Landlords and tenants could be left in the lurch with growing rental debt after the Biden administration and the Center for Disease Control and Prevention announced a new, targeted eviction moratorium covering areas with high or substantial rates of COVID - 19 transmission levels until Oct. 3.
The latest research released Wednesday by the Mortgage Banker Association's Research Institute for Housing America - finds that missed rent payments have now accumulated since the onset of the COVID -19 pandemic in the second quarter of 2020, and total has been estimated at $41.7 billion.
The MBA reports that rental property owners have lost an aggregate of $7.1 billion in first-quarter revenue from missed rent payments, down from $7.48 billion in the second quarter of 2021. In June alone, about 8.6% of renters, or 2.86 million households, were denied, missed or made a reduced payment. In the second quarter of 2021, an average of 9.7% of renters received permission from their landlord to reduce or delay their monthly payment.
Since the COVID pandemic, only $47 billion of the federal government has been allocated in rental assistance during the federal government, despite 6.6% of the funds being distributed. The National Apartment Association, representing more than 82,600 members who collectively manage more than 9.7 million rental homes throughout the United States, estimates that apartment owners and operators could be left to shoulder approximately $26.6 billion in rent debt not covered by federal assistance.
As a result, the NAA recently filed a complaint against the CDC's order, claiming property owners' constitutional rights have been violated by not being able to enforce leases and contracts. It also argues that the order contains no provision for compensating property owners for the losses they have sustained and continue to sustain as a result of their inability to evict delinquent and non-rent paying tenants.
NAA senior vice president of government affairs explained to FOX Business that the ultimate goal of the suit is to ensure both landlords and tenants are made whole.
A 2016 survey conducted by the Brookings Institute found that about 30% of landlord households are considered high income, earning less than $90,000 a year, and that property income for landlord households earning less than $50,000 accounted for nearly 20% of their total household income.
When you start having this pile up of unpaid rent and the unpaid rent debt, what you have is small operators that are hanging on, frankly, by their fingernails to stay solvent throughout this, in spite of the fact that they're not paying rent. Brown said the extension of moratorium is going to add to outstanding rent debt, too. It's clear that there is not enough federal resources allocated towards this issue to cover what is outstanding. Then a lot of housing providers are going to be and the residents are going to be left out.
Brown says that rental owners have the ability to offer everything from a repayment plan and waivers on late payment fees to connecting residents with Social Service Organizations to help them pay rent as well as their own internal rental assistance programs.
The worst outcome as an eviction explained, he explained. It's the last resort for any provider. It's a pain for the owner who would like to do everything we can except evict.
The NAA has partnered with the White House to promote the Emergency Rental Assistance Program and is encouraging its members and their tenants to use Consumer Protection Financial Bureau's web interface to find rental assistance programs in their local community. However, Brown emphasized that there has been lower participation in the program due to residents who either choose to not join the process or struggle to join it all together.
The rental assistance can't flow unless the resident participates, he said.
In addition, Brown notes the additional requirements of some rental assistance programs have made it increasingly difficult for NAA members to deal with.
Some of those programs have layered on some extra requirements which are really unrelated to the pandemic or making people whole the rent that they owe, but are about other policy objectives, like saying you can't increase rents for the next year, saying you can't evict anybody for the coming three to six months, even if they don't pay any rent, he said.
Brown recommends that NAA members continue to seek tenants assistance, keep open communication with their tenants, and keep access to rental assistance programs. He also encourages reaching out to their elected officials to push for distribution of the rental assistance funding.
Everyone has slightly different options depending on where they are and so we're just encouraging them to take advantage of what they can to keep themselves whole, keep their residents whole and keep the property stabilized, Brown said. The last thing we want to lose is a bunch of housing, especially naturally occurring, small homes, affordable properties etcetera that are so important. The last thing we want to see is a bunch of that lost.