With eviction wave looming, CT apartment landlords report varying degrees of distress

Eviction NoticeHartford developer Carlos Mouta is one of the last landlords you’d expect not to be in the market to buy a new apartment building.

But right now, as back rents from his 250-plus units concentrated in the city’s Parkville section continue to snowball due to the effects of COVID-19, the veteran realty investor says his deal spigot is shut off.

“I would absolutely not buy any properties,” Mouta said in a recent interview. “If I were to buy something, which I would not, I would buy an empty building rather than buy a building with tenants in it.”

Mouta is one of many apartment landlords aggrieved since March by state and federal pandemic-related decrees that have blocked the removal of most nonpaying tenants and stopped new eviction cases from being filed.

He said the situation is going to become dire in the months ahead, for both landlords and tenants, leading to foreclosures, missed tax payments, less available housing and even infestations as some property owners cut back on basic services.

“The water is receding, the tsunami’s coming,” Mouta said. “How big is that wave going to be when it comes back, how far is it going to go?”

Mouta, who declined to detail exactly how many of his tenants have stopped paying rent, stressed that his predictions were about the apartment market in general — not his own portfolio — based on discussions with numerous other landlords.

The eviction moratoriums, which will expire at year’s end barring any further government action, aim to keep residents housed and with a safe place to quarantine amid an unprecedented health and economic crisis that caused more than 250,000 residents to lose their jobs at the pandemic’s April peak, making it harder to make ends meet.

But the situation has also placed a heavy burden on some landlords, who argue they are being forced to take losses that will likely last well past 2020, as courts are expected to struggle to process an anticipated wave of eviction filings starting in January.

Analysis by global advisory firm Stout pegs the current past-due rent total in Connecticut at as much as $171 million, which could reach $354 million by January.

Meantime, more than 99,000 Connecticut renters were behind on their rent payments as of mid-October, according to a U.S. Census Bureau estimate.

Even with the end of the eviction bans just a few months away, landlords are worried the policies may be extended further and skeptical about what they’ll be able to recoup as well as how quickly they’ll regain possession of their apartments.

“They’re never going to be able to pay you back if they owe $7,000 or $8,000,” predicted Souza, who said that many of his family-owned company’s 275 Greater Hartford tenants have continued to pay rent this year, but that a number of coalition members have been less fortunate. “The landlords are going to end up holding the bag on that.”

“There’s a lot speculation obviously as to how to close the federal government is to an additional stimulus,” said Cecil Thomas, a housing attorney with Greater Hartford Legal Aid who represents low-income tenants in eviction proceedings. “Assistance right now is really important and I’m not sure allowing the eviction system to go forward again is the best way to deal with the issues we’re trying to deal with in the midst of a pandemic.”

Landlords in Connecticut and elsewhere have sued to overturn state-level and federal eviction bans, alleging they are unconstitutional, but those challenges so far have not found much success. Several lawsuits challenging an eviction moratorium issued by the U.S. Centers for Disease Control in September remain ongoing in federal court.

Tighter standards

Mouta says some of his tenants stopped paying rent as early as March, when COVID-19 reached Connecticut.

With no avenue for evicting them, he’s tightened his standards for any new prospective tenants — doubling security deposits and increasing the minimum acceptable credit score.

“There are a lot of people who would be qualified, but now they’re out of housing because we can’t take a chance,” Mouta said. “Everyone is doing that because it’s all we’ve got.”

Those actions are meant to blunt the impact of falling rent collections, but they have other consequences.

“It’s slowed down rentals, so there’s higher vacancy,” Mouta said.

He said most of his tenants had jobs when they moved into their units, so if they became unemployed due to the pandemic, they’ve still not paid him despite likely collecting unemployment benefits, which between late March and late July were $600 a week higher than normal due to federal stimulus funds.

For Mouta, a big issue with those not paying rent is they haven’t communicated with him.

Mouta said he’s cut back on cleaning his buildings and is delaying some planned repairs or improvements.

Erin Kemple, executive director of the Connecticut Fair Housing Center, said she is sympathetic to landlords who are hurting financially because of the pandemic, but she urged caution about any narrative suggesting that tenants are choosing not to pay rent simply to take advantage of a temporary situation.

“That certainly is not my experience,” Kemple said. “While there may be people out there who are taking advantage, the vast majority of people who I have any contact with are really in desperate straits.”

Kemple has pushed the Lamont administration to commit more funding, at least another $60 million, to the state’s rental assistance program, and she hopes a federal rental assistance stimulus is forthcoming.

Mixed bag

The pandemic is impacting landlords unevenly.

Many tenants — particularly in higher-end properties — have been paying rent as usual.

The quasi-public Capital Region Development Authority (CRDA), which has 24 apartment buildings containing nearly 2,000 units in its loan portfolio, hasn’t heard much complaining from its landlord-borrowers about renter nonpayment, according to Executive Director Michael Freimuth.

“I’ve been expecting it to pop up some place, but we haven’t seen it,” Freimuth said. “That doesn’t mean there aren’t individual cases out there.”

Any pandemic-related troubles experienced by CRDA’s multifamily developments — which are concentrated in downtown Hartford and contain largely market-rate units — have been mostly related to construction delays, sluggish leasing activity for newly finished properties, and higher vacancy rates for some.

While CHFA was worried back in March about how COVID-19 might impact its portfolio, things so far have turned out better than expected, CHFA CEO Nandini Natarajan said.

The quasi-public agency, which issues public bonds to finance affordable housing for low- and moderate-income renters, has had to grant only seven loan payment deferrals to developer-borrowers facing a COVID-19 cash crunch.

Natarajan’s hunch is that federal stimulus money has lessened the potential blow, in addition to tenants in those properties having been deemed essential workers and still earning a paycheck. Section 8 vouchers held by a portion of CHFA tenants also guarantee some stability in rent payments.

Source: hartfordbusiness.com