Advocates worry that evictions will spike

But landlords say rent payment rates near pre-COVID levels

After a three-month time-out due to the pandemic, Gov. Jared Polis started the clock moving again on evictions for nonpayment of rent in Colorado. Through July 13, landlords must provide a 30-day notice to catch up, rather than the usual 10 days, but once they do, they can go before a judge and ask for tenants to be removed.

But opinions vary on whether ending the moratorium will open the flood gates or if the system will see only a slight increase once the initial backlog clears this summer.

Tenant advocates, who pushed for an extension of the moratorium, argue that homelessness could spike this fall once federal unemployment assistance dries

up at the end of July. And they cite some huge numbers.

“Right now we are thinking 300,000 to 400,000 people face eviction risk in Colorado,” said Zach Neumann, executive director and co-founder of the COVID-19 Eviction Defense Project, which provides free legal assistance to struggling tenants.

Landlords counter that most renters are either current or have made payment arrangements. By the end of May, 95.2% of apartment renters in the state had paid the rent in full, an improvement from April and not too far behind pre-COVID levels, according to the Colorado Apartment Association.

“Eviction is a last and final solution in cases where someone has become unresponsive and uncooperative,” said Tony Julianelle, CEO of Atlas Real Estate, a property management and brokerage firm in Denver. “It is a traumatic experience for everyone involved and something we will do everything in our power to avoid.”

Julianelle said Atlas has a person dedicated to helping tenants find sources of income or obtain rental assistance. They will even sit down and help them craft a budget and work out a repayment plan. Once they received stimulus payments and obtained the full range of unemployment benefits, many current renters were able to get back on track.

But that assistance is limited and the unemployment rate, while down in May, remains above 10% in Colorado. The unemployed will likely use their last round of enhanced federal benefits in July to make the August rent, Neumann said. After that, all bets are off unless Congress steps in.

“Legal representation is helpful — it doesn’t solve the payment problem unless it solves the eviction problem. We need a broader-based financial solution,” he said. Based on the model he uses, the price tag on housing aid Colorado needs will top $1 billion.

How bad things get will depend on the course of the outbreak, how quickly people can return to work and what aid, if any, unemployed workers and the housing market will receive under the HEROES Act before Congress, Neumann said.

Carmen Medrano, executive director of United for a New Economy Colorado, said her members are having to make tough choices like paying for medication or food or staying current on their rent. Many have entered payment plans with landlords.

“We are not saying cancel the rent. With a moratorium, it simply says protect residents from eviction,” Medrano said. She and other tenant advocates hope the governor will monitor the situation closely and step back in if people are forced out in large numbers

But landlords say a spike is unlikely. They argue that they must have a way to replace nonpaying tenants with paying ones, or they risk foreclosure themselves. An extended moratorium creates an incentive to not pay. The delinquency numbers suggest that hasn’t been the case, but it does appear the elimination of late fees in Colorado from March to June 13 may have resulted in more late payments.

“You need a system in place,” said Mark Williams, executive vice president with the Colorado Apartment Association. “With the moratoriums and various orders that have been in place, there has been a void.”

Per the governor’s latest order, landlords and property managers will have to provide tenants who are behind 30 days to catch up, although it appears that will go back down to 10 days starting July 13. After that, they can go to the courts to seek an eviction order, which they can take to the local sheriff’s department to enforce.

At any point in the process, local governments could try to intervene, although the rental industry would likely push back. Constraints on the courts and law enforcement might slow the process down.

Deborah Wilson, managing shareholder at Springman, Braden, Wilson & Pontius in Wheat Ridge, said she isn’t optimistic that eviction cases will see a speedy resolution, given social distancing requirements and the backlog of other cases courts need to clear.

The first wave of eviction orders will go out against those who were behind heading into the pandemic. Personally, she doesn’t expect to be super busy. The clients she works with aren’t dealing with a large number of tenants who are behind.

A building with 192 units she represents had only one tenant not paying and not communicating. Another with 549 units has three tenants behind. But those renters were behind before COVID-19 struck, and they now owe more than $10,000 each in back rent.

Rather than wait around for an eviction, one scenario is that tenants who are behind will skip out at a higher rate. That could result in more collection cases, but it generally represents a preferred alternative to eviction for both sides. Some landlords are even offering “cash for keys,” a strategy used during the foreclosure crisis.

Besides a moratorium, tenant advocates have argued for a grace period where landlords can’t consider missed payments and damaged credit scores during the pandemic when it comes to qualifying future tenants.

“Once an eviction is on your record, you will never be able to find housing. Debt forgiveness is another step,” Medrano said. Even those who go back to work might struggle to find another place because of the financial problems they faced during the early months of the pandemic.

But landlords argue they should have the discretion to weigh credit risk. A question Wilson said landlords may ask is given how much assistance that was made available, why did a prospective tenant get so far behind at their prior place.

As the state lifts the moratorium, it is also trying to get a good handle on what comes next, including surveying a thousand Coloradans to gauge if they can make the rent or mortgage payment and what funds they are using to do so. The latest survey found 85% of renters planned to pay the rent in full and 82% of borrowers could meet the mortgage in June.

“We are keeping a close eye on that,” said Alison George, director of the Colorado Division of Housing.

The Polis administration initially set aside $3 million of emergency funds for housing assistance, and via an executive order added another $10 million. The legislature through House Bill 1410 is looking to add another $19.6 million in rental and mortgage assistance. There are also federal Community Development Block Grant dollars the state wants to redirect to housing assistance.

The division is working closely with 20 agencies and nonprofits statewide to make sure they have the resources to assist the coming wave of struggling households. It has developed a model repayment plan on its website that landlords can use to strike a deal with tenants who are behind.

George said the state also realizes that repayment plans are a temporary fix and that eventually more aid will be needed. Another program it is working on would allow landlords who apply to streamline assistance for tenants in need, rather than sending them one-at-a-time.

As more letters for payment go out, George said she expects more households will seek help. Those needing assistance should call 211, where they will be put in touch with a local housing counseling provider or they can visit the division’s website to learn about new programs and assistance that are being offered.

“My hope is that households can reach out and get assistance. We are trying to stand up the programs in the most efficient ways that we can,” she said.