During pandemic, landords need a break, too
Popular culture often portrays landlords as villains, and not long ago, I criticized a flyer circulated at the Ashford Westchase apartment complex for stridently demanding rent amid the COVID-19 pandemic and massive job losses.
A few days later, I received a remarkable email from the leadership team at Ashford Communities. Chief Operating Officer Naushad Ramoly agreed that his Westchase complex manager took the wrong tone and said he respected the media’s watchdog role.
Ramoly shared with me a revised letter to his 5,000 customers in which he promised that managers would assist tenants who have lost jobs due to the stay-at-home order. He reminded other tenants, though, that a 60-day suspension of eviction proceedings was not a rent holiday. They still needed to pay.
Balancing compassion for those suffering during the Coronavirus Recession and maintaining a viable multifamily housing business is difficult. Ramoly agreed to an interview about walking that tightrope.
“Who says that we struck the balance? Is it us, or is it the tenants? It’s a hard sell,” he admitted.
Last month, Ramoly offered tenants a $50 discount if they paid their April rent early. Typical rents in Ashford complexes range from $750 to $1,300 a month, so the amount is significant.
Early-payers benefited from lower rent, while Ashford hoped to collect more rent in anticipation of a spike in missed payments. Ramoly said halfway through the month, Ashford is experiencing a 10 percent to 20 percent delinquency rate compared to a 0.1 percent rate before COVID-19.
“This is a staggering figure for us, which of course, will have deep consequences,” he added. “We’re looking at huge delinquency numbers above half a million dollars, and we think May is going to be worse than April.”
For the U.S. apartment business, a 10 percent loss in revenue wipes out profits and takes money from landlords’ pockets.
From every dollar collected in rent, 39 cents goes to pay the landlord’s mortgage, 27 cents pays employees, 14 cents is for property taxes, 10 cents pays for maintenance, and nine cents goes to building owners and investors, according to the National Apartment Association. There is a one percent rounding
error.
Most economists predict May collections will be even worse as the unemployment rate climbs at an unimaginable pace. Ramoly expects a disproportional impact because his properties are Class B and C, the kinds of places where construction, restaurant and lowincome service workers live.
Many of the renters are also immigrants who may not qualify for government assistance. Ramoly has assigned his corporate affairs manager, Madufuro Eze, to help
100 families access private charities, and so far, he has raised $18,000 and hopes to obtain more.
One reason for the initial harsh letter is that less-informed tenants are confused about COVID-19 relief. To minimize homelessness, counties across the state have placed a moratorium on eviction proceedings until the crisis subsides, but people must still pay.
“Some of our residents have come in and said the government had given them a rent holiday,” Ramoly said. “We have to explain to them it is not a rent holiday; it’s just a moratorium.”
Along with other apartment building owners, Ramoly is frustrated that the government is protecting tenants but doing little to aid property owners, most of whom must still pay their mortgages.
The National Multifamily Housing Council and the National Apartment Association are pressing Congress for help in a fourth stimulus bill.
Building owners want an emergency assistance fund for renters, mortgage protections that are synchronized with protections against evictions, financial assistance for property owners and mortgage servicers, and property tax relief.
These are reasonable requests if the government is serious about keeping people in their homes. With 25 million jobs lost, missed rents will be far worse over the next few months. Companies like Ashford will need to dip into reserves, default on loans or begin laying people off.
Evictions will eventually resume, but to what purpose if 20 percent of the workforce has no income.
Any financial relief for rental housing, though, must ensure that everyone benefits. Banks should not pocket stimulus checks unless they provide assistance to property owners. Landlords should not save on property taxes unless tenants see a discount in rent.
Making sure everyone shares in the sacrifices is perhaps the second biggest challenge after finding a coronavirus vaccine. Whether Americans believe the pain was evenly distributed will determine whether we think the government responded properly.
Landlords who offer safe, affordable housing provide an essential public service. If we don’t want them to behave like villains, we need to offer them some relief too.