Landlords And Tenants Can Agree On One Thing: The Multifamily Industry Needs Rental Assistance
Though Democratic leadership criticized the bill as woefully inadequate and cynical, the $300 per week in extra federal unemployment aid it contained could possibly have shored up rent payments for some tenants. Without a stimulus bill, any further sliding by the economy could leave millions of renters unable to make payments and landlords without crucial revenue streams.
“The conditions on the ground will only add pressure for the government to provide relief," National Multifamily Housing Council Vice President of Government Affairs Kevin Donnelly told Bisnow Friday. "Without [Congress] reaching a deal, renters and property owners are left holding the bag, which threatens the finances of the whole housing system. And that’s a scenario we can’t accept.”
After the coronavirus virtually shut down the U.S. economy in March, the $2 trillion CARES Act and the Paycheck Protection Program provided stopgap assistance to people and businesses. But most of the bills’ recurring benefits expired in July, the one-time payouts have been largely spent and the bounce back of the early summer has tapered off, meaning congressional gridlock could prove catastrophic.
“Everybody loses here, and yet we can’t seem to move,” National Housing Law Project Director of Government Affairs Noëlle Porter said.
The “skinny bill” introduced by Senate Majority Leader Mitch McConnell, a Republican who represents Kentucky, would have repurposed $350B of unspent funds from the CARES Act and added $300B in new money — less than 10% of what the bill passed by the Democrat-controlled House in May would have provided, had it passed in the Senate.
Senate Minority Leader Chuck Schumer, a Democrat who represents New York, claimed the bill was proposed only for Republicans to be able to place blame for inaction on Democrats as they campaign for re-election. Regardless, the election being two months away means that both houses of Congress will soon adjourn for the final campaign stretch. Among tenant and landlord advocacy groups, little hope remains that any form of assistance will be agreed upon before the upcoming adjournment.
The federal eviction moratorium enacted by the Centers for Disease Control and Prevention looks likely to hold up to any major legal action, Porter said after the NHLF legal department analyzed it. Lobbyists from the NMHC and the National Apartment Association also expect it to withstand any court challenge.
But unless it can be extended past Dec. 31, the end of the year will mean that millions of dollars in back rent will come due for tenants, millions of whom haven't been able to find work. If no stimulus bill is passed by then, experts on both sides warn of a collapse in the housing market that is starting to wobble after months of surprising stability.
“With no extension of the moratorium, you’re going to see at least a wave of foreclosures of small rental properties that will precipitate a change in the nature of ownership of that class,” National Apartment Association President and CEO Bob Pinnegar said. “There’s no bottom here.”
It is a rare issue on which both landlords and tenants agree on what is best for the housing industry: direct rental assistance. The job market remains weak, and the gradual realization of how long-term the effects of the pandemic will be could lead to even more layoffs in the coming months, Pinnegar said. That would only compound a problem that is already growing, as fewer and fewer tenants are paying rent.
If the government enacts some form of rent forgiveness plan without any direct financial aid, then landlords will not be made whole, with the smallest-scale landlords (the segment of the industry with the most minority ownership) being hit the hardest. A survey the National Association of Hispanic Real Estate Professionals conducted of its membership reported that only 60% expressed optimism about being able to cover their operating costs until the end of the year.
“Without gas in the car, it won’t run,” Pinnegar said. “If all you do is forgive rent without some sort of [landlord] assistance, then landlords will be going under and it’ll be a shockwave that’s felt for years.”
The gravity of the impending eviction crisis is the primary source of hope among advocates that Congress can reach some form of compromise, Donnelly and Porter said.
“This is the highest-profile example of agreement among tenants and landlords that evictions are a nightmare for both sides,” Donnelly said. “The biggest problem going forward is the financial insecurity of renters.”
The issues will cascade beyond the least affluent renters who are at the greatest risk of eviction, with Class-A rent in cities like San Francisco and New York having already gone down double-digit percentage points, Pinnegar said. Renters by choice have been seeking homeownership in greater numbers, forcing concessions from landlords that are unsustainable in the long term.
Further complications that could arise include liability lawsuits if an evicted tenant falls ill or dies without housing and a commercial mortgage crisis, landlord advocates said. The multifamily industry doesn’t have the luxury to plan past the next few months because of the urgent issues of the present moment, but there are plenty of indications that the picture will only become more grim the longer it takes for Congress to step in.
“The number of potential cascading effects is mind-boggling,” Pinnegar said.
CORRECTION, SEPT. 11, 3:45 P.M. ET: A previous version of this article misstated the full title of the National Housing Law Project. This article has been updated.