffered financially as a result of the pandemic, who are at risk of becoming homeless, and who meet other criteria. But landlords say some tenants are abusing the eviction ban to live rent-free. Others cannot be evicted for any reason due to national and local rules enacted in response to the pandemic.

In general, this is a great time to become a real estate owner, as residential property values ​​have increased dramatically in many parts of the country.

But like many emergency policies adopted in response to the pandemic, the eviction ban has had disparate effects on businesses large and small. Many corporate apartment chains that cater to white collar workers are raising rents and making huge profits; a stock index of publicly traded apartment chains is up 43% through Friday. Meanwhile, some family owners give up and decide to sell, although on what scale is difficult to determine.

Individuals previously owned two-thirds of apartment buildings with five to 24 units. But from 2001 to 2015, that share fell to two-fifths, and researchers at Harvard University’s Joint Center for Housing Studies found that as large Wall Street-backed investors bought the buildings, they raised rents. faster.

“Since the units in these structures are generally older and have relatively low rents, institutional investors may view them as prime candidates for purchase and modernization. These changes in ownership thus helped keep rents on the rise, ”the researchers wrote.

Wall Street investors owned virtually none of America’s single-family homes a decade ago, but they now own around 2%, according to the Federal Reserve.

Redfin’s senior economist Sheharyar Bokhari said small homeowners struggling to keep up should at least be able to find buyers for their properties. In the second quarter alone, investors – rather than traditional home buyers – lost a record $ 48.5 billion to acquire 67,943 homes, the highest quarterly figure on record, according to a recent Redfin report. Investors bought 1 in 6 homes sold in the second quarter, compared to 1 in 10 on average.

“Many of them are unlikely to be underwater because the values ​​have gone up. So an opportunity for them is to sell the house and take the gain, ”he said.

Small homeowners who aren’t looking to sell say they’re hoping things will improve, but don’t see it happening anytime soon.

For a year and a half, Julianna Hernández has seen her income decimated. Of eight apartments in three Chicago apartment buildings she owns, tenants in half of them don’t pay, she said. One of them has not paid for over a year and threatened her so violently that she said she repeatedly called the police.

Despite her best efforts, she said she was unable to evict the tenant. This makes it difficult for her to make her mortgage payments and repay the credit cards she used to pay for the repairs.

“I have worked so hard to be where I am,” Hernández said. “I saved and tried to have a better life. And now there is nothing I can do.

“Some people have difficulties in their life, but some people are just taking advantage of the system,” she added.

Ed Benz manages 47 rental units in Pittsburgh, some of which he owns and others he manages for other owners. He said he grew up in a family receiving public assistance and knew he was better off than many of his tenants, who lost their jobs as a home care aide or staff. restaurant. But he also doesn’t think the way some policymakers vilified landlords during the eviction debate was fair.

“This is what I would call the ‘man’ syndrome. “Oh yeah, we’ll stick it to the man. Well, I grew up in a poor family and I understand that point of view. I have agreed with this on several occasions, ”he said. But he said that by preventing landlords from enforcing leases, eviction bans have kept them from collecting their income while their costs continue.

Benz said he ran out of reserves and fell behind on paying property taxes while trying to keep up with other bills, but sometimes during the pandemic he had five units at a time where tenants were late or did not pay rent.

“When you have a prolonged thing like this, those reserves go quickly. And I danced between the raindrops trying to keep things together, ”he said.

Carol Kelly, a former office manager who owns six rental units in Kansas City, said landlords recognize they offer an essential service, but only they are asked to provide it for free.

“What’s the difference between me and a grocery store or a restaurant?” ” she said. “You would never go to a restaurant saying, ‘Please feed me for the next 12 months and I’ll give an IOU.’ But that’s what people tell me.

The disparity between corporate apartment chains that cash in as about 11 million Americans stay behind on rent payments has helped fuel the wave of support for another extension of the CDC’s ban, this time applied to areas where the virus has spread heavily.

Representative James Clyburn, DS.C., chairman of the House select subcommittee on the coronavirus crisis, held a hearing on July 27, criticizing four business owners for their actions evicting residents not covered by the prohibition and refusal in some cases to accept rental aid funds intended to prevent tenants in difficulty from losing their housing.

“The inability of some large owner companies to comply with moratoriums on evictions or to cooperate with rental assistance programs is creating significant hardship for tenants affected by the coronavirus crisis and could contribute to an unnecessary housing crisis as our country recovers from the pandemic and its economic fallout, ”Clyburn said.

One of the main tenant advocates, Diane Yentel, president and CEO of the National Low Income Housing Coalition, told the committee that despite the bans, tenants were doing whatever they could to pay.

“Low income tenants did all they could during the pandemic to pay for it. They took out loans. They used credit cards. They have put off buying store-bought food or paying for the Internet their children need for virtual school. They have compromised to pay the rent when they can, and when they can’t, they’ve fallen behind, ”she said.

But Bob Pinnegar, chief executive of the National Apartment Association industry group, which represents homeowners of all sizes, said the Biden administration acted as if there were no consequences in repeatedly extending the moratorium. The day after the CDC announced the new ban, real estate groups in Alabama and Georgia filed a new, latest action against him.

“There is a fear in the industry that this may go on and on until the Supreme Court intervenes,” Pinnegar said.

Announcing the extension on August 3, CDC director Rochelle Walensky released a statement saying the moratorium “is the right thing to do to keep people in their homes and out of gathering places where COVID-19 is spreading.” . She cited the emergence of the rapidly spreading delta variant of the coronavirus. The new ban covers around 90% of the country.

Some landlords and tenants have been able to obtain emergency rent assistance thanks to a $ 46.5 billion assistance program designed to prevent evictions. But the program has been desperately slow to get off the ground in many parts of the country, and it sometimes forces landlords and tenants to agree to a new set of lease terms – an unlikely prospect if they aren’t. on good terms.

“You couldn’t make a worse system if you tried,” Pinnegar said.

Treasury officials say the program has already helped hundreds of thousands of tenants and funds have been coming out faster since the program began.

However, the longer the ban lasts, the more likely small independent owners – many of whom are seniors – are likely to deplete their savings and move on. Kelly, who is active in a Kansas City real estate group, said friends and acquaintances in the area decided to sell and foreign investors were grabbing the homes.

Benz said he is also seeing a similar trend in Pittsburgh.

“I’ve spoken to a number of homeowners who are just getting out of this booming market, or are turning their properties into Airbnbs,” he said.

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