◼ ECONOMICS Bloomberg Businessweek May 18, 2020
27To avert a damaging wave of foreclosures
like the one that swept the country more than a
decade ago, Congress included a provision in the
$2.2 trillion rescue package it approved in March
that allows homeowners with government-backed
mortgages to defer payments for up to a year. But
Washington stopped short of offering renters com-
parable relief on the assumption that those in dis-
tress would likely qualify for the $1,200 checks
theTreasurybeganmailingoutinApril,aswellas
beefed-upunemploymentbenefits.
ManyU.S.stateshaveimposedmoratoriums
onevictions.Butwithouta nationalrentalmar-
ketbailout,theeconomicpainis likelytospread
asefficiently as the virus that caused it, flowing
upward to landlords, their lenders, and cities los-
ing property tax revenue.
About half of the 43 million rental units in the
country are owned by small businesses such as
Shields’s one-woman enterprise. Unless help comes
soon, “both renters and property owners will slide
down the socioeconomic scale together,” says
Emily Benfer, a visiting law professor at Columbia
University. “It will have a ripple effect. Rent doesn’t
just go to property owners, it pays for property
taxes, mortgages, and salaries for the people who
maintain buildings.”
States with large renter populations, includ-
ing California, Florida, New York, and Texas, have
instituted temporary bans on evictions. Twenty-
three others—among them Arkansas, North Dakota,
Ohio, and Wyoming—have adopted few if any pro-
tections for renters, says Benfer, who collaborated
with researchers at Princeton University on a state-
by-state housing policy scorecard for the pandemic.
Trade associations that represent landlords are
lobbying Congress for $100 billion to cover some of
the rent shortfall, with direct payments to property
owners, but they have yet to unite behind any of
the various proposals floating in Congress.
At the end of 2019, there was $1.6 trillion of out-
standing mortgage debt on multifamily properties in
the U.S., according to Paula Munger, vice president
of research at the National Apartment Association
(NAA), citing a Federal Reserve study. Defaults in
the last recession reached 5% and could climb above
that during this deeper downturn, she says.
Many landlords operate on thin margins, typ-
ically 9¢ for every $1 of rent collected, according
to the NAA, and have nowhere to turn for help if
their rental income dries up. Most don’t qualify for
federal mortgage forbearance because only about
a third have mortgages backed by Fannie Mae,
Freddie Mac, or another federal agency. The Small
Business Administration is bolstering companies
thatkeepworkersemployed,butmanyproperty
owners don’t have a payroll. Shields, who tours her
properties with a lawnmower crammed into the
back of her Toyota Prius, handles most everything
herself and hires contractors for the rest.
“That caricature of the white landlord in the suit
who has suitcases of money—in our case, every one
of us has a day job,” says Jan Lee, who works as
a general contractor while managing two apart-
ment buildings in New York City’s Chinatown that
his family has owned for almost a century.
Lee doesn’t have a mortgage, but he already
knows he won’t be able to pay his full property
taxes, which could mean the end of the family
legacy on Mott Street. There’s no forbearance for
property taxes, and the city can impose late fees,
penalties, and liens that he’ll never be able to get
out from under. “I’ll have bad credit, I’ll owe lots
of money,” he says. “My entire family’s work over
three generations will be gone.”
The Boulder, Colo., townhouse Janet Meyer and
her husband bought 24 years ago was at the center of
their plans to fund retirement. Now the couple, who
are in their 60s, may have to dip into their savings
to cover the mortgage. Their tenants are struggling,
and the Meyers want to help. Two of the three men
in their 20s who share the $2,500-a-month rent▼ Lee in New York
City’s Chinatown,
where his family owns
two buildings*A TYPE OF PARTIAL OWNERSHIP WHERE TWO OR MORE INDIVIDUALS SHARE THE TITLE.FIGURES AS OF 2015. DATA: HARVARD UNIVERSITY, U.S. CENSUS BUREAUWhoOwnsU.S.ResidentialProperty?
Individualinvestor,trustee,ortenantin common* LLP,LP,orLLC
Generalpartnership,realestatecorporation,orREIT Nonprofit Other or not reported
0% of properties 50% 100%50 ormore25 to 495 to 241 to 4 units