Millions of Tenants Behind on Rent, Small Landlords Struggling, Eviction Moratoriums Expiring Soon:
Inside The Next Housing Crisis
In late November last year, a small property owner has seemed to have reached the end of the rope. Over the past year, one of the parents of the landlord was diagnosed with cancer and the other had recently undergone a major surgery. To make things even harder, the property owner had been laid off from a startup biotech company.
The problem did not stop right there, now faced with a bigger responsibility of paying a mortgage not only for the home they are currently residing but also for the investment property – a two bedroom condo unit. The tenant, who has been renting this unit, had also lost his job at the onset of the Covid-19 pandemic in Mid-March last year. At first, the tenant started to struggle making payment for his utility and eventually had to stop paying rent of $1,800. And by Thanksgiving, the tenant owes the landlord more than $20,000.
Fortunately, state and national eviction moratorium prevented the renter from being evicted amid the global health crisis. However, the landlord’s financial downturn was not flush enough to float him forever. After months of stress and anxiety, the landlord decided to use the loophole in the law: force the tenant out by moving into the rental condo.
But for humane reasons, right before the delivery of the final eviction notice, the two became friends and did not pursue the eviction. The landlord knows that the renter if evicted will have no place to go, citing that the partner of the tenant had been laid off with bad hips. This news is nothing new. In fact, more than millions of Americans lost their jobs due to the pandemic and are having a tough time paying rents and millions are facing evictions.
A lot of landlords and renters across the USA are facing similar situations. As the pandemic closed bars and restaurants and overwhelmed the blue collar job market, millions of Americans looked helplessly as their financial security slowly disappears. And while the unemployment have somewhat leveled off in recent months, still a third of American adults are struggling to pay for basic household expenses. According to a survey conducted last January, more than a third of U.S. Adults are having a hard time paying basic household expenses, and 11% said that their households were not able to eat decently the prior week.
Moreover, a survey conducted done last December by the economic research firm Moody’s Analytics showed, about 12 million American tenants are expected to have an average of $6,000 in late rent and utility payments per household by January 2021.
So far, a lot of those renters have been spared from being evicted. Cities like Seattle and states like Washington have made it temporarily illegal for landlords to evict most renters due to nonpayment amid the covid-19 pandemic. The Center for Disease Control and Prevention have strengthened this moratorium last September by issuing a federal ban on most evictions through January this year, which President Joe Biden extended through March 31st.
However, these short-term help leave open the question of what will happen after the eviction ban expires? According to several housing advocates, a tsunami of evictions and a significant rise in homelessness will most likely happen.
Jeanice Hardy, regional director of family and related services for the YWCA said, “If we do not find a way to keep people in their homes, it’s going to be overload. There is not enough shelters to go around.”
On various social media, the impending eviction crisis if usually depicted as a greedy fat-cat landlords pushing vulnerable renters out to the streets amid the global health crisis that we are all in, while activists are shouting “cancel rent” totally to the government. The reality however is far from being simple. More than 70% of properties with four or fewer tenants are not owned by these fat cats which are rendered in Dickensian caricature. Most of these landlords are hard working Americans, mom-and-pop landlords who are just trying to earn a living and are often nearby, managing the property themselves, and usually rely on the very rent to pay their own mortgages, health care bills, utilities and other monthly expenses.
Almost 50% of the 49 million rental units across the country are owned by individuals, who usually offer more affordable housing in their communities as compared to the billion-dollar conglomerates and giant companies that construct and build high-rise buildings with expensive counters and rooftop swimming pools.
These small property owners are shouldering a big burden during the worse health crisis in a century. For a lot of Americans, it is increasingly unsustainable. The landowner mentioned above, has since found a new job working in a stable pharmaceutical company and is on a much better financial standing right now. The landowner remains steadfast in preventing people from being kicked out of their home if they cannot pay, now that we are under this uncontrollable and unpredictable global health emergency. The owner is currently paying for the mortgage of the rented unit and believes that this is not sustainable but can’t see any reason why the tenants can’t find work eventually, and start paying back.
Another story comes from an unemployed father who lives in Seattle and is behind more than $4,000 in rent.
Ollie Aldama is one of the million of hard working Americans who toil everyday just to make both ends meet. He was in a coma for three months, after suffering from a severe case of necrotizing pancreatitis in 2014.
Aldama struggled to get back on his feet despite the agonizing rare condition that he has wherein his bones grow in places where they should not. His knees were fossilized and prevented him from taking any trade job. His weakened immune system makes it even harder for him especially in this pandemic where in-person roles are often limited. To make matter worse, his health certification as a phlebotomist has already expired.
Before the pandemic, he was able to earn about $35,000 annually. But now, he is lucky to take home a third of that, by delivering takeout through DoorDash and Postmates. A teary eyed Aldama said that he cannot even afford to buy anything new. He added that most of the things that he wore except for his socks and underwear are all used. But despite being so thrifty nowadays, he is still short on all his payments.
“There’s never been a point in my adult life,” he says, “where I ever thought I would be a hair’s width away from living on the street.”
The pandemic has impacted a lot of Americans, those belonging to the lowest bracket or have the lowest incomes suffered the most. They are the hardest hit both by the Virus and the financial crisis that goes with it.
An analysis conducted by the Federal Reserve Bank of New York revealed that financially vulnerable counties are most likely to have higher ratios of COVID-19 infections and deaths versus other counties with lower delinquency rates. This is measured through delinquency pattern on debts like credit cards bills and car mortgage loans.
The analysis also showed that as of mid-July last year, the high delinquency counties posted 4.3 cases out of 1,000, while counties with lower delinquency rates saw an average of 2.8 cases per 1,000.
Moreover, In August 2020, according to the Pew Research Center,14% of upper-income earners said that they or someone they in their household lost their job or income as a result of the global health crisis. Low-income earners had a higher percentage of 33%. On the other hand, the Washington Post –Ipsos poll revealed that people of color had it worse, with black people as a whole have nearly twice as non-Hispanic white individuals to die from the virus, and both Black and Hispanic people are more likely to lost their jobs amid the pandemic by a margin of 5 and 9 percent respectively.
The racial disparity is clearly manifested in the case of Stephen Musa. After losing a potential employment as a welder in Seattle last October, the 29 year old Liberian migrant worker fell behind his rent by more than $4,000 and has since struggled to make both ends meet for him and his 5-month-old son.
Musa dreamt of opening his own food truck, serving West African soul food, but with the current situation, even just getting by is really hard for him.
“Everything you hear is that the rest of the world is trying to go to the U.S. to get a better future. [But] you come here and see that it is not that easy,” says Musa.
He is grateful though for the non-profit organization, YWCA, for working with his rental-property company to write off his arrears. YWCA is working to eliminate racism, empower women and advance equity.
Musa however said that settling his back rent and other debts are just the start. Despite trying to find jobs, Musa has yet to find a steady source of income and worries about keeping a roof over his family’s head with the eviction ban comes to an end this spring. Musa is lucky though as his landlord is quite sympathetic. He however know that the hospitality is not forever, and sooner or later the management of the apartment complex has to paid with rents.
“The people that own these buildings have to pay their mortgages,” he says. “They have to make money.”
In housing, racial inequities, no thanks to the decades of racist mortgages and zoning laws, are still visible on the eviction threat. The Princeton’s Eviction Lab reported that 13% of the entire population of the country is Black people, and Black tenants make up about 35% of the evictions which was carried out since March despite the eviction ban. Black women faces a 25% more evictions as compared to their male counterpart since the start of the state and local moratoriums took effect last spring and summer.
A survey made by the Foremost Insurance Group showed that 75% of landlords across the country are white. In Seattle the share of landlords that are white is even higher according to the city auditor. A managing lawyer of the King County Bar Association’s Housing Justice Project said that this scenario creates a very uncomfortable dynamic. Edmund Witter mentioned that there is somewhat wrong or something is inherently not right, when one racial group is dependent on the other for a basic need. Witter is one of the lawyers of the housing advocates who provide free legal aid to tenants facing eviction.
The rental complex where Musa lives is owned by a trusts that have an all-white senior leadership team basing on their website.
The federal government has yet to get to the bottom of the impending eviction crisis with a viable long-term plan. Last December, the congress has allocated about $25 billion in emergency rental assistance. The amount will be used by both local and state government to reimburse landlords with renters who were not able to pay their rents. This come after CARES Act gave some local government block grants in order to stave off evictions. However, Mark Ellerbrook said that the contribution will not be enough. Ellerbbrook is the division director of housing and community development for King County.
To ensure that the aid which the federal government has given is distributed equitably, local government imposed a patchwork of stipulations. For example, 78% of emergency rental-assistance programs need that landlords should not evict their renters for not paying rent, with 10% of those programs requiring an agreement not to evict for at least 7 months or more, based on the reports by the National Low Income Housing Coalition or NLIHC. Other requirements include the freezing of rent.
In King County, renters must earn 50% or lower than the area’s median income and his or her landlord must agree to accept 80% of the rent owed to them in order to be eligible to the program.
In our first case, the landlord is thinking of applying for the funds, notes that even if the landlord received the amount, it would not make her whole considering that the renter owes more than the county’s reimbursement cap, which is about $20,000.
Another issue is that most local governments are also having their own budget problems and at the same time lack the staff to distribute the aid in a timely manner. And because of this, counties with such problem rely heavily on non-profit organization, but as it turn out, a lot of these NGO are also undermanned and understaffed, underfunded to do the new initiative.
Ellenbrook said that pricey areas like Seattle has tenants that makes more than local median income but cannot afford their rent. Some landlords may be turned off of the bureaucratic hurdles of applying for the aid. This is a reality for small landowners or mom-and-pop landlords who may be put off by the obstacles of applying for the help, resulting to driving them out of the rental market, and leading to a long-term decrease in affordable rental housing in the already scarce communities.
Alex Brendon, one of the many property owners in Seattle is contemplating of getting out of the rental business altogether, just like the increasing number of other small landlords in the area. He lost his job in July due to the pandemic and have been struggling to support his two small children. And although his renter failed to pay him for three months, he was not able to evict the tenant amid the pandemic which at that time was rapidly spreading across the country. After 10 months, and more than $18,000 of unpaid rent, he was able to take back ownership of the property by moving into it himself.
During the campaign period, then presidential candidate Joe Biden proposed ambitious solutions that would alleviate conditions for both the struggling American renters and their landlords.
One of the many suggestions he proposed includes making Housing Choice Vouchers as an entitlement benefit somewhat similar to Medicaid and Social Security System (SSS). Commonly known as Section 8 Vouchers, the existing program does not warrant that low-income individuals who qualify for help will receive it.
Eligible households will have to wait for at least 1 and a half years on the average before getting a voucher. However, according to the NLIHC, the delay can be much longer; with quarter of the biggest public-housing authorities in the US have waiting lists for as long as seven years. In order to prevent families from waiting that long, the King County housing authority decide on using a computer-randomized lottery system. But last year, that meant only about 2,500 of the 20,000 eligible families who applied for it managed to make it onto the waiting list, which tries to put families in about five years’ time.
Expanding the program would ensure that low-income renters will have a roof over their heads regardless of their employment status, and that small landlords will be paid for at least part of the rent they were owed, regardless if their tenants were not able to pay on time.
Biden also suggested the construction of new public-housing communities that do not look like the old and dilapidated projects before. Low-income housing advocates picture a 100-acre, mixed-income neighborhoods surrounded with stores, public schools, clinics, community centers, library and many more, all within walking distance.
One housing community in unincorporated King County, the Greenbridge, which is just south of Seattle City’s limits somewhat fits the description. The community has 325 houses, all subsidized and scattered across hundreds of affordable houses. Families coming from different socio-economic groups share all the amenities like the parks and more than five dozen public art installations. The residents are shielded in periods of economic downturn; they pay up to 30% of their income for the rent, while public-housing authorities pay for whatever is the balance. If the resident experiences a decrease in his income due to layoffs or work reduction it will have an effect onto his monthly rental. The program is designed and developed to help boost residents out of the poverty and prevent their children from going into the same.
Stephen Norman, executive director of the King County housing authority said, “We like to say that if we are raising the next generation of public-housing applicants, we failed.” Norman is part of the company that had developed the project.
With regards to Joe Biden’s proposals, a lot of affordable-housing advocates are really excited but warned that they would be pricey and complex to execute. Across the country, less than a quarter of American families are beneficiaries of the program even if they are eligible for the public-housing assistance program. The left leaning think Urban Institute said only a quarter of the entire American families benefit from this.
While the NLIHC said that on the average, those who benefit from the projects wait for about nine months just to be placed. And if placed in an ideal place like Greenbridge, it would take even much longer. Some beneficiaries are reportedly queuing for more than a decade. And most Americans in the same set-up, they do not have that luxury of time. The eviction moratorium is set to expire by the end of March and it is not clear whether state or local government or the federal government will interfere and extend the moratorium, and if they do, for how long will the ban be. Like most troubled small landlords, they fear the their situation of having to lose their homes because of non-payments of rent, but more importantly, the ban will benefit financially distressed tenants who are in danger of losing their rented place.
However, the current set-up is temporary and is not sustainable. It will eventually fold and it will not be a good thing for both the renter and landlord. But for now, the possibility of being evicted is placed on hold, and as more Americans continue to look for ways to pay rent and utilities, going to homeless encampment is not in the offing –for now.