The impact of COVID-19 continues to pummel Americans to the ground. Massive job cuts owing to nationwide closure of countless businesses means the U.S. now faces unemployment rates that could soon reach levels witnessed during the Great Depression. Two groups hard-hit by the volatility are landlords and tenants.
Cash Crunch Woes
About 87% of businesses say their markets have become increasingly competitive in the past three years. But with the current pandemic bringing the economy to its knees, resulting in millions of job losses and unprecedented filings for unemployment, our economy has been turned on its head. For many households, this means choosing between paying rent and focusing available finances towards more basic amenities such as food. In an effort to cushion citizens, some states such Utah have taken measures, with Utah Governor Gary Herbert deferring all rent payments until May 15.
All the measures being taken by state governments are laudable. After all, it’s the government’s job to cushion its citizens as much as possible. However, following orders to defer rental payments, landlords now find themselves between a rock and a hard place.
Dilemma of Landlords
Some landlords are sympathetic to the plight of their tenants. Most of them understand that families are grappling with never-before-seen scenarios. However, renting and leasing residential properties remains a business — and that’s how some landlords see it, regardless of the prevailing pandemic conditions.
Across different states, the situation remains the same; legal clocks continue to tick anticipating delayed rent payments and forced evictions. Landlords now have to choose between forfeiting rental income by accepting to delay rent or enforce evictions and seem like the bad guy in the narrative. Either way, it’s not an easy choice.
Homeowners Get More Protection
Even though 72% of Americans are bothered by the complexity of the U.S. tax system, taxpayers have received a reprieve from the IRS, meaning filing taxes can be delayed for the next few months. Homeowners have also been spared as their mortgage payments have been postponed for the immediate future. The same measures have not been taken to cushion renters. Housing advocates now argue that the lack of action to cushion renters will hurt them given the fact that their income is often less than half of homeowners.
Some states such as Connecticut, through their governor, Ned Lamont, have negotiated with banks and credit unions to give suspensions on mortgage payments for struggling homeowners. It seems that efforts to cushion homeowners through mortgage relief benefits help more affluent members of the community. The burden has now been shifted to those least capable of bearing it with renters having it rough, and for some, it seems like there might not be respite soon.
Stopping Evictions Isn’t the End-All-Be-All
Most states have been ordered to stop processing eviction requests from landlords. It might seem like a step forward for tenants, but they’re still not off the hook. Courts remain closed in a bid to lower the spread of the pandemic. But when the courts open, renters can still face evictions.
In the current circumstances, landlords can still file for an eviction. It might mean that court marshals won’t physically come to the door to kick out tenants, but they can still initiate an eviction process. A filed eviction order could end up affecting tenants long-term by barring them from accessing future housing, triggering future job loss, or affecting their state of wellbeing. While eviction moratoria are a crucial first step in shielding tenants, they do not ensure renters everywhere will remain housed.
Hard-Hit States and Strikes
New York has reported the highest number of infections of all the states, and more than 366,000 people filed for unemployment in the week of March 22. That number represents a 2,200% increase from the previous year. It’s not just New York that’s witnessing a growth in cases filed, with states such as New Jersey, Michigan, and California all reporting over 15,000 cases and a surge in unemployment filings.
In the wake of the situation, some renters heave opted to organize rent strikes. Usually, tenants collectively withhold rent from their landlord by failing to put payments into building-wide escrow accounts when trying to force repairs and other concessions. However, tenants are using the strikes to send a political message to landlords and state governments. Many renters argue that the current situation is a political one, so it needs a political response.
The law provides that landlords can hold their tenants legally responsible for damage to their property, with these damages becoming a class E felony if losses exceed $1,000. However, amid a pandemic, the situation becomes a bit challenging. The best solution is to consider an agreement with your renters. For instance, if you have a new renter, you accept the deposit after the COVID-19 pandemic quiets down. Additionally, consider taking partial rent payments and extend the remaining portion at an interest-free rate.
The consensus among landlords in different areas is that they want to work with tenants to reach an agreement on deferred payments. The concept behind the agreement is to waiver late fees while giving tenants more time to get their finances in order after the outbreak.
A Word of Advice for Landlords
Nobody knows how long the COVID-19 pandemic will last, so it’s a matter of patience. In the meantime, filing for evictions isn’t in your best interest because the courts remain closed indefinitely. The ideal solution is to talk to your tenants and see what people can afford to pay and when they can pay.
There’s still a lot of uncertainty surrounding federal government aid — meaning, as a property owner, you’re not in a position to waive rent altogether. Nobody knows what mortgage companies are going to do, but the assumption is: if you have a mortgage on your premises, you’ll still pay it. Ideally, center your approach around waiving late fees and deferring rent in a way that will be sensible for you and your tenants. This situation calls for cool heads and a level-minded approach for survival.