A Student of the Real Estate Game (ASotREG)

I've written over 250 articles. Use the search below for any topic having to do with Real Estate and investing.

Try these: passive investing, asset management, real estate

I've written over 250 articles. Use the search below for any topic having to do with Real Estate and investing.

Try these: passive investing, asset management, real estate

The State of Evictions and the Role of Housing in Poverty

Sep 11, 2020 | Asset Management, Market News, Multifamily

If you work in multifamily real estate (especially workforce housing), you’ve probably spent a lot of your time recently monitoring collections, modifying payment procedures, and working with delinquent residents. You’ve been closely tracking the various eviction restrictions enacted by the CARES Act, state and local agencies, and the CDC, trying to make sense of what it all means and what adjustments you should be making at the property-level.

You’ve likely lost sleep thinking about the impact the expiration of the additional $600 per week in unemployment benefits may have on collections and are beyond frustrated by Congress’s inability to pass a new round of stimulus.

It’s a challenging situation for both tenants and landlords. With the dust beginning to settle, I wanted to synthesize my thoughts on the current environment and the role housing plays in poverty:

  • Many delinquent residents are accumulating several months of past due rent. The various eviction restrictions have limited the landlord’s ability to remove delinquent residents and lease that unit to a paying tenant. This is getting worse each month.
  • The CDC’s new order prohibits new and previously filed evictions of tenants who provide landlords with a signed declaration meeting specific criteria; income level, loss of income, they’re making good faith efforts to make partial rent payments, and they understand they will still owe the unpaid rents.
  • The $600 per week expanded unemployment benefits expired July 24th and no additional aid package has been passed. With no additional stimulus checks or extra unemployment benefits, there’s no way residents with high delinquent balances will catch up.
  • We all expected a second round of stimulus checks and some level of enhanced unemployment benefits, but now it’s unlikely that Congress can reach an agreement before the election.  
  • Many landlords are finding creative ways to remove delinquent residents; non-renewing residents with high delinquent balances and even paying residents $500 – $1,000 to walk away from their unit. Residents who cooperate aren’t reported to the credit agencies and can oftentimes go and lease a unit at another apartment complex.
  • We’re essentially kicking the can down the road.  Landlords can’t evict while challenged residents build up a balance they can never pay off. What happens next? Will landlords forgive a part of the balance in return for partial payment? What will the eviction backlog look like? What impact will the eviction have on these individuals and families?

I can’t pretend to understand all the nuances around the current housing crisis; however, I have a unique insight into the challenges our residents face.

It’s impossible to ignore that at the other end of the story is real people who have been affected by the pandemic.

Today, many renters spend ~50% of their income on housing costs, with one in four spending over 70% of their income on rent and utilities alone. It’s crazy to think about it.

When families are evicted, they oftentimes lose their possessions, their kids need to switch schools, and the court record prevents them from obtaining decent housing elsewhere. Studies have shown that eviction causes job loss and been shown to affect people’s mental health.

Eviction is not just a condition of poverty, it is the cause of it.

The Princeton Eviction Lab tracks evictions by market and is a great resource for understanding just how widespread the eviction crisis is.

We need to get this under control and to me it starts with building more middle-income housing.

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