Earlier this month, the Centers for Disease Control and Prevention (CDC) extended the renter eviction moratorium through March 31, which is good news for renters impacted by Covid-19. But the ban is putting additional pressure on small landlords, known as “mom-and-pop landlords,” struggling to pay their bills.
In some states, moratoriums are scheduled to last even longer. California, for example, extended its moratorium to June 31, and New York has pushed its moratorium deadline back until May 1.
Around 20% of renter-occupied households, or nearly 10 million households, were behind on rent at the end of January, according to data from the U.S. Census Bureau. The total amount of back rent is unknown, but Moody’s Analytics estimates that delinquent renters owe, on average, about $5,586 each. In New York, renters are up to $1 billion in arrears.
Mom-and-pop Landlords Earn Less Than Owners of Large Buildings and Single-family Homes
Mom-and-pop landlords own approximately 77% of small building units, which are often more affordable than single-family rental homes or large apartment complexes. These small investors and their tenants are likely to be more vulnerable to economic downturns, according to an analysis by the Urban Institute.
Many of these small investors (around 34%) are retired, and their rental units are their only source of income, which imperils them if they can’t collect rent or receive Mom-and-pop landlords also earn around 17% less than owners of single-family homes or large complexes and have the largest share of Black (15%) and Hispanic (13%) owners.
“Covid-19 has disproportionately affected Black and Hispanic households, and their greater representation both as tenants and landlords in two-to-four-unit buildings may further exacerbate wealth inequality if no action is taken to protect two-to-four-unit landlords from losing their property because of the decline in rental income,” a report by the Urban Institute states.
‘Taking Property Without Compensation’
Some have called the eviction ban unconstitutional, accusing lawmakers of holding property hostage and forcing landlords to house people who would otherwise be homeless (which is typically the job of the cities and states) while still being responsible for mortgages and property taxes. This burden has caused many landlords to suffer financial distress.
Stephanie Friese, attorney at law firm Chamberlain Hrdlicka in Atlanta, is representing a landlord whose rental property is his sole source of income and has not been paid in six months. Friese and her client are suing DeKalb County, trying to force the local government to begin eviction proceedings.
Friese says she doesn’t believe the court’s unwillingness to schedule evictions is based on statutory authority: “Some counties have just willy nilly decided not to schedule evictions.”
“What these orders are doing is taking property without compensation. I don’t think it’s constitutional,” Friese says. “It’s indentured servitude to have to uphold your responsibilities as a landlord while people can live there for free.”
Landlords Face Uphill Battle Evicting Tenants During Covid
To avoid Covid-related evictions, tenants need only sign the CDC’s Covid declaration form. It states that you were impacted by Covid and can no longer afford all or some of your normal rental obligations.
For landlords, this declaration can mean dealing with a whole host of behaviors (not necessarily Covid-related) that might have otherwise resulted in eviction proceedings.
Forbes Advisor spoke to several real estate and unemployment attorneys across the country about mom-and-pop landlord rights. Here are two takes on this question: What can landlords do if they’re struggling financially and can’t collect rent from their tenants?
Because different states and municipalities have their own rules and programs, the lawyers’ advice varied. So landlords need to seek advice from local attorneys who know the laws in their area.
Matthew I. Kramer, a real estate attorney at Weinberg Wheeler Hudgins Gunn & Dial in Miami, said that courts in south Florida generally interpret the CDC eviction moratorium as a blanket order, so they’re not inclined to look at eviction cases now, even those that include criminal activity.
“The reality is it’s next to impossible to evict a residential tenant under the CDC rules. I’ve had situations where the tenants have committed criminal acts, and it’s impossible for the landlord to evict,” Kramer says.
“Unless there are some extenuating circumstances, landlords might be spinning their wheels trying to get an eviction case in front of a judge. It might be better to hold off until the moratorium expires,” he says.
In California, the system is kind of stacked against mom-and-pop landlords, says Joseph Tobener, an attorney at Tobener Ravenscroft in San Francisco.
Landlords are forced to either take no rent or reduced rents if their tenants make the Covid declaration, and because “subsidies are not there to supplement the income they’re losing,” landlords have resorted to loopholes and more extreme measures.
“The untold story is that landlords are becoming increasingly desperate. We see lockouts, trumped-up evictions,” Tobener says. For example, because a landlord cannot evict for nonpayment, they may create a nuisance eviction complaint or say they’re getting out of the rental business to move non-paying tenants out.
“A lot of this could be ameliorated with a robust package by the federal government,” Tobener says.
Landlords Can Apply for $25 Billion Relief on Behalf of the Tenants
Last month, the U.S. Department of the Treasury announced its $25 billion Emergency Rental Assistance Program (ERAP) under the Consolidated Appropriations Act, 2021. The funds are used to help struggling households pay rent and utilities.
The money has been distributed directly to the states, including the District of Columbia, U.S. territories, local governments with more than 200,000 residents, the Department of Hawaiian Home Lands and Indian tribes (defined to include certain Alaska native corporations) or the tribally designated housing entity of an Indian tribe.
From there, the states decide how the money is distributed. Landlords can request assistance on behalf of their tenants.
For landlords to access ERAP funds for tenants who are unable to pay rent, they are required to:
- Get the tenant’s signature on the application (electronic signatures are acceptable)
- Share all correspondence and paperwork with tenants
- Use the funds for current rent or back rent
Government Relief for Landlords
In addition to the ERAP, beleaguered mom-and-pop landlords can find financial assistance in various ways, as long as they operate as a business and report their earnings.
For landlords who operate as sole proprietors or corporations, they may be eligible for Pandemic Unemployment Assistance (PUA), a program designed to help self-employed workers affected by the coronavirus who might not usually qualify for unemployment insurance (UI).
Some problems with the PUA process is that employment departments, which issue PUA benefits, might be backlogged, says Cyrus Mor, an employment attorney in Orange County, California.
“In California, the employment development department (EDD) has over 1 million backlogged claims. Many of the claims have been flagged for fraud, and they should never have been; this is why it’s taking so long for many people to get their benefits,” Mor says.
PUA was part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act and covered up to 57 weeks of lost wages; it has been retroactively extended. The current PUA expiration date to apply for benefits is March 13.
Similarly, mom-and-pop landlords who report their rental income either through a 1040 Schedule E (or other structure that shows revenue, such as a limited liability corporation or LLC) can apply for the Small Business Administration’s (SBA) Economic Injury Disaster Loans (EIDL) for landlords. These are low-interest rate loans that do not have to be repaid until one year from the loan date. Additionally, if the loan is under $25,000, they don’t have to pledge collateral
“Many small business landlords don’t realize they qualify for these loans,” says Kathy Cook, acting public affairs supervisor at the SBA.
For landlords with government-backed mortgages (this includes home loans backed by Fannie Mae, Freddie Mac, the Federal Housing Administration, the U.S. Department of Veterans Affairs or the U.S. Department of Agriculture, there’s the option to apply for forbearance under the CARES Act. A forbearance plan will allow you to pause your mortgage payments for 180 days with the possibility of extending it for an additional nine months.
Borrowers who don’t have government-insured mortgages should contact their lender if they cannot afford their mortgage payments.
Both Landlords and Tenants Have Rights
Covid has taken a wrecking ball to many people’s financial lives, especially low-income people and those who work in the service and hospitality industries, which was disproportionately affected by the shutdowns. For those folks, paying rent can be impossible. However, nonpayment of rent can create a disastrous domino effect that can gut mom-and-pop landlords who depend on the income to pay bills and their mortgage payments.
It’s critical that landlords don’t run afoul of the law and make matters worse. The best thing landlords can do is try to work with their tenants, says Zac Oswald, attorney for the Legal Aid Society’s housing practice in Nashville.
In rural areas and with elderly tenants, they often don’t know that rental assistance is available. So it might serve everyone if landlords help them understand their rights and get rental funds on their behalf through programs like ERAP. In this scenario, everyone wins. However, forcing renters out illegally or making their living arrangements untenable could plunk the landlord in a lawsuit.
“Gigantic no-nos include changing the locks and ending utilities to push people out,” Oswald says. “There’s a lot of misinformation about what landlords can and can’t do, so it’s important to talk to an attorney if you want to evict a tenant.”