Rent Laws and Coronavirus: What Landlords Should Know
As the novel coronavirus (COVID-19) sweeps the nation, the United States is urging citizens to stay at home and socially distance themselves. Experts agree that taking these precautions is the best way to “flatten the curve” and stop the spread.
Sports, entertainment, and events industries essentially came to a halt overnight as large gatherings became quickly banned, but now more and more states are ordering for the temporary closure of non-essential businesses.
While this may benefit public health, it’s devastating for business and has nearly crippled the economy. Bars, restaurants, movie theaters, shopping centers, gyms, parks, beaches… you name it, nearly everywhere people would ordinarily go for work or leisure is off-limits until further notice.
As a result, nonessential businesses are forced to close their doors, displacing hundreds of thousands of workers and sending unemployment levels to record-breaking highs. The Guardian reports that more than 6.65 million people filed for unemployment benefits in just last week alone, adding to the 3.3 million unemployment filings from the week before.
By these numbers, more U.S. citizens have filed for unemployment in the last two weeks than they have over the last ten months. This presents a major problem for landlords; an increasing number of renters are required to stay home, in the dwelling you provide, but fewer and fewer have the income required to stay in place, making fears of rent non-payment virtually inevitable.
The last thing the nation needs is another housing crisis to compound on already dire circumstances, but at the same time, you’re running a business and your livelihood is at stake, too. So how do we avoid eviction levels like 2008, while ensuring that housing providers like yourself can also stay afloat?
New rent laws and landlord legislation are under development as federal and state governments attempt to address the issue. Here’s what you need to know so far:
State-Issued Rent Moratoriums
Each state is taking its own approach to rent laws amid the coronavirus pandemic and the economic crisis that ensued as a result. Some states, such as California and New York have been hit much harder than others.
California, for example, responded with Governor Newsom’s executive order N-37-20, issuing a state-wide moratorium on evictions due to rent non-payment in effect until May 31, 2020. That doesn’t mean that all CA tenants are freed from rent obligations, however. It means that renters whose ability to pay rent has been impacted by COVID-19 may not face eviction for six months. However, they must prove a 30% loss of income, and at the end of the six months, they will be still responsible for the missed rent payment(s).
Pending laws in New York are taking a different approach, instead proposing a 90-day suspension of all rent payments if a tenant has lost a job or closed their business due to the coronavirus.
As a landlord, you’ll have to keep up with the pending and enacted rent laws in your state to stay compliant with the legislation that unfolds during these unprecedented times. The National Housing Project has published a state-by-state eviction moratoria, researched and updated by students at Columbia University, that you can use as a resource.
In the meantime, landlords are encouraged to negotiate with their tenants to find a payment schedule that benefits both parties. A tenant may offer partial rent at the beginning of the month, and payment in full two weeks later. That way, you can keep rental income streaming while providing critical housing to displaced workers.
Federal Stimulus Package and Landlord Aid
There has also been rent law developments at the federal level, with the U.S. Dept. of Housing and Urban Development (HUD) issuing a moratorium on evictions from public housing and federally backed mortgages—but what does that mean for private housing providers running a small rental property business? Unfortunately, not much.
Congress recently passed a $2 trillion stimulus package—formally known as the CARES Act—that includes checks to low- and middle-income families. This may help ensure landlords get paid, since rental property owners are still responsible for their mortgage payments, insurance, taxes, utilities, and staff salaries.
However, as the legislation presently stands, the aid received through government-issued checks are a one-time deal. For many urban renters—where the pandemic has hit hardest—the $1,200 would be barely enough to cover one month’s rent, let alone the pending rent payments in the months to come. Furthermore, no one is quite certain when these federal payments will be issued or received, leaving landlords at a stand-still in the interim.
Depending on your income level, you may also be entitled to a stimulus check that can help cover financial obligations while tenants struggle with rent payments, but that money will only go so far. Ultimately, if tenants can’t pay rent, landlords will have a very difficult time paying their own employees and meeting their mortgage obligations—putting their properties at risk of foreclosure, and even more Americans at risk of losing their jobs.
Although the CARES Act includes nearly $350 billion for the new Paycheck Protection Program, designed to get cash into the hands of small business owners, there are certain rules for qualification. The Paycheck Protection Program may have less red tape than other federal loans available through the Small Business Administration (SBA) disaster relief program, it nonetheless states that new loans may only be used to cover:
- Mortgage interest incurred before Feb. 15, 2020
- Utilities which service began before Feb. 2020
- Payroll costs and employee benefits
In fact, 75% of funds provided through loans must be used on payroll. That may benefit property managers who oversee large apartment complexes, but what about the independent landlords who lease small, single-family units? According to HUD and the U.S. Census Bureau, mom-and-pop investors who own two to four rental units own nearly three-quarters (74%) of all apartment properties. They’ll require greater assistance to avoid foreclosure and preserve their livelihood.
Hope on the Horizon
There’s no government bailout for landlords as of yet, but the National Multifamily Housing Council, in coalition with ten other real estate organizations, have written letters to Congress pleading for industry help.
Continue checking for regular updates from federal and state legislators. Until then, stay healthy and remain hopeful.
Kaelee Nelson received her Master degree with an emphasis in Digital Humanities and pursues her career as a writer in San Diego, currently writing for 365businesstips.com. She enjoys informing readers about topics spanning industries such as technology, business, finance, culture, wellness, hospitality, and tourism.