If Landlords Get Wiped Out
Wall Street Wins, Not Renters
Nobody’s bailing out Connecticut landlord Maribeth Shields.
More than half of the tenants in the 27
low-income apartments she owns in the city of
But Shields can’t pay, either. Her profit
last year came to only $24,000, and now she’s behind on $1.2 million in
mortgages. Like millions of other
“My tenants think I’m rich,” Shields says. “They have better cars than me, better nails, and better tax refunds.”
The next housing crisis is here, and this
time, it’s about rentals. Across the
To avert a damaging wave of foreclosures like
the one that swept the country more than a decade ago, Congress included a
provision in the $2.2 trillion rescue package it approved in March that allows
homeowners with government-backed mortgages to defer payments for up to a year.
In an Urban Institute survey of renters carried out from March 25 to April 10, almost half said they had experienced material hardship in the previous month.
Property Ownership in 2015 by Number of Units
About half of the 43 million rental units in
the country are owned by small businesses such as Shields’s one-woman
enterprise. Unless help comes soon, “both renters and property owners will
slide down the socioeconomic scale together,” says Emily Benfer, a visiting law
States with large populations of renters,
Trade associations that represent landlords are lobbying Congress for $100 billion to cover some of the rent shortfall, with direct payments to property owners, but they have yet to unite behind any of the various proposals floating in Congress.
Lenders could be collateral damage,
particularly regional banks that often finance local property investors. At the
end of 2019, there was $1.6 trillion of outstanding mortgage debt on
multifamily properties in the
“That caricature of the white landlord in the suit who has suitcases of money—in our case, every one of us has a day job”
Many landlords operate on thin margins, typically 9 cents for every $1, according to the NAA, and have nowhere to turn for help if their rental income dries up. Most don’t qualify for federal mortgage forbearance, because only about a third have mortgages backed by Fannie Mae, Freddie Mac, or another federal agency. The Small Business Administration is bolstering companies that keep workers employed, but many property owners don’t have a payroll. Shields, who tours the property with a lawn mower crammed into the back of her Toyota Prius, handles most everything herself and hires contractors for the rest.
Rich Uncle Pennybags, the Monopoly game
character who tips his top hat with one hand and holds tight to a sack of cash
in the other, may be the most famous landlord in
“That caricature of the white landlord in the suit who has suitcases of money—in our case, every one of us has a day job,” says Jan Lee, who works as a general contractor and whose family, over the years, has run a laundromat and a home furnishings store from its ground-floor retail space.
Lee doesn’t have a mortgage, but he already
knows he won’t be able to pay his full property taxes. And that could mean the
end of his family’s legacy on
Their tenants are struggling, and the Meyers want to help. Two of the three men in their 20s who share the $2,500-a-month rent lost restaurant jobs in March. The Meyers agreed to drop the rent by $400, hoping they’ll manage to keep up.
“We rely on the rental income to make everything work,” she says. “I don’t want to imply that if our tenant doesn’t pay rent, we’re going to miss a meal. There’s a very challenging balance around what is our responsibility in the unjust class system we’re in.”
The pandemic has magnified the inequality of
the housing market, which is sparking a new era of tenant activism. In cities
Shane Riggins, 31, who has been unemployed
since March, joined the
While he’s sympathetic to his landlord, who has only one rental property and a mortgage to pay, he worries about saving enough money to survive the new economic crisis.
“It’s not like we want to stick it to this landlord, who is only trying to make ends meet and pay bills, but we all lost our jobs,” Riggins says. “Every time I pay rent, it’s taken immediately and given to a bank. Is that really, in this crisis, the best use of money?”
Renters were cash-strapped before Covid-19. It won’t take much to push many of them over the edge, says Barry Zigas, senior fellow at the Consumer Federation of America. Tenants who pay what they can are indirectly helping themselves. They’ll help keep their homes out of the foreclosure pipeline and give the landlord money to keep up with repairs, he says.
Small investors own much of the naturally
occurring affordable housing in the
“Landlords are not a popular class of business people, for valid reasons and not,” Zigas says. “But that obscures what’s now the very symbiotic relationship of renters and owners.”
Shields’s mortgage lenders have allowed her
to postpone payments, which she fears may only be delaying the inevitable
foreclosure on her loans.
For her—or her lenders—it may also mean evicting tenants who didn’t pay as soon as the moratorium is lifted. Renters are less likely to have enough savings to make up for months of lost income, and they also lack the incentive of homeowners to try to keep up.
“They won’t catch up,” Shields says of her tenants. “We’re never going to recover from this.”