The coronavirus has badly hit a city where already housing was at a stress point. Politicians in the City, including Bill de Blasio, the Mayor were just beginning to consider introducing some type of universal rent control in New York when the pandemic hit.
The City of New York, perhaps more than any other American metropolitan area, is a city of renters. About 5.4 million people or two-thirds of the City’s households live in rental units. The loss of jobs and declines in incomes associated with Covid-19 is hitting New Yorkers hard. Many are facing challenges in paying house rent.
It’s important, however, to note that it’s not only renters who are facing challenges. Some landlords are also bearing the brunt of the Pandemic. The majority of small landlords lack access to good credit that can help them cover costs associated with lost or late rents.
Some are calling for federal and state relief on housing rates as well as other costs typically associated with their rental properties. This would provide them with choices in terms of supporting their tenants. Some are even having to pay higher fees for trash services due to increased trash volumes and even trash violations. This is simply because more people are now working from home.
How Can Landlords Help?
As renters continue losing jobs due to the Covid-19 Pandemic, landlords are faced with tough choices. In April, for example, in New York, as many as 40% of renters were unable to meet their rent obligations. Landlords with tenants in Broadway or the service industry may not be collecting rents even though some of these people are possibly collecting unemployment benefits.
Under such circumstances, although they are rightly concerned about protecting their investment and keeping up with their mortgage payments, landlords also have a competing concern towards helping out their struggling tenants.
Some of the ways through which they can help include:
Keep Building and Facilities Safe
Landlords have a social and moral responsibility to ensure their tenants are living in healthy and safe environments. This is particularly more pertinent during the Covid19 Pandemic. Provision of services within buildings should take into account health requirements such as social distancing especially for shared services such as Laundromats, gyms, lifts, etc.
Landlords must do everything reasonably practicable towards ensuring people living or visiting the building are not unnecessarily exposed to the risk of contracting Covid19. They can keep tenants constantly informed of the latest government or local health initiatives, requirements, or guidelines.
Communicate with Tenants and Share Possible Solutions
As more businesses continue shutting down due to Covid-19, millions of Americans will need help if they are to survive. Even those New Yorkers who qualify for Federal and State benefits are encountering challenges in the system that hinder access to assistance.
Although landlords are facing challenges of their own, they are still in positions of easing the woes of their tenants. For example, if you can, talk directly with your tenants or at least request that you be included in the ongoing conversation.
The Pandemic is giving everyone different pressures and options on how to cope. Find out what kind of concessions your financier or bank might be offering, the landlord insurance options available for you, the kind of inflexible costs that you face such as council rates, and how much of the associated pain you are ready to share – and, perhaps more importantly, for how long.
Request your tenants to possibly do the same analysis. This is likely to will form a fair basis on which to make compromises.
Reach out to Your Tenants on a Personal Level
If as a landlord you have not already done so, reach out to your tenants and see how their businesses and families are being impacted by the Pandemic. Many retail tenants are deemed to be essential but the truth is that they can only operate in a severely constrained manner while others have been declared non-essential. These are the tenants who are likely to experience cash flow issues with rent becoming harder to pay.
You may need to come up with strategies on how to help them. If you can afford a partial or total rent deferral, you may want to consider offering your tenants such a deferral by modifying the existing lease.
Signing Rent-Deferral Agreements
In March, the US Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Part of the CARES package is a 60-day moratorium on foreclosures for those homes with mortgage loans that are federally backed. Mortgage forbearance moratorium is a delay of payments without any accrual of fees or interest.
Landlords receiving forbearance are barred from serving their tenants with eviction notices during the forbearance period. The law also bars landlords with all types of federally backed mortgages from enforcing tenant evictions until at least July 25.
Landlords are being encouraged to sign rent-deferral agreements with their tenants, in which the signing tenant agrees to add to future payments the unpaid rent.
Understanding Tenant Eviction Laws
It is estimated that about 28% of the 43.8 million rental units in the US are covered by the eviction protections offered by the CARES Act. Also covered are other properties in the country subsidized with Low Income Housing Tax Credits as well as other federal backing.
Whether landlords are necessarily following these new rules is another debate altogether. Although a Bill to forgive all mortgage payments and rent for the period of the Covid-19 crisis was introduced in April by Ilhan Omar, the Minnesota Representative, for now, renters no matter where they live still owe the rent.
As a landlord, you could opt to reduce, defer, or entirely suspend rent for your tenants for a period in order to avoid tenant insolvency. However, ensure any such decision is documented very carefully.
The Covid-19 Pandemic has upended the “status quo” globally and real estate in New York is no exception. Some landlords may never fully recoup the lost payments due to Covid-19 shutdown especially if they previously had gone to court to seek help with collecting rent from a tenant.
It’s important, however, to appreciate that the interests of the tenants and the landlords are really complementary. If they act proactively, landlords have an opportunity to turn the current Covid-19 crisis into a window of opportunity mutually beneficial to themselves, the tenants, investors, and the community.