Housing crisis ahead?

As protections for renters and homeowners soon expire, will that spark another housing crisis?

This story was updated on June 12, 2020.

A high-rise apartment complex in Bethesda, Md.— The Grand run by Brookfield Properties of New York — planned to increase rent during the COVID-19 pandemic by as much as 60 percent for tenants.

Montgomery County and renters advocates stepped in to get a bill passed to limit increases to 2.6 percent during this time. Landlords and their sycophants called this overreach and worse, with some even filing a retaliatory complaint against the Montgomery County Renters Alliance. But a 60 percent increase during a time of record unemployment and the coronavirus pandemic is outrageous and cruel. It would have caused a lot of people to have to move during a pandemic.

That’s one example of the sad state of affairs occurring throughout the US. The COVID-19 virus has tragically killed about 420,000 people worldwide, including some 113,000 in the United States, the most by far of any country. While losing a job, business, residence or health insurance doesn’t compare to losing a life, millions of people have been put in a bind through coronavirus-related disruptions.

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Men stand in an unemployment benefits line in San Francisco in 1938. Photo by Dorothea Lange, from the New York Public Library/Unsplash

It’s happened at an unprecedented level. More than 44 million Americans — the most ever by far in a three-month period— have filed for unemployment relief, as of June 11.

Many people live paycheck to paycheck, depending on their livelihoods to pay the rent or mortgage each month. So when they lose their jobs, they don’t have money for those bills. But the rent or mortgage payment is still due for most each month.

Many mortgage companies are allowing people to delay housing payments. The share of mortgage loans in forbearance rose to 8.53 percent, about 4.5 million homeowners, at the end of May.

While more European tenants have seen their rent canceled, many tenants in the US who ask for rent relief for even one month have been rebuked. Tenants in Chicago asked Mac Properties to cancel April rent due to the worldwide emergency and were told that was “not even a consideration to do so.”

I asked the Bozzuto Group, the landlord for my Maryland multi-family development, for a rent discount for tenants since we haven’t had access to the usual services and amenities in our building, such as the gym, game room, and business center, since early March. Of course, I support and understand why we can’t use those during the coronavirus pandemic. But why should I have to pay the same rent if I am receiving fewer than normal services? Landlords should offer tenants discounts in rent, especially when they are a company that makes billion$ annually.

Through mid-June, the company has only offered to waive the $3 fee to pay rent online, which is almost nothing. Bozzuto reported $2.45 billion in annual revenue for the Baltimore area alone and manages some 75,000 apartments and 2.2 million square feet of retail space, including in New York, Chicago, Boston, and Miami.

Some landlords are giving renters a great break. Brooklyn landlord Mario Salerno canceled April rent for hundreds of tenants. John Zutz, who owns a triplex in Milwaukee, allowed his two tenants to only pay $100 for April. So far, they are among the few U.S. landlords doing so.

The town of Ithaca, N.Y., passed a resolution to cancel rent debt during the pandemic, believed to be the first to do so. The measure still has to be approved by the state.

Some have proposed a nationwide rent strike, which has been vigorously opposed by most public officials.

The “relief” proposed by most government entities involves delaying eviction procedures for those who cannot pay and encouraging payment plans to be worked out. Those plans might include interest payments. In other words, renters still have to pay, and many will pay even more through these payment plans if interest is included. Mortgage companies have also worked out arrangements, but those will, too, only delay the payments.

The financial stimulus plan of $1,200 per head of household didn’t even cover one month for most. The $600 weekly federal unemployment benefits has aided many, but numerous people have not received jobless benefits even though they qualify due to delays, system crashes, and other issues.

Real relief is needed now. Tenants who lost jobs and need help should have rents canceled, and that includes impacted businesses that can’t pay leases and homeowners who can’t pay mortgages.

Property owners often get tax breaks and other aid. They will likely see some relief on their bills, as well, in the coming months. They could also use deposits from renters to cover shortfalls. Many can afford a decline in rent payments for a month, and they will use that decrease to get better future packages of government aid and tax breaks.

The situation could lead to another housing crisis when the federal eviction ban is expected to be lifted in most states in late July, some experts say. Many who are evicted could wind up in homeless shelters that are not set up for social distancing or living in their vehicles, putting them at greater risk of getting COVID-19. Others will be forced out by rising rent as rent stabilization agreements expire.

For the long-term, officials need to more deeply examine how to make housing more affordable. While the U.S. average for a two-bedroom apartment is about $1,400 a month, many in bigger cities pay more than $2,000. The median housing price in the U.S. continues to rise to almost $300,000 and is much more than that in most large cities. That is not a sustainable pathway.

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