Via Wolf Street

Small and large landlords, please share your experience in the comments so we can get a better feel of what is actually happening on the ground.

By Wolf Richter for WOLF STREET.

In addition to residential eviction bans issued by states and municipalities, including the one signed into law in California yesterday, there is now the nationwide eviction-moratorium order through December 31, issued by the U.S. Centers for Disease Control and Prevention (CDC) yesterday – the broadest eviction ban yet.

The order covers all renters in the US below a certain income level (individuals who expect to earn less than $99,000 this year and joint filers expecting to earn less than $198,000). There are other limitations and requirements. But renters can still be evicted for reasons other than nonpayment of rent.

Treasury Secretary Steven Mnuchin told the House coronavirus subcommittee yesterday that the moratorium would affect up to 40 million renters (of the 43 million renters in the US). This is far broader than the eviction ban under the CARES Act that applied only to renters in properties whose mortgages were backed by the government (Fannie Mae, Freddie Mac, VA, FHA, etc.), which covered about a quarter of all renters.

Under these eviction bans, renters still owe the rent, but they cannot be evicted for nonpayment of rent. Instead, the landlord can pursue legal action in the courts to obtain a judgement and then collect on the judgment, but cannot evict the tenant for nonpayment.

Rental properties are usually leveraged. Landlords – whether small landlords with one or two properties or large landlords with many properties or apartment buildings – carry mortgages on those properties and have to make mortgage payments. Many of those mortgages have been bundled into mortgage-backed securities, some backed by the government.

READ ALSO  Subprime, No Problem? FHA Mortgage Delinquencies Hit Record 17.4%. Even as Fed Policies Trigger Mad Land-Rush in Split Housing Market

Even the massive landlords born out of the Financial Crisis, such as Invitation Homes, that own tens of thousands of single-family houses fund their properties with debt, even if at the institutional level by issuing bonds and rent-backed structured securities.

Now there is a risk that these cash-flows up the pipeline, from renters to landlords to creditors and investors are halted, triggering a rolling tsunami of defaults and foreclosures amid landlords.

Or so it would seem. But really?

Surveys by Apartment List of about 4,000 households have indicated that about one-third of households did not make their full housing payments in July and August. One-third! That would be a huge problem.

These “housing payments” include rents and mortgage payments, and we know that mortgages are defaulting in large numbers and are entering forbearance agreements with the lenders.

In terms of rents, Apartment List says: “Among renters with unpaid housing bills, 49 percent have either negotiated, or are in the process of negotiating, an arrangement with their landlord.”

But this dismal data on nonpayment, based on household surveys, does not parallel data supplied by large landlords.

The National Multifamily Housing Council (NMHC), which represents large landlords of multifamily apartment buildings has started to track rent payments during the Pandemic. This is based on data submitted by landlords, not households surveys. It covers 11.4 million “professionally managed” market-rate rental properties.

The question: Some percentage of renters is always late, even during the Good Times. So how have rent payments deteriorated due to the unemployment crisis?

READ ALSO  Investors anticipate Joe Biden election win

The NMHC found that as of August 27, 92.1% of apartment households made a full or partial payment for August, down by 1.9 percentage point from August 27 last year (94.0%).

It provides further detail for each week of August:

  • By Aug 6: 79.3% of rent payments made, down by 1.9 percentage points from Aug 6, 2019 (81.2%).
  • By Aug 13: 86.9% of rent payments made, down by 2.0 percentage points from Aug 13, 2019 (88.9%).
  • By Aug 20: 90.0% of rent payments made, down by 2.1 percentage points from Aug 20, 2019 (92.1%).
  • By Aug 27: 92.1% of rent payments made, down by 1.9 percentage points from Aug 27, 2019 (94.0%).

The chart shows rent collections by week, compared to the same week in the same month last year. The percentages are based on total occupied units, excluding vacant units. The also exclude purpose-built student housing, privatized military housing, and subsidized affordable units:

If this deterioration of nonpayment of 1.9 percentage points, as experienced by landlords of 11.4 million apartments, is applied to 43 million renters in the US, it would mean that roughly 817,000 households in the US have fallen behind on rent due to the unemployment crisis.

This is not anywhere near the huge numbers being thrown around in the media and by lobbying groups. For example, The Aspen Institute proclaimed that “20 Million Renters Are at Risk of Eviction.” That would be almost half the renters in the US.

So what is it? 817,000 or 20 million?

Landlords, big and small — yes, you! — please share your rent-payment experience in the comments below.

We’re trying to get a grip on what is actually playing out on the ground. If you are a small landlord with one or two units, or if you’re a larger landlord with lots of units, please share your experience in the comments below so that everyone can get a better feel of what is going on here.

READ ALSO  California Tries to Stem the Unemployment Insurance Chaos: Week 27 of U.S. Labor Market Collapse

You don’t need to give your actual name. The more info you can provide about your rental, the better. This might include:

  • State or metro they’re in
  • Big city, smaller town, rural
  • How many total units
  • Apartments or houses
  • How many (or %) vacant; how is this different from a year ago
  • How many nonpayments for August vs. a year ago
  • Have you agreed to temporarily reduced rent payments? On how many units?
  • Other factors that might shed some light on this.

This is just an informal survey, and it won’t have statistical value, but if enough landlords participate, we can get a better feel of what landlords and tenants face. You can come back over the next few days and read the comments to see how other landlords are doing. Thank you.

Enjoy reading WOLF STREET and want to support it? Using ad blockers – I totally get why – but want to support the site? You can donate. I appreciate it immensely. Click on the beer and iced-tea mug to find out how:

Would you like to be notified via email when WOLF STREET publishes a new article? Sign up here.