Struggling renters put pressure on landlords to sell or tighten tenant screening
Many tenants struggle to stay afloat amid the coronavirus pandemic. This has been shown by two recent studies that are increasing the pressure on their landlords.
According to the Mortgage Bankers Association, a trade organization, around one in every 12 tenants - or 2.82 million households - missed, delayed, or made a late payment in September. The percentage of tenants receiving unemployment benefits more than doubled from April to September, increasing from 3% to 7%. This was the result of the Internet panel survey of over 8,000 households.
"There is a tremendous amount of evidence that federal support for stimulus checks and the paycheck protection program has been great at helping households pay rent," said Jamie Woodwell, MBA vice president, commercial real estate research. "But some of those resources are starting to run out."
Jenn Katchmark of Washington holds up an evacuation sign intended for Pres. Donald Trump walks through Black Lives Matter Plaza in Washington on Thursday, November 5, 2020. (AP Photo / Jacquelyn Martin)
In a separate survey of 1,381 landlords by Avail and the Urban Institute, 35.2% of landlords did not receive 100% of rental payments in September, and a slightly larger proportion - 38.1% - did not expect full payments in October.
More than three quarters of the landlords who had not received any payments in September stated that their tenants “did not pay or did not pay in full” according to the survey conducted by the advice platform for mom and pop landlords, while 12.9% offered their tenants one Discount to ease the financial burden of the pandemic.
The key help is running out
The results come when state aid runs out and rental support is harder to find.
The unemployed Americans already faced two financial problems: first, the expiration of the additional $ 600 weekly unemployment benefit under the CARES Act in July, and second, the expiration of the additional $ 300 under the Lost Wages Assistance (LWA) program in September.
Read More: Here's What You Need To Know About The New Eviction Moratorium
The expiration of two more government programs by the end of the year could mean up to 15 million more unemployed Americans left without unemployment benefits.
At the same time, the National Low Income Housing Coalition found that nearly a third of city and county rental assistance programs had been postponed or their funds had dried up.
Snowball effect on landlords
Housing attorneys demonstrate outside the building where the office of Andrew Cuomo, New York Governor, is located in New York on Monday, September 28, 2020. The activists called for immediate, safe and stable housing for all people in New York and an extension of the moratorium on evictions for residential buildings. (AP Photo / Mary Altaffer)
This can also affect the owners, as both studies pointed out.
In the second and third quarters, 11.0% of tenants missed a payment in the two quarters, 4.0% missed two payments, 2.8% missed three payments, and 3.8% missed four or more payments, according to the MBA . As a result, rental property owners lost up to $ 9.2 billion to these missed payments in the third quarter of 2020.
Read more: How to negotiate with your landlord if you are facing an eviction
Because missed payments add up, landlords use stricter criteria when reviewing new customers. The Urban Institute and Avail study found that 35.6% of landlords have tightened their criteria, with 50% of Black and Hispanice landlords focusing on previous evictions when selecting tenants. This is compared to 35% for white landlords.
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Many landlords are also considering selling their properties. The same study found that around 31% of landlords felt that they were now under more pressure than before the pandemic to sell their property, especially among those who had not received full rent in September.
Earlier this year, President Trump used the powers of the Centers for Disease Control and Prevention to enact an eviction moratorium until December 31. Borrowers who met a number of criteria and completed a return form on the CDC website were able to defer rental payments.
Read more: Rental Assistance: Find Assistance in Each State
However, experts fear that an avalanche of evictions could follow as soon as this moratorium is lifted at the end of the year.
"We're definitely seeing some churn and those who miss three, four, or five payments are in serious trouble," said Eddie Seiler, associate vice president at MBA. "After one payment, you're on the edge of the cliff."
Dhara Singh is a reporter at Cashay and Yahoo Finance. Follow her on Twitter at @Dsinghx.
Mortgage leniency increases as homeowners reactivate deferred payment plans
Landlords can initiate the eviction process despite the moratorium, says the government
Housing expert: eviction moratorium is "not enough" during a pandemic
Done in 90 minutes: The rental support for ailing tenants quickly runs out
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