By Cindy Chetti
- Cindy Chetti is the senior vice president of government affairs at the National Multifamily Housing Council (NMHC) in Washington, D.C. She can be reached at firstname.lastname@example.org
The COVID-19 crisis has roughly 33 million Americans out of work and struggling to pay everyday expenses—chief among them, rent. Renters especially are expected to be particularly hard hit by the economic situation. The Terner Center for Housing Innovation at UC Berkeley estimates that 16 million renter households are likely to have at least one family member whose work will be negatively affected by job or income loss in the wake of COVID-19.
Thanks to a variety of government initiatives and multifamily industry responses, most apartment renters seem to be paying their rent for now. According to the NMHC Rent Payment Tracker’s survey of 11.4 million units, 80.2 percent of apartment households have made a full or partial rent payment by May 6. This is but a small decrease from the percentage during the same period a year ago and testament to policies and procedures that have been implemented since the pandemic hit the U.S.
While this is good news, we don’t know how long apartment renters will be able to keep this up. As this pandemic drags on, the unemployment rate continues to climb. Now over 14.7 percent, this is the highest level of joblessness we’ve experienced since the Great Depression. More concerning is how long it may take to recover from these job losses. In fact, some economists say 42 percent of the recent layoffs from the pandemic will result in permanent job losses.
All this underscores the need for continued support for our 40 million and growing residents. The significant government financial support for those experiencing income disruption in the wake of the COVID-19 crisis is likely to be insufficient for an alarming number of renters impacted over the long haul. And if residents are unable to pay their rent, apartment firms will also be unable to meet their mortgage obligations, pay their property taxes or fund their payrolls. That in turn is likely to set off a whole other chain of events with potentially devastating financial and economic effects.
The apartment industry and its residents contribute $3.4 trillion to the U.S. economy annually and support more than 17.5 million jobs. By providing more economic relief for America’s apartment renters, the U.S. government can shore up housing’s fundamentals and be a positive counterbalancing force against some fierce economic headwinds in the wake of COVID-19.
Building on The CARES Act
Prior to the passage of the CARES Act, NMHC called on lawmakers to enact a number of provisions that would provide assistance to renters and property owners affected by financial hardships as a result of the COVID-19 outbreak. Many of the proposals were incorporated into the $2 trillion CARES Act, not the least of which were the recovery rebates and the expanded unemployment benefits.
While the CARES Act provided relief to many households, it is insufficient for the millions who continue to struggle to cover rent, food and healthcare. Not only did the CARES Act fail to tie financial assistance measures to individuals and their housing obligations, but it may also be insufficient in addressing the continuing financial challenges of the rental industry.
As an example, the CARES Act limits multifamily forbearance to a 90-day time period yet provides eviction protection for up to 150 days. This mismatch in timeframes could result in a mass wave of financial delinquencies and defaults and create uncertainty on behalf of both residents, and apartment owners and operators.
Keeping people in their homes should be the top priority for lawmakers. While initial figures seem somewhat positive, NMHC strongly supports critically needed protections for apartment residents, owners and operators given the growing expectations for long-term economic pain for renters. NMHC has been in constant communication with Congress and the Trump administration urging the inclusion of housing relief in future legislative packages.
To ensure the housing stability Americans need and deserve during this crisis, Congress must:
- create an Emergency Rental Assistance Program for those who are impacted by the crisis and do not already receive federal housing subsidies;
- clarify that all multifamily firms with 500 or fewer employees may access the Small Business Administration’s (SBA) Paycheck Protection Program (PPP); While the CARES Act is clear in its intent that all small firms should be eligible for PPP loans, the SBA’s implementation guidance has created uncertainty for the real estate industry;
- revise the National Eviction Moratorium to be limited to those negatively impacted by COVID-19;
- expand mortgage forbearance protections to all multifamily properties, not just those with federally backed mortgages; and
- provide financial assistance and protection for all property-level financial obligations such as property taxes, insurance payments and utility services.
The Apartment Industry Is Stepping Up
The apartment industry takes seriously its responsibility to provide homes for its 40 million residents. Unsure of what the government response to the pandemic’s economic disruption will be, the multifamily industry has been proactive in its approach to potential distress in the market.
On March 13, NMHC called on apartment firms to:
- voluntarily halt evictions for 90 days for those who can show they have been financially impacted by the COVID-19 pandemic;
- avoid rent increases for 90 days to help residents weather the crisis;
- create payment plans for residents who are unable to pay their rent because of the outbreak;
- waive late fees for those residents; and
- identify governmental and community resources to help residents secure food, financial assistance and healthcare and share that information with residents.
Firms across the country sprung into action to implement these goodwill practices, not the least of which were Equity Residential and Essex Property Trust.
Many firms went even further to provide support by establishing private relief funds. The most notable example may be Camden Residential Property Trust’s $5 million resident relief fund, which was reported to be fully subscribed in 16 minutes.
The Domino Effect Is a Threat
While these measures are providing some short-term sense of security to residents and apartment housing providers, there’s growing evidence that, given historical economic and unemployment, it’s only a matter of time until they are unable to make ends meet.
And if rent stops flowing, the falling dominoes that could follow would be devastating for not only the housing industry, but the U.S. economy writ large.
As an example, multifamily property owners have $1.6 million in outstanding mortgage debt. The federal government backs nearly half of those multifamily mortgages. Without rental payments, we will certainly see a wave of foreclosures that could surpass those during the Great Recession, creating a significant drag on the U.S. economy and the government’s ability to intercede.
However, the effects would also trickle down to state and local economies, which are already under tremendous revenue and budget pressures. Nationally, apartments contribute a total of $58 billion in property taxes. If that revenue dries up, cities and states will be forced to make cuts to essential services such as schools, emergency services and other important local needs.
The apartment industry continues to work with Congress as it creates legislation to address the needs of renters and apartment operators. Although this outbreak has brought with it devastating financial effects, we must all work together to support those in need and ensure all residents continue to have a safe, secure place to call home.