Tenants, Landlords, and Covid-19 Rent Relief
The unforeseen effects of covid-19 and covid-19 relief on the fragile tenant/landlord relationship.
A little over a year ago, no one could have guessed that the world would be knee-deep in a deadly pandemic, and struggling to return to what we once knew as “normal”. And while the initial shock and fear have subsided on a global scale, the pandemic is still very much a force to be reckoned with. Still, many countries have taken some adequate measures against Covid-19, and are even beginning to open up more public venues and relax some of their restrictions.
At home, however, we’re still seeing high infection rates and a growing death toll. Arguments abound as to why we as a country still find ourselves this deep in our particular situation, but all of that aside, the fact remains that this pandemic has still got its claws in us - and it affects almost every single aspect of our lives. While it may not be the most important thing to worry over, the coronavirus has absolutely taken our economy hostage, and we’re fighting to wrestle control back.
As quarantine restrictions and lockdowns have come and gone in waves, tens of millions of American citizens have suffered major losses in the form of unemployment or losing entire businesses. The lawmakers of the country have been almost inconceivably torn between letting people work to earn a livable income or forcing people to quarantine at home and obey strict preventative protocols. And now, to make up for lost time (and wages) they’ve resorted to stimulus packages.
By now, we’re all familiar with the concept. The government put together a spending plan and some new protocols for all of the country’s major infrastructure and even cut a check for each household. The aim, of course, to not only keep the country running smoothly during these trying times but to put a bit (seriously, a small amount) of money into the hands of the folks who keep the economy afloat; the general population.
Sadly, 9 months of full-blown pandemic conditions also require a few concessions in the multifamily market. It isn’t hard to comprehend that people who suddenly find themselves out of work and lacking a paycheck may not be able to continue paying their rent on time or at all. March’s CARES (Coronavirus Aid, Relief, and Economic Security) Act addressed this with direct payouts for households to do with as they please, funding for rental assistance programs, and a 120-day eviction moratorium.
Now, the second (in 9 months) stimulus package has been put on the table, although as of the time of writing, there is still debate as to the appropriate payout amount for each household. Whereas before, an eligible household was once granted $1200 per adult and $500 per eligible child, the new package was originally written to only grant $600 per adult and eligible child. Still, with $25 billion allocated towards rental assistance, an extension of unemployment benefits for the estimated 12 million people on the brink of losing their benefits, and yet another eviction moratorium, tenants can breathe a (small) sigh of relief.
To say that the situation is unprecedented is an understatement. And while it may not be a sustainable solution, bailing out struggling American families, if even only by a small margin, is a blessing to many during these uncertain times. But the aid is a double-edged sword for some, creating more harm than good.
If you’re wondering how a stimulus package with payouts of possibly $2000 for the average American and freedom from the worry of being booted out of their home could possibly be a bad thing for anyone, you need not look any further than the plight of landlords. An often overlooked aspect of the covid-19 pandemic is the financial pressure put on landlords. It is easy to first think of tenants who cannot pay their rent, but what about the folks due to receive said payment?
These are extra dark times for anyone who makes a living through rental properties. Many landlords have seen significant decreases in rent collection, and with the provisions put in place, can do nothing about it. Even worse, landlords don’t typically qualify for unemployment benefits, so how are they meant to survive?
Rental assistance programs, at the very least, enable tenants to pay what they can and thus put some money in the pockets of the landlords, but there are still an estimated 9.2 million tenants across the country who simply cannot and have not paid rent in months. And make no mistake, the bills, and expenses that even the humblest of landlords face have not stopped rolling in. With no recourse options to remove non-paying tenants, the situation only grows more severe for rental income earners.
As the second eviction moratorium draws near, a vicious cycle begins to emerge. Property owners aren’t collecting enough to keep up with maintenance, pay property taxes, and in the worst cases, make mortgage payments. Often overlooked necessities such as trash removal come at a cost, one that fewer and fewer landlords are able to pay as the months pass us by.
It’s an absolutely difficult discussion to have but at some point, the other boot is going to drop. We all know that the real enemy here is covid-19. Tenants aren’t simply withholding payment for personal reasons, and landlords aren’t just being greedy. There is a real problem at hand, and while one party may see some relief as soon as the new stimulus is signed, it leaves the other party out in the cold yet again. And remember, the rental relief funding is going to be less than the original CARES Act provisions.
One thing about the multifamily market space is that competition aside, we are an invaluable, tight-knit community and one of the major pillars of the United States economy. While some of the larger players haven’t suffered too much, we must still look out for the middle-tier and lower-tier folks who truly survive on the rent they are able to collect. There is no doubt that the coming months will be tough but in the meantime, hopefully, the new stimulus will allow more tenants to catch up on their rent.
If you find that you’re facing unforeseen financial difficulties with your multifamily property due to the Covid-19 pandemic, please feel free to reach out to us, as we would like to hear more from the frontlines of the industry.