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Small Multifamily Owners Struggle With Eviction Moratorium As Tenants Face An Uncertain Future

The fallout from the coronavirus pandemic has left Celtic Realty Advisors CEO John Ridgway in a position he could never have imagined: suing the federal government.

When the $2 trillion Coronavirus Aid, Relief and Economic Security Act was signed into law in March, it introduced a 120-day eviction moratorium on any property that has a federally backed mortgage.

Soon after, Ridgway began to see rent delinquency at The Grove on Gladstell, his small multifamily property in Conroe, Texas. Two tenants at the 52-unit property stopped paying rent and refused to communicate. And, like other landlords around the country with a federally backed mortgage, Ridgway had no ability to pursue an eviction remedy through the state courts.

Frustrated, Ridgway decided to take decisive action. He partnered with Anne Tseng, owner of the 16-unit Sappington Garden apartment complex in Fort Worth, to file a joint lawsuit against the U.S. government, challenging the legality of the moratorium.

“Housing is not free. And it's, in my mind, unconstitutional for the government to take away my rights and access to enforce a valid contract that I have with my residents, including access to collection efforts up to and including eviction,” Ridgway said.


The CARES Act introduced the eviction moratorium as a way to provide housing security to millions of people facing loss of income and unemployment in the wake of the pandemic. Though many understand the rationale and need for renter support, critics say the moratorium was too sweeping in nature and has placed an undue burden on small multifamily owners with federally backed mortgages.

“There's been a significant burden on apartment owners because they have their own bills to pay, they're effectively paying the rent,” National Housing Conference President and CEO David Dworkin told Bisnow.

Rental payments have been surprisingly robust since the economic disruption of the coronavirus pandemic began to materialize in March. Between 94% and 96% of tenants paid their rent in April, May and June, according to the National Multifamily Housing Council’s rent tracker. But that data is based on reporting from professionally managed market-rate apartment units and doesn’t capture the performance of smaller multifamily owners, who typically don’t join the NMHC or report their rent collections.

“There are players within that space that our data is not well capturing. We know that and we are very concerned about those entities, particularly smaller entities, those who have a lot of subsidized properties that again, are not well-captured in the national metrics,” NMHC Vice President of Construction, Development and Land Use Policy Paula Cino said.

Stimulus funding from the CARES Act has been credited with keeping rent flowing to many multifamily property owners. But for small-business owners with federally backed mortgages and growing rent delinquencies, the situation is more difficult.

Ridgway’s lawsuit, filed in the U.S. District Court, Northern District of Texas, Fort Worth Division, on June 24, is seeking a declaratory judgment that Section 4024 of the CARES Act cannot be legally enforced.

“I felt it was necessary to take this step because there was no one else doing it,” Ridgway said. “Even though we've decided on the lawsuit several weeks ago, and developed and filed it, we continued to see an expansion of the taking of private property or the government interference in private business.”

Ridgway said that he now has five tenants at The Grove on Gladstell that owe more than one month's rent, up from the original two, which amounts to roughly $11K in delinquent payments. That’s in addition to waived late fees and other services provided by the complex.

“I'm still paying for their water, I'm still paying for the sewer. I'm still paying the property taxes. This particular property, the residents also pay through a fee back in addition to their rent for cable and internet. I'm still providing their cable and internet even though they're not paying for it,” Ridgway said.

“I'm 98% leased right now, which means I have one apartment available to lease and, you know, there's strong demand in the area. So if those five people were out, then I could get paying residents into those units.”

The Grove on Gladstell is classified as workforce housing, and many of the tenants that live there are renting at the best level they can afford, Ridgway said. As missed rent payments mount, the likelihood of their ability to repay that rent goes down.

“Are we legally entitled to it? Yes. Is the realistic practical matter of us ever being able to collect that? Probably not,” Ridgway said.

He is aware of other lawsuits being filed in states like New York and Kentucky but believes his lawsuit is the only one directly suing the federal government.

Ridgway said he isn't trying to file for eviction against every tenant who cannot pay rent, and that his company is working with other tenants who have lost jobs and are having issues filing for unemployment. The difference is, those tenants have been communicative about their situation.

“If I got the moratorium lifted today, even though they owe me two months' rent, June and July, I wouldn't file eviction on them,” Ridgway said.

Veritas Equity Management CEO John Boriack

Veritas Equity Management owns and operates five multifamily properties in the greater Houston area, with an average number of units ranging between 200 and 250 at each property. Of those five properties, two have federally backed mortgages.

CEO John Boriack told Bisnow that typically, the company collects around 99% of rent each month. That dipped to between 90% and 95% during the early days of the pandemic, but has improved since.

Veritas' portfolio consists of market-rate workforce housing, and average rent at the properties with federally backed mortgages is about $803 per month for a one-bedroom, $1,116 for a two-bedroom and $1,208 for a three-bedroom apartment.

The company has been willing to work with residents who have fallen on hard times, as long as those tenants are proactive and have been communicating with the leasing office and management staff.

“We're almost always going to keep that person in their home and try to work something out,” Boriack said.

“There [are] people who are taking advantage of the moratorium situation and are flat-out not paying the rent and not communicating with us and not making any effort there. And so, when we don't hear from a resident and don't have any communication with them, we really don't have a choice but to pursue legal remedies.”

Boriack said he has two or three tenants in each property that are not paying rent. For the delinquent tenants in the two federally backed properties, eviction is not an option. Veritas has still been able to make mortgage and bill payments, but the company has paused distributions to its investors, who are largely retirees counting on the income.

“We did have to completely stop all distributions of any profits to investors or anything like that,” Boriack said.

“My investors are not big funds for equity brokers. It's people that have saved up 50 grand, 100 grand, 200 grand and they don't trust the stock market. And they're relying on their income during their retirement to keep their bills paid and put kids through college and things like that.”

Alec Tuckman is a small multifamily owner in California. One of his properties is a six-unit apartment complex in North Hollywood. According to Tuckman, that property has a tenant who owes at least two months of rent. The monthly rental payment for that unit is $2.4K a month.

The property does not have a federally backed mortgage, but multiple lawyers have advised Tuckman that he would be unable to evict that tenant for several months, if not a full year, because of California state law and the backlog in pending eviction cases.

Tuckman said he believes the specific tenant is taking advantage of the situation, and he is concerned that he will not be able to recover the money.

“I had to temporarily suspend payments to my bank and now I'm looking at temporarily higher payments to make up for that moving forward,” Tuckman said.

With heightened demand for bank services, Tuckman said he has had trouble connecting with Wells Fargo to get assistance. That said, Tuckman has still been able to meet his financial obligations, thanks to some reserves.

“It is an inconvenience and an irritation, and I now have to go under the assumption that this tenant will not repay their loan and I will have to go after him when the law allows it,” Tuckman said.


The CARES Act eviction moratorium is due to expire on July 24, with an additional 30-day notice period requirement for tenants to vacate. Once the moratorium expires, housing experts believe there will be a wave of eviction filings across the country.

Between 19 million and 23 million people in the U.S. could potentially face eviction by September, according to the Aspen Institute, a nonprofit think tank.

“I think the filings will be the first indication of what's coming, and then the speed at which evictions occur will depend on individual markets,” Dworkin said.

“In August and September you could see tens of thousands of people evicted, very quickly, in the poorest neighborhoods in the country, and that is a recipe for disaster.”

“Typically, the threat of eviction falls heavily on poor communities and people of color, especially Black renters,” Princeton University's Eviction Lab Statistician and Quantitative Analyst Peter Hepburn told Bisnow last week. “These are individuals who have suffered the most severe health and economic effects of the COVID-19 pandemic.”

Most landlords Bisnow has spoken to over the past few months have expressed a preference to work with tenants rather than lose them, and every landlord Bisnow interviewed for this story said evictions would be reserved for bad actors or those not making an effort to communicate or work with the landlord. 

In March, as the pandemic first took hold and before federal mandates were implemented, NMHC called on the industry to voluntarily halt evictions for 90 days, but underscored that landlords will need help, too.

“We also recognize that most rental properties are owned by individuals and small businesses that have financial obligations, including mortgages, utilities, payroll, insurance and taxes,” the council said in a statement March 22. “If residents cannot pay their full rent obligations because of the COVID-19 outbreak then owners are at risk of not meeting their own financial obligations. This puts the individual property and the larger community in which it is located at risk.”

NMHC and others have lobbied the federal government to keep renter assistance coming, but also to couple it with support for multifamily property owners.

The CARES Act provisions expire July 31, and lawmakers are working to finalize a new stimulus bill. The U.S. House of Representatives passed the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act (H.R. 6800) in mid-May, and the Emergency Housing Protections and Relief Act of 2020 (H.R. 7301) in late June. 

The bills provide $100B in emergency rental assistance, as well as a 12-month extension on eviction moratoriums. Separately, the U.S. Senate is considering its own version of a stimulus bill, which would be smaller than the House version.

“It's very unclear politically, where that entire package is going on the Senate side. But there were some things in that [HEROES] bill that we are supportive of and we think provide real solutions,” Cino said.

Both NMHC and NHC support the proposed $100B in rental assistance, which would allow tenants to pay their rent and property owners to meet their own obligations.

“We think that is the best solution. That probably helps renters make those initial payments, so they don't face the risk of eviction, and at the same time that provides stability for everyone in the market, the renter and the property owner alike,” Cino said.

However, NMHC and the National Apartment Association have said they are less thrilled at the prospect of the eviction moratorium being extended for 12 months, which Cino said could seriously deter investment in affordable housing projects in the future.

The need to finalize a new stimulus bill is growing daily, between the massive public health crisis posed by the coronavirus and the expiration of vital public financial assistance through the CARES Act to support those who have lost jobs.

“I worry that we could end up with mass evictions in many markets that would be most concentrated in low-income areas that have already been rocked by unrest, following the George Floyd killing. That is a tinderbox,” Dworkin said.