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At the heart of the American dream is the core belief that there is the ability to improve one’s lot, for oneself and one’s children. Acting upon that dream, ordinary citizens saved their pennies and took a leap of faith to invest in what always seemed to be the “sure thing”: property. Owning a rental property could provide a buffer to working income, a nest egg for retirement or a college fund to realize the dream for a child’s future. Becoming a landlord carried with it a sense of self-determination and independence.
The average landlord is someone like your mom, dad, uncle, friend — people trying to make a living and save for the future. There are large investment firms and real estate corporations with vast rental holdings, to be sure. But, according to a report from the Pew Research Center, “72.5% of single-unit rental properties are owned by individuals.” For many, managing rental properties is their business, and like other small business owners, they’re suffering from the crushing effects of the pandemic.
Are Relief Measures Lifting The Burden?
The Coronavirus Aid, Relief, and Economic Security (CARES) Act of March 2020 provided $2 trillion in aid and tax relief benefits, forbearance on federally backed mortgages and foreclosure moratoriums. State and local governments received $150 billion to use toward relief measures. Additionally, a temporary eviction moratorium was initiated to prevent a swell of evicted citizens into homelessness or compacted living situations. What was supposed to be a 120-day suspension evolved into multiple extensions, which recently ended nationwide.
The $1.9 trillion American Rescue Plan earmarked $25 billion for rental assistance and $5 billion for utilities while extending the eviction moratorium to September 2021. The almost $50 billion collectively for rent relief is to be disbursed by state and local governments, yet only a little more than $3 billion had been distributed as of July 2021.
An Imbalance In Support
There has been a disproportionate burden placed upon “mom and pop” property owners in what seems an impossible situation. Unlike those entitled to unemployment or protected by a moratorium, over 10 million individual landlords are still responsible for their property expenses. These costs include taxes, insurance, mortgages, utilities, homeowners association fees and maintenance.
It’s likely many don’t have the cash reserves, especially after 18 months of not collecting rent, nor enough equity to qualify for a loan. For some property investors, the only option has been to sell to private equity firms. The alternatives would be foreclosure and bankruptcy, tarnishing their record for any future loan or property acquisitions.
We’ve rallied behind small businesses and understood the gravity of the situation many renters are in. Retail and dining establishments are open to consumers, stadiums are filled with fans, outdoor gatherings exceed earlier restrictions and airlines are filling planes. Individual property owners, however, have been silently struggling to stay afloat and are in need of support to drive forward.
Are There Solutions To This Crisis?
According to the National Apartment Association, the over $46 billion in federal government aid for rent relief, being disbursed at glacial speed, won’t cover the losses. The organization is suing the federal government for an additional $26 billion for direct landlord relief. According to Bob Pinnegar, CEO of the National Apartment Association, “Each passing month further escalates the risk of losing an ever-increasing amount of rental housing, ultimately jeopardizing the availability of safe, sustainable and affordable housing for all Americans.”
It’s been suggested that many individual landlords with smaller holdings will likely need to sell their property to cover their losses. A decrease in affordable housing will impact low-income renters, especially those who are Black and Hispanic as they are more likely to rent.
The backlog of evictions will likely take a long time to process. Unfortunately, some tenants are not willing to communicate with their landlords or apply for aid, even if the property owners are willing to work with them. In other cases, evicted tenants may change bank accounts, ignore collections or declare bankruptcy.
As a landlord, however, you can choose to take back some control over your current dilemma. Here are some “take charge” measures for financial assistance and loss remediation you can act upon today:
• If you’re a non-mortgaged property owner, negotiate a short-term delay or altered payment schedule with your local tax agency.
• Apply for rental assistance from the Emergency Rental Assistance Program in your state. You must do this before attempting any eviction action, and you must provide the court with proof that the application was denied or the tenant failed to participate before an eviction summons will be issued.
• Communicate regularly with your tenants. Offer direct assistance to help them with relief fund applications, negotiate partial payments and payback plans. Foster that personal relationship.
• Remember to follow the law if you choose the eviction process. You cannot lock tenants out, nor turn off utilities, which could lead to criminal charges and fines.
Rental property owners have been at the mercy of a prohibition that could have long-term ramifications for the future of the entire rental market. We need to rally behind them, too.
The Buckhouse Realty Team 