Small businesses around the country are getting hammered, and individual owners of rental properties are no exception. What are the larger implications?
When the pandemic began and an eviction moratorium was put in place, the cause was admirable. Shutdowns and economic uncertainty required an empathic hand when dealing with unemployed workers who also faced eviction. However, the unintended consequences can be dire, especially for individual rental property owners, which make up about half of all rental units, according to the 2018 Rental Housing Finance Survey. I know in Florida, we’ve had a glut of investors, both from out of state and globally, buying affordable properties as investment properties, many of whom are investing their retirement funds in these properties. In this article, I’m mainly referring to single-family homes.
When eviction moratoriums are lifted, I believe we’re going to see evictions happening at record rates. According to the National Multifamily Housing Council (NMHC), only 76.6% of U.S. apartment households had made a full or partial rent payment as of January 6, the lowest level since the beginning of the coronavirus pandemic.
This is down from 79.3% as of Aug. 6 and follows the stoppage of the additional $600 monthly insurance payments that was being paid to unemployed individuals, according to the National Association of Realtors®.
Individual rental property owners and corporate-owned rentals will be forced to raise rents to even attempt to recoup their losses from the last year. After all, in some cases, these landlords have given away their product for more than a year, all while paying the brick-and-mortar costs of maintaining the properties and paying taxes. Oh, and did I mention, we have an affordable home crisis in our country?
I don’t have a crystal ball, nor have I studied this issue with the time it deserves. I’ve spoken to a number of real estate leaders who believe this rental crisis will be impactful. How do you provide affordable housing and make a living? Of course, the recently passed COVID-19 relief package included $25 billion on rental assistance and expanded unemployment insurance. According to a recent Zillow survey, “While the extra assistance helps on a monthly basis, millions behind on their rent still face an incredible challenge of catching up on payments that have piled up before temporary eviction moratoriums expire.”
In addition, for the individual owners, selling may be the only feasible option, and that may be good for the real estate market, which is desperate for inventory. However, if the landlords themselves haven’t been able to keep up the hard costs, you’re looking at a surplus of foreclosures.
I would love to hear your opinion of this. Please email firstname.lastname@example.org with your thoughts on this potential crisis and what you think should be done.
Tracey C. Velt is the managing editor of REAL Trends, now owned by HWMedia.