CAN’T PAY THE RENT
As the pandemic-induced recession drags on and more people miss rent payments, the economic crisis threatens to spill into the financial system — as it did in 2008.
Thirty million Americans are out of work, the economy is stalling, Congress is slashing unemployment payments, and August’s rent is due.
Forty percent of Texans told the Census Bureau in June they were worried about paying their rent as state and federal and local bans on evictions ended. Most say their jobs have not come back, and many don’t think they will as long as COVID-19 continues to spread.
The nation could face another Great Depression. The only way to keep people’s lives on track and prevent the crisis from spreading to the banking sector is to keep people in their homes until the economy can properly restart.
When it comes to ruining someone’s financial future, an eviction case is perhaps second only to personal bankruptcy. Most landlords will not rent to someone who has been through an eviction, which forces them into substandard housing or homelessness.
Either way, studies show an eviction often leads to job losses, automobile repossessions and other financial setbacks.
Evictions are also hard on landlords, costing them thousands of dollars in court and legal fees and lost rent. They need that money to pay their mortgages, which bankers and investors rely on for cash flow. I checked in with an apartment company that I’d written about previously for an on-theground update.
“This could easily turn into the 2020 Housing Crisis if we don’t do something quickly,” said Amer Kumar, vice president of Ashford Communities, which operates 15 working-class complexes in Houston. “We are working with our residents and coming up with payment plans. We are working on renewal amounts, basically, whatever they can pay.”
Ashford has seen a 50 percent increase in tenants asking for a break on rent or moving out without paying, Kumar added. Some have not paid since March.
Despite losing money every month, Ashford has not initiated any eviction proceedings for lack of payment. The cost of putting a new tenant into a unit can cost seven months worth of rent, making it more profitable to keep families in place, at least for now, Kumar said.
Ashford’s director of community and corporate affairs, Maduforo Eze, has been helping residents with good payment histories apply
for government benefits and charity programs.
“We have to show so much empathy now,” Eze told me. “I see people who are very stressed out, they don’t know what to do, and I am trying to connect them to these organizations. … I have to call persistently these nonprofits and churches every day, because they may have money, they may not. It’s become an extra job.”
Not all landlords are trying so hard. The day after the federal eviction moratorium ended on July 24, Lone Star Legal Aid received 1,358 applications for eviction help, a 23 percent jump from the same date last year.
This month will be worse. Economists argue the $600 a week of supplemental unemployment since March has kept lowincome consumers going, but the program expired in July.
Mayor Sylvester Turner rejected a proposal to extend a local eviction ban, preferring to provide financial aid instead.
Landlords largely agree. Keeping rents flowing is vital to keep them from declaring bankruptcy and not repaying their debts. In that scenario, everyone loses as the financial illness spreads from renters to landlords, banks, investors and the wider economy.
"Members of Congress and Trump administration leaders need to understand that unless comprehensive action is taken now to protect the tens of millions of Americans who live in an apartment home, they risk destabilizing the nation’s housing market, undermining the nascent economic recovery, and turning the ongoing health and economic crisis into a housing crisis," said Doug Bibby, president of the National Multifamily Housing Council.
Landlords are doing their part and not raising the rent. In Houston, the average rent typically goes up $5 to $7 a month, but since March, it dropped $5, according to ApartmentData.com. In San Antonio, where it rises $6 a month, it has dropped $3.
“Occupancy is the name of the game right now for landlords. If you can retain your occupancy, even with semi-paying renters, you will survive,” Kumar told me. “But once you start losing renters, that’s when landlords get in real trouble.”
Restaurant workers, hotel staff and others in the service sector cannot work due to the pandemic. We have not only a moral responsibility, but an economic one, too.
If workers cannot pay their rent, it will trigger a banking crisis that will cost the nation much more than a few hundred dollars a week in financial aid. Helping low-income workers is like vaccinating for a virus; it will hurt a little, but in the long run, do a lot of good.