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Some renters and homeowners are getting financial assistance during the economic disruption from the coronavirus pandemic. What about landlords?
Over the weekend, a landlord in Dayton, Ohio, found himself caught in the blazing Klieg light of an angry internet. A Twitter user posted an image of a text message purportedly written by the landlord, Gary Whitaker, to one of his tenants. In effect, the message said that, coronavirus pandemic or no, the rent was due on April 1.
That note didn’t go over well on social media. “Landlords should forfeit all of their property,” the original poster tweeted. That sentiment (and subsequent tweets) have since been shared tens of thousands of times.
Whitaker says that he can explain it: His phone was hacked. He didn’t send the text attributed to him, he says. At the same time, he also says that rent for his properties — 365 units across eight cities in Ohio and Florida — really is due on April 1, pandemic or no.
“There’s all kinds of trolls out there telling me that I’m the worst landlord in the world,” says Whitaker, the owner-manager of Dayton-based Whitaker Properties. “It didn’t really get to my tenants, because my tenants are not calling me abusive names. They’re paying the rent next month.”
Whitaker’s time in the hot seat illustrates one threat that coronavirus poses to the economy. The Economic Policy Institute estimates that 3 million Americans will lose their jobs by the summer; an even larger number has already applied for unemployment benefits as a wave of pink slips engulfs workers in industries affected by the global pandemic and the shutdowns it has triggered. A small-business apocalypse is looming, and many informal workers in the gig economy — plus artists, musicians, freelancers, and independent contractors — have seen their hours and opportunities dry up. Yet the rent, ever unrelenting, is still due on time every month.
In the face of mounting hardship, many leaders have stepped up with ideas for relief. The U.S. Department of Housing and Urban Development issued a moratorium on evictions from public housing and foreclosures on federally backed mortgages. City and state leaders have implemented a range of protections for renters, particularly in California and New York. The $2 trillion federal stimulus package that Congress is working on includes checks for low- and middle-income families as well as a jolt to unemployment insurance, plus billions in funds for housing and community development.
Yet many of the calls for actions to protect vulnerable renters and homeowners from the economic ravages of the pandemic miss one oft-maligned category of property interests: landlords. Rental property owners who cannot collect the rent are still liable for their own bills. Not just the mortgage, but utilities, insurance, taxes, and payroll for staff and contractors they employ. If landlords are asked to carry the brunt of the pandemic’s blow to the economy, they’ll lay off workers, miss their own obligations, and possibly wind up forfeiting their properties.
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“The bottom line is that if renters are struggling to afford the rent, owners will similarly struggle to not only pay all of their employees, but meet their own mortgage obligations — putting their buildings at risk of foreclosure,” says Jim Lapides, vice president of strategic communications for the National Multifamily Housing Council, a coalition of apartment building owners.
In a letter to leaders in Congress, the National Multifamily Housing Council and ten other real-estate organizations outlined their support for relief for beleaguered renters. They also called for aid that would specifically benefit rental property owners, who employ some 341,000 maintenance staff, superintendents, and other workers nationwide. That’s about seven times more people than work in the coal industry, for comparison’s sake.
In addition to pleading for aid for landlords, the industry letter asked Congress to think carefully before taking up an increasingly popular policy response to the pandemic. The letter drew a bright line: “We caution policymakers against imposing blanket eviction moratoriums.”
The apartment industry is calling on landlords themselves to halt evictions, delay rent increases, and waive late fees for the next 90 days minimum. In addition, groups like the National Multifamily Housing Council are pressing rental property owners to come up with payments plans for tenants and to help them identify public and private resources for aid. There are heartwarming stories of landlords giving their tenants a break proactively. But there are at least as many anecdotes about landlords showing no chill. It may be that some of them are worried, too.
“The margins on property rentals aren’t what people imagine they are,” says Emily Hamilton, senior fellow at the Mercatus Center at George Mason University. “This is going to take a toll.”
Most landlords, after all, are not cold, unthinking corporate entities. They’re overwhelmingly individuals and small business owners. Mom-and-pop investors — those who own two to four rental units — own nearly three-quarters (74%) of all apartment properties, according to HUD and the U.S. Census Bureau. For very large buildings of 50 or more units, corporations account for a larger share of owners (68%), but large properties make up a much smaller slice of the overall rental market. While lost rent falls hardest on individual owners of modestly sized buildings, the pandemic poses across-the-board risks.
“A smaller building means less wiggle room in the budget,” Lapides says. “If the owner only has ten units and two of those can’t make their rent, that’s a 20% vacancy rate essentially, without an actually vacant unit. And if something breaks in the unit, they’re still going to have to fix it. But the magnitude of this problem puts businesses of all size at risk.”
Rental property owners excluded from the coronavirus protections could be stuck holding the ticket.
Eviction moratoriums that aren’t matched by similar protections for rental property owners (such as mortgage forbearance) run the risk of shifting the economic hit from coronavirus toward landlords and lenders. And even given balanced relief for renters and owners, there are still circumstances under which landlords might need to pursue evictions. Landlords have to take action when tenants engage in unsafe or criminal activities that threaten themselves, other tenants, or the properties they’re renting. Right now, at a time when the country is spiraling into recession, landlords by and large probably aren’t looking to evict tenants in order to hike rents.
“If you think about it, in this environment, if you evict someone today, who do you think is going to take their place?” says Carol Galante, faculty director for the Terner Center for Housing Innovation at the University of California-Berkeley. “People are not moving around in the market right now. People are frozen in place.”
Efforts by top policymakers to stall evictions and foreclosures can only reach so many renters or rental-property owners. The freeze on foreclosures for mortgages insured by the Federal Housing Administration, for example, applies to more than 8 million homes. Another order to suspend evictions and foreclosures for mortgages backed by Fannie Mae and Freddie Mac applies to the lion’s share of single-family homes. That’s good news for homeowners, but it doesn’t cover many renters. On that front, Fannie Mae and Freddie Mac are extending mortgage forbearance to multifamily property owners, provided they promise not to evict any tenants. Better news for apartment residents and property owners alike, although as of 2018, Fannie and Freddie only hold 39% of multifamily loans.
Meanwhile, many city and state leaders are using emergency powers to hit the brakes on evictions, full stop. To the extent that these orders are legal, they apply across the board, whether the owners of the rental units have government-backed notes or not. If these local leaders don’t also pause foreclosures on commercial loans — as some, but not all, have done — then rental property owners excluded from the coronavirus protections could be stuck holding the ticket. Landlords aren’t calling foul, but they are asking for help.
“To maintain a stable economy,” the industry letter to Congress reads, “we believe that targeted federal financial government assisted relief should also be provided to them during this time of crisis and that any disruptions to the normal financial flows, not be disproportionally borne by anyone in the process — renters, property owners, servicers, lenders or mortgage securitizers.”
For his part, Whitaker, the Dayton property manager, says that he doesn’t expect coronavirus to touch his bottom line. He surveyed his tenants, he says, and none of the tenants who replied to his email reported any job losses as of Friday. “Call me back in 60 days and I may have a different comment — I don’t see stress on my company or the tenants we rent to,” Whitaker says. “Our maintenance staff is full time. We were exempted from the shelter-in-place rule in Ohio, because we have to provide a service, whether it’s routine maintenance or cleaning hallways or doing the drains or whatever.”
The best way to protect tenants may be to ensure they get whatever aid they need so they can pay their rent on time. This is ultimately the best approach to help landlords, too. If Congress fails to take sufficient action to supplement lost incomes for vulnerable renters, then renters who fall behind may face eviction — if not now, then eventually. By the same token, mom-and-pop landlords could be out of their apartment buildings, too.
But not Whitaker. He sounds surprisingly optimistic about how the pandemic will affect his outlook in Dayton, Cleveland, Akron, Jacksonville, and the other cities where Whitaker Properties operates.
“In the last recession, you had a lot of people lose their homes. Lots of foreclosures,” Whitaker says. “[My partners and I] are preparing to buy properties at dirt-cheap prices, then hold them until the economy gets back, remodel them, whatever we have to do to get them back on the [rental] market.” He adds, “It may not be nice to say, but this is business.”
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