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Some landlords struggling to keep up

Extension of ban on evictions was last straw for several mom-and-pop outfits by The Washington Post | August 15, 2021 at 1:49 a.m.
Julianna Hernandez at her home in Chicago. Her income has fallen from tenants who can't or won't pay, and her debts are mounting. MUST CREDIT: Photo by Youngrae Kim for The Washington Post.

Jennifer Collins of Lahaina, Hawaii, lost her job as a restaurant server during the pandemic but hoped to stay afloat on rent she collects from three small condos she owns.

Things didn't go as planned. Collins, 61, said one of her tenants has largely abandoned Collins' condo for another home and purchased a new automobile but refuses to either pay rent or leave Collins' property, even changing the locks so Collins could not access it.

Collins has attempted to evict the tenant but said she has so far been unsuccessful. She is back waiting tables now but said she is trying to sell two of the condos.

"My stomach just starts just churning talking about it. I'm nervous, I'm like a deer in the headlights," she said. "I am in over my head and I just want to be done with it."

Advocates for renters celebrated earlier this month when the Biden administration effectively extended a Centers for Disease Control and Prevention ban on most evictions. But for some small landlords -- struggling to pay mortgages and taxes -- it was the last straw.

The CDC's ban legally protects only renters who have suffered financially because of the pandemic, who are at risk of homelessness and who meet other criteria. But landlords say some tenants are abusing the eviction ban to live rent-free. Others cannot be evicted for any reason because of state and local rules enacted in response to the pandemic.

In general, it's a great time to be a real estate owner, as residential property values have risen dramatically in many parts of the country.

But as with many of the emergency policies passed in response to the pandemic, the evictions ban has had disparate effects on large and small companies. Many corporate apartment chains catering to white-collar workers are raising rents and booking enormous profits; an index of publicly traded apartment chain stocks is up 43% earlier in August. Meanwhile, some mom-and-pop landlords are giving up and deciding to sell, though at what scale is difficult to determine.

Individuals used to own two-thirds of apartment properties with five to 24 units. But from 2001 to 2015, that share fell to two-fifths, and researchers from Harvard University's Joint Center for Housing Studies found that as large, Wall Street-backed investors purchased the buildings, they raised rents more quickly.

"Given that units in these structures are generally older and have relatively low rents, institutional investors may consider them prime candidates for purchase and upgrading. These changes in ownership have thus helped to keep rents on the climb," researchers wrote.

Wall Street investors owned virtually none of America's single-family homes a decade ago but now own about 2% of them, according to the Federal Reserve.

Redfin senior economist Sheharyar Bokhari said small landlords who are struggling to keep up should at least be able to find buyers for their properties. In the second quarter alone, investors -- rather than traditional homebuyers -- dropped a record $48.5 billion to acquire 67,943 homes, the highest quarterly figure on record, according to a recent Redfin report. Investors bought 1 in 6 homes sold in the second quarter, up from a typical 1 in 10.

"It's unlikely that a lot of them are underwater, because the values have been rising. So one opportunity for them is to sell the house and take the gain," he said.

Small landlords not looking to sell say they hope things will improve, but don't see it happening anytime soon.

'NOTHING I CAN DO'

For the past year and a half, Julianna Hernandez has seen her income decimated. Of eight apartments in three Chicago buildings she owns, tenants in half of them are not paying, she said. One has not paid in more than a year and has made such violent threats to her that she said she has repeatedly called the police.

Despite her efforts, she said she has not been able to evict the tenant. So she is struggling to make mortgage payments and pay off credit cards she used to pay for repairs.

"I worked so hard to be where I am," Hernandez said. "I saved and tried to make a better life. And now there is just nothing I can do."

"Some people do have hardship in their lives, but some people just take advantage of the system," she added.

Ed Benz manages 47 rental homes in Pittsburgh, some he owns and some he manages for other owners. He said he grew up in a family on public assistance and knows he is better off than many of his tenants, who have lost jobs as home health aides or restaurant workers. But he also doesn't think the way some policymakers vilified landlords during the eviction debate has been fair.

"It's what I would call 'the man' syndrome. 'Oh yeah we're going to stick it to the man.' Well I grew up in a poor family and I understand that viewpoint. I've agreed with it a lot of times," he said. But he said by preventing landlords from enforcing leases, eviction bans have prevented them from collecting their income while their costs continue.

Benz said he has exhausted his reserves and fallen behind on property tax payments while trying to keep up on other bills, but at times during the pandemic he's had five units at a time where tenants were behind or paying no rent.

"When you have a prolonged thing like this, those reserves go quickly. And I've been dancing between the raindrops trying to keep things together," he said.

Carol Kelly, a former office manager who owns six rental homes in Kansas City, said property owners recognize they offer an essential service but said they are the only ones being asked to provide it free.

"What's the difference between me and a grocery store or a restaurant?" she said. "You would never go into a restaurant and say, 'Please feed me for the next 12 months and I'll give an IOU.' But that is what people are saying to me."

The disparity between corporate apartment chains cashing in while an estimated 11 million Americans remain behind on their rent payments helped fuel the groundswell of support for another extension of the CDC ban, this time applied to areas with significant spread of the virus.

Rep. James Clyburn, D-S.C., chairman of the House select subcommittee on the coronavirus crisis, held a hearing July 27 taking four corporate landlords to task for their actions evicting residents not covered by the ban and in some cases refusing to accept rental assistance funds designed to keep struggling renters from losing their homes.

"The failure of some large landlord companies to comply with eviction moratoria or to cooperate with rental assistance programs is creating significant hardship for tenants affected by the coronavirus crisis and could contribute to a needless housing crisis as our nation recovers from the pandemic and its economic fallout," Clyburn said.

A top advocate on behalf of renters, Diane Yentel, president and chief executive of the National Low Income Housing Coalition, told the committee that despite the bans, renters were doing all they could to pay.

"Low-income renters have done all they could do during the pandemic to pay it. They have taken out loans. They have used credit cards. They have put off buying store-bought food or paying for Internet that their children need for virtual school. They have made trade-offs to pay rent when they can, and when they can't they've fallen behind," she said.

But Bob Pinnegar, chief executive of industry group the National Apartment Association, which represents landlords of all sizes, said the Biden administration has been acting as though there is no consequence to repeatedly extending the moratorium. The day after the CDC announced the new ban, real estate groups in Alabama and Georgia filed a new suit against it, the latest of many.

"There is a fear in the industry that this could go on and on and on until the Supreme Court intervenes," Pinnegar said.

'THE RIGHT THING'

In announcing the extension Aug. 3, CDC Director Rochelle Walensky issued a statement saying the moratorium "is the right thing to do to keep people in their homes and out of congregate settings where covid-19 spreads." She cited the emergence of the rapidly spreading delta variant of the coronavirus. The new ban covers an estimated 90% of the country.

Some landlords and tenants have been able to secure emergency rental assistance through a $46.5 billion aid program designed to prevent evictions. But the program has been frustratingly slow to get off the ground in many parts of the country, and it sometimes requires landlords and tenants to agree on a new set of lease terms -- an unlikely prospect if they aren't on speaking terms.

"You couldn't create a worse system if you tried," Pinnegar said.

Treasury officials say the program has already helped hundreds of thousands of renters and that funds are going out more quickly since the program started.

The longer the ban continues, however, the more small, independent landlords -- many of them senior citizens -- are likely to exhaust their savings and move on. Kelly, who is active in a Kansas City real estate group, said friends and acquaintances in the industry have decided to sell and that foreign investors are snapping up homes.

Benz said he's seeing a similar trend in Pittsburgh as well.

"I've talked to a number of landlords that are just getting out of the business in this hot market, or else are turning their properties into Airbnbs," he said.

Print Headline: Some landlords struggling to keep up

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