The other people facing housing woes amid pandemic: Mom and pop landlords

The peril for Americans who cannot pay rent because of COVID-19 is well established. Less apparent is the financial ruin that faces millions of mom and pop landlords who live rent check to rent check and need the income to pay bills.

Take Tina Brown. She’s a landlord in the Bronx, one of the five New York boroughs, and just as the lockdown set in, she lost the two-family house where she’d been living because her tenants had stopped paying rent years earlier. She’d like to move into her family’s other building. But she can’t because that tenant likewise stopped paying rent last year and cannot be put out because of the state’s eviction moratorium. Until things change, Ms. Brown is sleeping on her sister’s floor.

According to an analysis of government figures, the country has 10 million to 11 million private landlords, and they own 48% of all U.S. rental units. For the past five months, they have been struggling along with their tenants. Unlike millions of Americans and small businesses that received federal pandemic aid, small landlords have largely fallen through the cracks.

About 18% of American tenants couldn’t pay June rent, and 33% doubted they could do so this month, according to the Census Bureau. Unpaid rent has ripple effects on landlords who have to pay mortgages, property taxes, insurance, upkeep, and other bills – and rarely have credit or cash to carry them through emergencies.

“The problem is that landlords are vulnerable, too. The assumption is that they’ve got deep pockets and are all over the country or world. Oftentimes, the landlord is the same income status as the tenant, and they’ve got mortgages and obligations as well,” says Jonathan Miller, CEO of Miller Samuel, a New York-based real estate appraisal and consulting firm.

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A city of renters

Observers say the situation could be even worse in New York, one of the first cities to shutter. This is a city of renters – two-thirds of the population, which is over twice the national average, according to the Department of City Planning.

While some temporary eviction bans are expiring elsewhere in America, they’ve been extended in New York. As of July, landlords in this state must wait until coronavirus-related restrictions are lifted before they can evict anyone who lost income due to the pandemic.

Landlords say they’d rather work with renters than evict them, especially in a recession. Janice Hamilton, a Brooklyn landlord since 2003, has a longtime tenant who lost her job and is paying what she can.

“We’ll do whatever we need to do to work it out. She’s a good person, and she’s trying to pay,” Ms. Hamilton says. “You can either get a little money or zero dollars.”

Even in usual times, many private landlords are vulnerable because their tenants are. Low-wage workers – those particularly at risk for coronavirus-related layoffs – tend to rent from smaller landlords; better-paid workers have the ability to drift toward bigger buildings with more amenities that are run by large management companies. Such conglomerates can absorb lost rent from a few tenants, but landlords with a single unit don’t have that luxury.

Early in the pandemic, many banks allowed troubled landlords to defer their mortgages for three months and tack outstanding charges resulting from unpaid rent onto the end of their payment plan. Five months into the crisis, many financial institutions still say they will work with clients experiencing trouble because of COVID-19. But landlords know that will end one day.

Stopgap measures

In response to COVID-19, states, counties, and cities have set up or expanded almost 300 temporary rental assistance programs, many of which will pay landlords directly, according to the National Low Income Housing Coalition. But they are woefully underfunded – with some funds depleted in as few as 90 minutes, says Emily Benfer, co-creator of the COVID-19 housing policy scorecard at Princeton University’s Eviction Lab.

In Manhattan, the median market-rate rent for an 895-square-foot apartment in June was $3,378, according to Mr. Miller of Miller Samuel. That dollar figure may make it tough to believe that landlords are hurting. But many city apartments are in rent-controlled or rent-stabilized buildings where the rent runs a fraction of the market rate and may not cover costs. And a large portion of the buildings are a century old, requiring significant maintenance. Regardless of where one operates, high expenses can leave little for profit – or even maintenance.

With such razor-thin margins, landlords like Diamantis Kyriakakis’ extended family do a lot of work themselves. The family has owned a handful of walk-ups in Manhattan, Queens, and New Jersey since the 1990s. Mr. Kyriakakis, a chiropractor, still cuts lawns he’s been mowing since he was 10. When New York City was under stay-at-home orders this spring, his 60-year-old father kept going out to fix tenants’ leaky sinks, pipes, and toilets.

The Kyriakakis family uses the rental money to pay bills. COVID-19 hit them hard. Of all their tenants, only one retired man has kept current since March, Mr. Kyriakakis says. Everyone else is at least a month late.

“We still need the rent, but we’re also human. We understand people need to feed their families, and we have to support them in that,” Mr. Kyriakakis says. “There are some slumlords out there. They give a bad reputation to the rest of us.”

With New York state’s high property taxes, tenant-friendly laws, the city’s rent-regulated apartments, and provisions that mean evictions can take six months (pre-pandemic), longtime local landlords say owning a building now is harder than in the blighted 1970s and ’80s, when thousands of storefronts were boarded up and landlords abandoned their buildings.

“Being a good landlord is hard,” says Tracey Benson, president of the National Association of Independent Landlords. “You want to take care of your people, and your home. Tenants generally play by the rules. But there are others – tenants who tear doors off the cabinets and do other things most people wouldn’t even imagine.”

Rogue tenants

Some tenants have used COVID-19 to game the system. Lynne Haney, a sociology professor at New York University, has been renting her Brooklyn home to seven tenants since 2016. Two people were responsible for collecting the rent and sending it to her.

Late on March 31, she says, one of them emailed that they were all on rent strike and would be withholding the $6,500 monthly rent, starting the next day in April. Professor Haney replied that she understood times were hard, saying she’d work with tenants if they would pay what they could. The two organizers refused, said everyone was striking in solidarity with people who couldn’t pay, and cut communications. Two months later, Professor Haney says, she connected with the remaining five renters and found out they had been paying their rent all along – and that the organizers had kept the money while they relocated to Wisconsin. Professor Haney ultimately got the back rent but was especially galled because she, like many small landlords, keeps the rent low to help her tenants.

Ms. Brown, who’s unemployed, has been a landlord for 10 years. She figures it realistically could be March 2021 before she could remove her nonpaying tenant, assuming there is no second COVID-19 wave. Meanwhile, Ms. Brown says, the tenant has moved three more people into the two-bedroom apartment and is disturbing the neighbors with loud music, as well as marijuana and cigarette smoke.

“So while she’s living in my house rent-free, I’m in my sister’s office, sleeping on a mattress on the floor and paying to keep my stuff in storage,” Ms. Brown says. “It’s enough to make me lose my mind.”

Landlord advocates warn that tenants who can pay their rent should. If neighborhood landlords founder, less empathetic corporations will take their place and could try to force out unprofitable tenants.

“Government seems to always have enough money to bail out corporations,” says Jay Martin, executive director of the Community Housing Improvement Program in New York, which advocates for low-rent landlords. “There is no bigger corporation than the tens of millions of renters who keep the housing market alive on a monthly basis with rent payments. If they cannot make their payment and we [as landlords] cannot make our property tax liabilities, there will be a cascading effect on states, municipalities, even banks – the likes of which this country has never seen.”