Check Is in the Mail? For Many Bill Payers, It Won’t Be

On Wednesday, as on the first day of any month, many companies and households will have bills to pay. This time, a lot will simply pile up.

Angela Rogan is unlikely to make the rent on her apartment in the San Francisco Bay Area. Katherine Anderson, who owns a cafe-bakery in Seattle, isn’t going to pay her $30,000-a-month lease. Even the Cheesecake Factory, a multibillion-dollar company, has told landlords not to expect an April remittance.

The trajectory of the U.S. economy will largely rest on how many payments go unmade, which bills are put ahead of others and the terms on which they are settled.

The $2 trillion relief package passed by Congress amounts to a grand attempt to flush the economy with cash so that the obligations of corporations and minimum-wage-earning tenants alike can be met as usual.

But much of the money will take weeks to arrive — too late for many — and once it does, the big question hanging over the economy will be how many unpaid rent notices, water bills and mortgage payments remain after the virus subsides and commerce resumes.

Should a significant portion be curtailed through negotiation or absorbed by the government altogether — such as loans that allow businesses to make payroll the next few months but can be forgiven when traffic returns — a coronavirus recession could be followed by a robust recovery in which commercial life looks something like normal. Should they linger and turn into long-term debt hanging over businesses and households, it will curb future spending and lead to a weaker recovery as the damage produces more layoffs, more spending cutbacks and more unpaid bills.

Consider the metal lockboxes in the 110 apartment buildings owned by Bridge Housing, a nonprofit affordable-housing developer that manages about 12,000 subsidized units in California, Oregon and Washington. On Wednesday, Bridge’s 30,000 tenants, most of them hourly workers with little or no financial cushion, will start dropping their April rent checks in the boxes. The checks will be opened by workers in latex gloves, and scanned into a software program that logs each payment. Those checks, in turn, will be used to pay overhead, maintenance and mortgages.

Usually, no more than 3 percent of Bridge’s tenants fail to pay. But in anticipation of a disastrous April, Cynthia Parker, Bridge’s chief executive, had her finance team analyze possibilities that would have seemed unthinkable weeks ago: What if only half the residents pay their rent? What if only a third do?

Bridge is already trimming expenses, like cutting consultants on future projects and putting off computer purchases for the office. But if rent collections lag for long, it will have to look at more severe measures, like laying off workers. Even with a healthy cash cushion, the company can go only so long with such a steep revenue decline.

“We’re running models right now to look at how long we can last on operating reserves,” Ms. Parker said in an interview. “We’re in the middle of it, but it’s anywhere from three to six months before this starts impacting loans.”

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Credit…Aaron Wojack for The New York Times
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Credit…Aaron Wojack for The New York Times

That the United States is careening toward recession is now a given. That this recession will be brutal is also a given: Economists are projecting that gross domestic product could fall as much as 30 percent in the second quarter, which would rival the worst months of the Great Depression.

The depth and suddenness of that fall have forced swift decisions by businesses and households about which payments to make. Those decisions set off their own economic ripples, as laid-off workers cut back spending and landlords struggle to pay their mortgages.

“These are cascades that, once they get going, are very hard to stop,” said Claudia Sahm, director of macroeconomic policy for the Washington Center for Equitable Growth, a progressive think tank. “You’re already seeing it.”

You can see it with Owen Rice, a commercial real estate broker who runs the Seattle office of Hughes Marino and is furiously negotiating to lower his clients’ rent bills or get deferrals and extended payment plans.

“It’s about ‘How do I survive, how do I keep people employed?’ and they’re looking to renegotiate so they can get through the next 90 days,” he said.

To blunt the economic pain, governments of all sizes have proposed some measure of relief to households and businesses. Several cities have put moratoriums on evictions of both residential and commercial tenants, while dozens of banks including JPMorgan Chase and Wells Fargo have agreed to halt new foreclosures and temporarily waive mortgage payments for borrowers whose finances have been affected by the virus outbreak.

On top of all this is the congressional move to address the crisis. It gives cash to most American households and extra help to those who have lost jobs, though not in time for next month’s rent. Treasury Secretary Steven Mnuchin has said most people will get their money within three weeks.

For businesses, the package aims to create a lifeline by delaying at least some decisions about which bills to pay and which debts to forgive. For instance, it gives small businesses access to forgivable loans that they can use to pay their rent and workers. And the potential forgiveness, not just the funds, may be crucial for many to survive.

“Everyone is resisting the word bailout, but how about nobody has to pay rent for the months they were closed?” said Ms. Anderson, owner of the London Plane in Seattle. “It’s not as if you’re going to make up the money for that rent that you didn’t get.”

There is wide agreement that the crisis demands a unique solution — not a traditional stimulus that would spur people to go out and spend, but the economic equivalent of a medically induced coma, a way to prevent permanent damage until the underlying health crisis can be solved.

Progressives, including Representative Alexandria Ocasio-Cortez of New York, have called for moratoriums on rent and other financial obligations. And even conservatives, despite concern about government initiatives already costlier than those in the 2008-9 financial crisis, have said this is a case where it makes sense to provide grants — not merely loans — to individuals and businesses.

Michael R. Strain, director of economic policy studies at the right-leaning American Enterprise Institute, said that corporations might be able to afford to take on extra debt to carry them through a period of lost revenue, but that most small businesses, particularly in the service sector, could not.

“A manufacturing company could come back to a backlog of orders, but if you’re a services business, you’ve just lost this revenue,” he said. “People are not going to go out to eat six times as often when this is over.”

If businesses have to take on huge debt burdens to survive the crisis, Mr. Strain said, “that situation leads to a much more prolonged downturn.”

For workers, weathering more than a few weeks without pay may be a challenge. The 11-year economic expansion left record low unemployment, but it did less to ensure financial stability. The Federal Reserve reported last year that four in 10 Americans would have difficulty covering an unexpected expense of $400.

Cori Aitken, 34, lost one job as a sales representative at Temescal Brewing, a small brewery in Oakland, Calif., and another job tending bar. Now she’s looking to cut her $1,900 monthly expense budget, which includes about $1,000 in rent and $300 for utilities, along with a phone bill, car insurance and loan payments.

The first thing she did was cancel her $90-a-month membership at the Y.M.C.A. When her credit card bill arrives, she’s going to make the minimum payment to preserve cash. With about $1,000 in savings and the expectation of $1,500 a month in unemployment benefits, Ms. Aitken can pay April’s bills easily enough.

“I’m worried about May 1 and June 1,” she said.

As restaurant and retail traffic have come to a near standstill nationwide, many small businesses have tried to bring in revenue by selling their services online or recasting themselves as delivery and takeout businesses. Bars are selling to-go cocktails. Exercise studios are conducting fitness classes over the internet. Restaurants that used to require reservations are delivering to doorsteps.

But for most, it’s not enough. Ms. Anderson, from the London Plane, started delivering popular items like pasta Bolognese with a bottle of red wine and a loaf of bread. After a week of haphazardly sending out boxed meals that generated about 10 percent of normal sales, she decided to stop and lay off the rest of her employees.

With a $20,000 tax payment and a $30,000 rent bill coming due, she had to decide how to spend what little was left.

“We’re prioritizing our employees and offering them an extra week of pay,” she said. “The landlord can probably wait.”

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