When their young family outgrew their first home, some friends of mine decided not to sell it. Instead, they kept it as a rental, finding they were able to cover the mortgage and repairs and still end up with a little extra each month. This small venture into landlording has been a boon. Yet when the pandemic hit, it became a serious risk.
Like many places, my state of Minnesota was under an eviction moratorium even before then-President Donald Trump issued and President Biden extended emergency renter protections at the federal level. If my friends' tenants had stopped paying rent, they couldn't have been evicted. But my friends aren't a huge real estate corporation. They're just a family. And "[b]ecause most of the available rental assistance is directed at tenants rather than landlords," as the Twin Cities Pioneer-Press reported, "many landlords are reliant on their tenants' ability to get help in order to ensure their own payments are made."
Thankfully for all involved, my friends' tenants remained able to make rent. But many other tenants didn't, and many of their landlords aren't big corporations either. They're essentially small business owners — just like the proprietors of local shops and restaurants we've all been so eager to support — but they're not being treated that way in pandemic relief policy. As a result, some are facing financial catastrophe.
Eviction moratoriums and #CancelRent are popular for obvious reasons. Many renter households were struggling to make ends meet before COVID-19 mitigation policies wreaked havoc in their lives. Over the summer, fully a third of U.S. households didn't make their housing payments. That figure is much lower now, around 5 percent per the most recent data I found, but it's still significant, and there are undoubtedly many households just barely meeting each month's obligations.
But there's a huge problem in the way this has been handled. Census data shows about one in two rental units are owned by individual investors, and 87 percent of the properties those investors own are single units. In other words, the average American landlord looks a lot like my friends. They're not The Man, and they can't absorb thousands of dollars in unpaid rent, even with a promise it will be paid eventually. Most have mortgages on their rentals. They may be dealing with the same job losses their tenants face. Half a year of nonpayment permitted by an eviction moratorium can ruin them.
Two reports this week give a sickening glimpse of what that ruin looks like. Curbed profiled five small-time landlords in New York City who are fast approaching their financial break point. "I went from having a $7,000 rent roll to having $2,200. That difference has to be paid by someone, and that person is me," said Cynthia Brooks, a public transit worker whose four-unit building has one paying unit, two empty units, and one unit with a renter who stopped paying in April and hasn't communicated with her since.
This building was her dream — the product of years of scrimping and triple shifts — and now, having blown through her savings trying to hang on to it, she has to sell. "I mean, look, I understand that there are tenants out there who really need help," Brooks told Curbed. "This is nobody's fault. We're all hurting here. We just need help. I've gotten a [mortgage] forbearance. I've budgeted. I have no more tricks left."
The other four stories are similarly gutting. Several of the landlords are immigrants or children of immigrants. One has a baby on the way. Another inherited the building when she lost her dad to COVID. "It is a nightmare situation," said Mike Mesheriakov, who owns a home with a second unit in the basement. "It's so frustrating because nobody cared. They just talk about canceling rent. What about the small landlords? I have three kids. The money I spent took away from my family."
Reason's report finds similar cases among New York's Chinese immigrant community, where working-class landlords thought property would be a safe investment. One such landlord, speaking through an interpreter and near tears, rented her home to a tenant who "stopped paying rent over the summer and was demanding a $12,000 cash payment to move out." The landlord has been unemployed since the hotel where she worked as a housekeeper shut down. "I worked in the United States for a whole 29 years. I worked to the point that my waist needs surgery. I can't even sell my house," she said. "I really don't know how to live anymore."
Another landlord is living with his wife and two children in a studio apartment, unable to reclaim his home from a squatter "who is a dropout from an elite private university [and] has never offered to pay rent." He can't get rid of the squatter without an eviction order, and he can't get an eviction order. He told Reason he has contemplated suicide.
Mortgage forbearance, which is available on all federally backed mortgages, can help these landlords (if they know about it, which many don't). Yet for some, like Brooks, it won't be enough. There are too many other expenses. Taxes on real estate and income are a big one, and governments enforcing eviction moratoria should offer significant tax relief to offset those losses.
Ultimately, however, the total moratoria need to go. The federal moratorium in particular is needlessly broad and ripe for abuse, and direct income assistance is a simpler and better way to keep renters housed than a likely unlawful federal edict which simply moves the hardship up the line. Complete suspension of residential eviction cases, as is happening in New York City at least through the end of this week, is also an unjustifiably sweeping intervention with bad, unintended consequences. Moreover, data from Princeton University's Eviction Lab shows evictions weren't spiking even without moratoria. That's probably because landlords, particularly small-scale owners who may know their tenants personally, understand there's a pandemic on and would rather keep good tenants paying what they can than make people homeless and have units sit empty, earning nothing and costing a lot.
With vaccine production ramping up and the national COVID-19 caseload and death rate declining, struggling small landlords may see relief — a return to financial normalcy for tenant and building owner alike — finally within reach. But for some, that relief will come too late if something doesn't change in the meantime. Their bills will overwhelm them. Like Brooks, they'll have to sell buildings that were meant to be their livelihood, their retirement, their way of helping their community, their home. And they'll almost certainly have to sell to someone richer, someone who can afford to absorb a year of partial occupancy or nonpayment or court costs to recoup missed rent, someone to whom the building will be less a dream than an addition to the portfolio.