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New CDC Eviction Ban and the State of the Rental Sector

April 12, 2021

Small Landlords Pressured to Sell Properties

The Covid 19 pandemic stretches on into 2021 and it’s still creating a lot of pain for small to mid sized business landlords. The government is responding with some aid, but the relief is for renters, not so much for small business landlords.

The US government issued new orders via the CDC to prevent tenant evictions which would have been massive due to the shutdowns and pandemic recession. According to the US Census Bureau, 9.5 million Americans, or 17% of tenants are still behind in their rent payments.

Urban Wire shows the estimates of rent owed to landlords vary, but are significant.

Screen capture courtesy of Urban.org

A typical story of the day appeared in the LA times recently:

“I am hoping something will turn around so I don’t have to sell,” said Beverly Rowe, who manages her family’s Los Angeles triplex.  Rowe reports one tenant owes $30,000 in rent payments missed over the last year.

And in Austin, despite a relief program for landlords in that hot housing market, landlords are struggling:

One landlord is having to sell her car and take out loans to keep her property.  Her tenant owes her nearly $6,000.  “Not having the income and trying to keep up with everything — I’m behind on my car, behind on a lot of my other bills. I had to get loans,” she said.  — from report on kxan.com.

Clearly, tenants need assistance given the prolonged recession, yet more reports of small business landlords having to sell their properties shows unfairness. Landlords selling their properties doesn’t solve tenant’s challenges. It just passes them to a more wealthy landlord and results in fewer rentals available and extreme caution regarding tenant screening. Rentals will become harder to obtain for many needy renters in future.

This is one of the key drivers of growing investment in single family detached housing — which attracts renters not burdened by the pandemic.

Small business landlords, the mom and pop business owners of the rental real estate world, who do not have extensive financial resources are still being called upon by the government to shoulder the burden of the pandemic, and the laws they passed.

CDC Order to Extend the Eviction Moratorium

Effective on April 1st, the CDC order extended the eviction moratorium and refers to the order as a Covid 19 prevention move.

There are questions whether aid is targeted properly and whether it will be enough to deal with the issue. Thousands of landlords and property management companies will be affected.

These orders will likely continue for perhaps another year before many renters are able to arrange to pay back rent owed or pay their rent consistently. The stress is showing:

Screenshot courtesy of CNBC and Youtube.

The downside for renters is it may reduce the availability of rentals in coming years. As this CNBC report shows, landlords will need to perform extreme caution when doing tenant screening. Requirements for future renting could be difficult for most renters to achieve.

Although multifamily and apartment owners are reporting growing the number of vacancy fills, NMHC’s rent tracker shows rent payments are actually falling. This might be a surprise to those who felt the economy was turning around and stimulus was being delivered to renters.

 

Please do share this report with your tenants and social media connections

 

Yet, the collective burden of mounting debt and business closures is likely causing even more defaults and late payments. In no way is this to suggest renters are avoiding paying rent. The chances of many of them paying back huge rent arrears is slim to none and chasing that rent down means landlords will incur additional legal costs later this year and in 2022.

Latest Multifamily Rent Payment Trend

Screenshot of nmhc.org rent tracker.

Great American Relief Plan?

The new restrictions come even after the Great American Relief Plan put out by President Biden. It provides $26 billion in relief for renters, yet nothing for landlords. Renters may qualify for 12 months of coverage. The plan is said to have plenty of non Covid 19 grants — handouts not related to the emergency at hand.

Under this new bill, tenants earning $75,000 (married couples earning up to $150,000) will receive $1,400 each, plus $1,400 for each dependent including college students, disabled adults and elderly Americans. But many aren’t sure how far $26 billion will go in a country that has a hundred million renters.

Texas and California are two states with their own additional renter assistance programs. According to a report in the Texas Tribute, 1.6 million Texans had little confidence they could pay their next month’s rent. California believes its economy will fully reopen in June, however the new variants are gaining a foothold in younger populations.

Will New Variant Surge Create More Trouble?

In April, Covid new variant cases have risen dramatically in Canada, and some provinces (Ontario up 4,000 new cases each day) have headed into lockdowns again. Michigan is suffering a big surge again a worrying sign for other neighboring states. More than 40 states are seeing rises again.

Michigan Covid 19 Cases history timeline chart.  Screenshot courtesy of Google.

The GARP does not protect all renters however. Here are the eviction protection qualifications:

  • tenant has qualified for unemployment benefits
  • tenant can prove a financial hardship (including a loss of income) during the pandemic
  • tenant is at risk of experiencing homelessness or housing instability
  • tenant’s household income is less than 80% of their areas median income

Those with slightly higher income who have high rent prices would not qualify, and these would be tenants in higher priced single family houses.

There definitely is a rental crisis in the US, and the US government is responsible for ensuring landlords are protected at a time when they’re calling on landlords to shoulder the weight of the pandemic.

The optimistic side of this controversy is that vaccinations are picking up pace with over 100 million having received one shot.

Need to be much more efficient this year? That’s why ManageCasa property management software makes so much sense.  Find out more.

 

 * Any opinions expressed in this article are solely those of the author and do not necessarily agree with ManageCasa’s views.

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