Tenants Stay Current on Rent, for Now

Tenants Stay Current on Rent, for Now

Since April, landlords have looked to the first of the month fearing that tenants will stop paying their rent. For the most part, that has not happened. Despite a 14.7 percent unemployment rate and millions of new jobless claims each week, collections are only slightly below where they were last year, when the economy was booming.

How can this be? The answer is a little negotiation and a lot of government money. The $2 trillion CARES Act, which backstopped household finances with stimulus checks and extended unemployment benefits, has kept a surprising number of tenants current on their monthly balances. At the same time, many landlords have reduced rents or are forgiving overdue payments in full or in part.

The trend cannot continue without a swift and robust recovery, which is becoming increasingly unlikely, or without another big injection of government money, which Senate Republicans say is not happening anytime soon. American households were struggling with rent long before the economy went into free fall, and there are signs — from an increase in partial payments to surveys that show many tenants are putting rent on their credit cards and struggling to pay for essentials like food — that this pressure is building.

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Credit…Andrew Harnik/Associated Press

When the coronavirus outbreak started shutting down the economy in March, there was widespread fear that millions of tenants would fall behind on their monthly bills. Renters were already struggling with housing costs, with a quarter of tenant households paying more than half their before-tax income on rent and utilities, and the loss of jobs and hours seemed almost certain to worsen those troubles.

Much of the available data has told a different story. In April, the National Multifamily Housing Council started releasing weekly rent tallies, and aside from a substantial dip in the first week, the rates have been only slightly below where they were last year. Through May 20, landlords in the council’s survey had collected 90.8 percent of rents, compared with 93 percent a year earlier. A similar story has played out in state surveys and earnings reports from real estate investment trusts like Mid-America Apartment Company and Equity Residential.

But many of these numbers skew toward higher-end buildings. Other surveys show that buildings with poorer tenants have lower collection rates. Meantime, deferrals and partial payments appear to be increasing: Apartment List, a rental listing service, said 31 percent of respondents failed to make the full May payment on time, up from a quarter the month before. Hoping for a swift recovery, many landlords are telling tenants they can pay later, knowing this often won’t happen.

“Landlords and renters will share in the pain,” said John Pawlowski, an analyst with Green Street Advisors, a real estate research firm in Newport Beach, Calif. “We just don’t know what the sharing balance will look like.”

New Story, a San Francisco-based nonprofit organization that builds and finances affordable housing, recently raised $2 million to help renters struggling to make their bills because of coronavirus-related job losses. Alexandria Lafci, a founder of the organization and its chief operating officer, has spent the last few weeks calling landlords to haggle on behalf of tenants.

“I called 21 properties and got eight yeses with an average of 20 percent off,” she said. Only three landlords rejected any accommodation, with the rest agreeing to arrangements like lower payments for the next three months or shaving down past-due balances to give tenants a break without lowering their advertised rents.

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Credit…Tom Brenner/Reuters

Rental housing is a fragmented business, with purveyors ranging from publicly traded corporations that own tens of thousands of units to operators of only one or two. And falling rent collections are more likely to affect smaller landlords, who tend to have a limited financial cushion and less capacity to borrow.

These landlords play an important role in the housing system — especially for lower-income tenants. Individual investors own about half the supply of low-cost units, and many are what housing advocates call “naturally occurring affordable housing,” or homes and apartments that carry below-market rents even without a subsidy, according to the Joint Center for Housing Studies at Harvard. These units, which overwhelmingly consist of small apartment buildings and single-family homes, are also more likely to have tenants affected by the coronavirus, with more than half of renters in the hardest-hit occupations living in single-family homes and duplexes, according to the center.

Naturally occurring affordable housing is often overlooked, but these units are crucial. Government housing programs like Section 8 rental vouchers and the Low-Income Housing Tax Credit do not come close to satisfying the demand for lower-cost housing. This is why cities have yearslong lists for vouchers and lotteries for the tiny number of newly built subsidized units.

Getting such housing is laborious and invasive, and it leaves out workers like undocumented immigrants and families whose incomes put them just beyond the threshold to qualify. Naturally occurring affordable housing is in a sense more valuable, because it represents units that anyone — someone switching jobs or fleeing an abusive spouse, for instance — can find on Craigslist.

This housing can also be easily lost, not because it disappears, but because it is purchased by a homeowner or investor who renovates in hopes of increasing rents. This is what has happened over the last two decades: Since 2014, according to Harvard’s Joint Center, the nation has lost about 2.7 million affordable units, defined as those carrying rents less than $600.

Carline Chery, 50, owns three Boston duplexes. Two-bedroom units go for $1,800, more than what the lowest-income renters can pay but roughly $900 less than the typical rent in the metropolitan area, according to Zillow. Compared with a public company, Ms. Chery runs a shoestring operation, with no reserves and little capacity to absorb a missed month.

  • Frequently Asked Questions and Advice

    Updated May 28, 2020

    • My state is reopening. Is it safe to go out?

      States are reopening bit by bit. This means that more public spaces are available for use and more and more businesses are being allowed to open again. The federal government is largely leaving the decision up to states, and some state leaders are leaving the decision up to local authorities. Even if you aren’t being told to stay at home, it’s still a good idea to limit trips outside and your interaction with other people.

    • What’s the risk of catching coronavirus from a surface?

      Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks.

    • What are the symptoms of coronavirus?

      Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days.

    • How can I protect myself while flying?

      If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.)

    • How many people have lost their jobs due to coronavirus in the U.S.?

      More than 40 million people — the equivalent of 1 in 4 U.S. workers — have filed for unemployment benefits since the pandemic took hold. One in five who were working in February reported losing a job or being furloughed in March or the beginning of April, data from a Federal Reserve survey released on May 14 showed, and that pain was highly concentrated among low earners. Fully 39 percent of former workers living in a household earning $40,000 or less lost work, compared with 13 percent in those making more than $100,000, a Fed official said.

    • Is ‘Covid toe’ a symptom of the disease?

      There is an uptick in people reporting symptoms of chilblains, which are painful red or purple lesions that typically appear in the winter on fingers or toes. The lesions are emerging as yet another symptom of infection with the new coronavirus. Chilblains are caused by inflammation in small blood vessels in reaction to cold or damp conditions, but they are usually common in the coldest winter months. Federal health officials do not include toe lesions in the list of coronavirus symptoms, but some dermatologists are pushing for a change, saying so-called Covid toe should be sufficient grounds for testing.

    • Should I wear a mask?

      The C.D.C. has recommended that all Americans wear cloth masks if they go out in public. This is a shift in federal guidance reflecting new concerns that the coronavirus is being spread by infected people who have no symptoms. Until now, the C.D.C., like the W.H.O., has advised that ordinary people don’t need to wear masks unless they are sick and coughing. Part of the reason was to preserve medical-grade masks for health care workers who desperately need them at a time when they are in continuously short supply. Masks don’t replace hand washing and social distancing.

    • What should I do if I feel sick?

      If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others.

    • How can I help?

      Charity Navigator, which evaluates charities using a numbers-based system, has a running list of nonprofits working in communities affected by the outbreak. You can give blood through the American Red Cross, and World Central Kitchen has stepped in to distribute meals in major cities.