San Diego Union-Tribune (Sunday)
BACK RENT IN U.S. NEARS $7.2 BILLION
Millions of Americans, including some in San Diego County, are struggling to pay monthly rent because of the pandemic; now, with moratoriums expiring soon, eviction looms for many
Millions of Americans, including county residents, struggle to pay rent because of the pandemic; now, eviction looms for many.
Sandra Yacura’s tenants haven’t paid rent since August. Both women renting her East Village condo, which is $2,000 a month, lost service industry jobs due to COVID-19 and have struggled to make payments. One of the women managed to get another job, only to lose it because of the pandemic.
Yacura had them apply for a city of San Diego rent relief program that would pay her directly for lost rent. One tenant got approved after three months, and the other’s application is still pending. The money Yacura got wasn’t enough to cover the lost rent, and it’s not like she is a wealthy landlord. Yacura works for a nonprofit (not traditionally a high-paying job) and has a mortgage of her own to pay.
She said she hasn’t been hard on the tenants, understanding these are unprecedented times. And she was grateful that she was able to get some money from the city.
“I don’t think yelling at somebody is going to make money appear,” Yacura said, noting she doesn’t have any plans to evict and is hoping for more money to be added to rent relief programs.
There are millions of renters struggling to come up with monthly rent across the nation, and landlords of different sizes wondering what their next move might be. While some politicians and analysts have warned of a coming “eviction cliff,” we might not know just how many people owe back rent and are not paying until protections end.
National outstanding rent debt is expected to be as high as $7.2 billion by the end of 2020, said a report from the Federal Reserve Bank of Philadelphia. The estimate is based on eviction moratoriums across the nation ending by the end of the year.
California has one of the longest moratoriums in the nation, with Gov. Gavin Newsom signing a law in August that shielded all renters from eviction due to Covid-19-related back rent through Feb.1.
The law means someone who lost work or income in the early days of the pandemic could avoid paying rent from March to Aug. 31. California’s legislation said if hardship continued from Sept. 1 to Jan. 31, the tenant must pay 25 percent of rent to
avoid eviction. No matter what, the renter is still on the hook for money they owe.
Because California’s eviction legislation goes until February, we may get a preview of how other states fare before our moratorium ends.
Just how many people have not been paying rent in San Diego County is unclear, or even how much is owed. A few different organizations have taken a stab at it, but not all small landlords report what is happening to national organizations and many have worked out deals with renters — perhaps masking how much money in rent has been lost.
Chris Thornberg, economist and founding partner of Beacon Economics, said there is not a huge database that economists can look up to get firm numbers on just how many people are not making rent payments.
“It’s just not data we collect,” he said. “There’s millions of apartments out there. You need to be able to collect data in some consistent fashion on a regular basis from thousands, if not millions, of landlords at different levels of sophistication. It just isn’t easy.”
Thornberg said the lack of information makes taking a position on government action, such as claiming a large eviction cliff is heading our way, difficult and sometimes disingenuous. He said it’s easy to find sob stories, but it might not represent the majority of renters.
There is some data on professionally managed apartment units but it does not capture a lot of the smaller landlord situations.
A September study from property management and software company Realpage said the San Diego metropolitan area had one of the highest percentages of people actually paying rent in the nation. It said just 3.4 percent of renters in San Diego were not paying, compared to 12.9 percent in New Orleans and 10.6 percent in Las Vegas.
Economists at Realpage said high payment totals are partly the result of deals renters had worked out with landlords. They used data from the National Multifamily Housing Council, which tracks more than 11 million apartments.
While 3.4 percent of renters not paying in San Diego may seem high, it is important to remember there are often people who don’t pay rent in good times. The percentage of people not paying rent in San Diego was only up 1.2 percent from the same time in 2019.
Property Management
San Diego-based FBS Property Management knows first hand what it is like to have a large pool of renters locally, operating around 900 apartments across 72 ZIP codes in San Diego County.
FBS Vice President Lucinda Lilley said about 90 of their tenants have worked out payment plans or other deals because of hardship due to job losses related to the pandemic.
She said somewhere around 20 have not paid at all for several months, and are not compliant with sending in paperwork to prove their case. She said there isn’t a lot FBS can do legally because of eviction moratoriums, although more aggressive landlords have sought “just cause” evictions.
Examples of just cause evictions include being a nuisance, lease violations not related to rent or using an apartment for an illegal purpose.
“The majority of our residents who have experienced financial difficulty have been extremely cooperative,” Lilley said. “And so are we. We don’t want to evict people. Evicting people as a landlord is bad business — it costs money, it costs time and we don’t want to displace people.”
FBS manages condos, small apartment communities and houses for independent owners of rentals, such as people who buy a condo as an investment. She said the company has had a 10 percent to 15 percent loss of income this year.
Not all property managers are the same, something the renter advocacy group San Diego Tenants Union has dealt with for months. Tenants Union organizer Ash Kuhnert said she has personally worked with at least 20 renters who had a loss of income due to COVID-19 and landlords still tried to evict them under just cause provisions.
In one case, the tenants union provided paperwork from a renter in City Heights who had not paid rent because her husband lost his job. She was still working. Still, they turned in paperwork to prove loss of income due to the pandemic as a reason for delayed payment.
The landlord sent a letter trying to evict, stating she was playing music and loitering in common areas, and was somehow involved in a drug raid at the complex and other allegations. The tenant strongly denied all the claims and is working with the tenants union to prove her case. Efforts to reach the landlord were unsuccessful and the tenant declined to have her name in the paper.
Kuhnert said hundreds of renters are in similar situations and need help navigating the law.
“If we let these landlords get away with it, it will just get worse and worse,” she said.
Rent relief programs
The rent relief program Yacura had her tenants apply for is through the San Diego Housing Commission, which was based on $15.1 million given by the San Diego City Council through federal Coronavirus Aid, Relief, and Economic Security, or CARES, Act. An additional $5 million has been earmarked by the city.
It took three months for one of Yacura’s tenants to get approved and the other is still listed as “pending.”
Distribution of the funds took longer in some cases because applications had to be verified, said Azucena Valladolid, the commission’s senior vice president of rental assistance and workforce development.
For starters, they received 13,158 applications but had to spend time filtering out nearly 5,000 because they were outside of the city of San Diego. The commission only operates in the city. Next, it needed to get many applicants to provide additional paperwork, such as medical bills or loss of income. She insisted they were “lenient and overly broad” on what paperwork was needed.
They ended up with 900 applications from people who were unresponsive to requests for more verification. Even after contacting all those applicants, they still had 700 that never responded. Valladolid said the process delayed how quickly some landlords received money. In the end, 3,673 households received help with rent.
San Diego County has its own $27 million rent relief program that could potentially help the tenants who mistakenly applied to the Housing Commission.
Lilley, the FBS vice president who is also presidentelect of the Southern California Rental Housing Association, said she would like to see additional rent programs approved so that mortgages continued getting paid. Her organization represents roughly 2,400 rental owners and is an advocate for the rental housing industry.
She is opposed to eviction moratoriums continuing, and she’s not alone as many apartment associations are coming out against them. They argue landlords are being asked to essentially provide free housing when the government should be the ones providing economic relief.
California law says unpaid rent, considered civil debt, can be claimed by landlords in small-claims court starting March 1. This could create additional cost and time for landlords, and perhaps take years to reach a conclusion as money owed is sent to collections.
Lilley said her company doesn’t want to take anyone to small-claims court and would much rather come up with a payment plan, as they have done with other renters. But, she acknowledges that it is possible they may never get back some rent if it means getting a court judgment and waiting for a person to pay years down the road.
“This is going to put landlords in a position where they don’t get a dime,” she said.
In the meantime, there hasn’t been a large drop in rent prices. Average asking rent was around $1,873 a month in the third quarter of 2020, said real estate tracker Costar, up about 1 percent in a year.
phillip.molnar@sduniontribune.com Twitter: @phillipmolnar