Apartment owners and managers who are trying to map out their plans for dealing with a potential spike in evictions post July are facing situations that are all over the map.
The fluid and variable policies from federal, state, and local authorities have operators’ heads spinning while trying to make the best moves to please residents, investors, the courts, renter advocacy groups, and public opinion.
Some are hearing loud and clear from their investors, who are insisting they find residents who can make rent so that the property’s bills are paid.
All this while Congress has Americans and businesses in limbo about what financial backstop will be offered to the unemployed, businesses, and others. Capitol Hill negotiations are ongoing, many now saying any kind of agreement likely won’t be reached until next week. The $600 unemployment insurance boost from the CARES Act expires July 31.
Goodwill Making a Difference
The multifamily industry also is dealing with a PR battle as media reports on an imminent eviction “tsunami,” a claim some apartment economists classify as an exaggeration based on questionable math.
In response, some operators are touting the goodwill gestures they have extended to needy residents—in addition to other private renter-support programs that have been made available—as temporary solutions.
“Our short-term strategy is in line with our consistent strategy during COVID-19,” Camden senior vice president Tom Sloan said. “We are actively following state and local guidelines across the country, and we are working with existing residents who have remained in contact with us. Many residents have taken advantage of our relief programs like rent deferral of up to 60 days and Camden’s $10.3 million resident relief fund that distributed up to $2,000 grants to our Camden residents with financial disruption from COVID-19.”
Steve F. Hallsey, managing director at merchant builder Wood Partners, said he is watching the city, county, state, and federal mandates “very carefully” as it pertains to evictions.
“Fortunately, with our Class A assets, we have had only a slight tick downward in our collection rate,” said Hallsey, whose only properties with collections rates under 98% are in Hollywood, Calif., and Miami.
“We are taking the position of no evictions at present except for crime, criminal/gang-related issues,” Hallsey said. “Our investors want us to be cautious, not aggressive. They don’t want us making front-page news about mass evictions. [A spike next month in evictions] will hurt C and B-minus properties most.”
UDR, which said local eviction moratoriums have been lifted in 20% of its markets, believes its renter assistance payment plans will help keep residents in their homes.
“When we reached a point where we had the right to evict, we did,” said UDR chairman and CEO Tom Toomey during a July 29 earnings call. “It was only 2% of our renters, which equals about 800 residents, so for us, this is not the tsunami some [in the media] have suggested.”
In Florida, for example, the state lifted the moratorium for three days “and we filed for 75 residents,” Toomey said. “Of those, two-thirds showed up and paid their balance. The other third wanted to participate in a payment plan. Our goal here is to be compassionate. We’re seeing that some renters then have other means to pay their rent, and they were just using the moratorium to float.”
One NMHC Top 50 apartment manager—requesting anonymity—said the firm has offered payment plans, has waived credit card and late fees, and has reached out to all residents who have not paid. According to the manager, some do not respond and do not pay. As a result, the company will be moving forward with evictions when the moratorium is lifted. “We cannot afford to have people in apartments for four to 10 months that have not paid any rent,” said the source.
Atlanta-based The Management Group (TMG) executive vice president Jamin Harkness said his communities are still renting and renewing. “We are being more selective on the front end with rentals via our screening criteria,” Harkness said. “That has boded well for us during this time. And, based on advice from our attorney, we have been using the $600 unemployment payout in qualifying income calculation for new rentals.”
Stimulus checks and the $600 weekly bonus for many unemployed have played a role in assisting residents and owners. The industry will soon find out how much a factor it has been once those dollars are reduced or eliminated. One proposal offered by the Republican-led Senate on July 27 included temporary support of $200 per week and the potential of paying the unemployed 70% of their wages based on their most recent employment. Stimulus checks of up to $1,200 also are included based on need and prior income up to $99,000.
‘Knock’ on the Door, No One’s Home
The communications disconnect between apartment communities and their residents has frustrated many, particularly considering owners’ willingness to work with their renters.
“We have gone above and beyond to help residents with rent-related challenges since March,” said Jeff Lowry, COO of Madera Residential in Lubbock, Texas. “We gave a credit ranging from $25 to $35 and later $50 to $70 to pay online, no ACH charges, late payment charges forgiven, and writing off rent in varying amounts. Throughout the past 130 plus days we communicated by every method possible to our residents to let them know what we were doing and asked them to communicate with us.”
While a high percentage of residents have worked with Madera staff to help offset some rental payment stress, Lowry noted that some residents have refused to communicate and have not attempted to make even a small payment toward rent.
“They knew early on that we were being prevented from taking any eviction action, including notices to vacate,” he said. “We even offered to any resident who had a balance of more than $500 if they would just turn their keys in, we would not take any adverse action on their credit score by reporting them.”
On July 25, those in this segment that did not engage received their 30-day (required by the CARES Act) notice to vacate at properties it has with agency loans covered under the CARES Act Section 4024, Lowry said. “We also gave the same notice to residents who just quit trying to pay and work with us, some of whom are surely affected by the COVID-19 pandemic fallout,” he said.
Lowry said between the forgiven revenue and the loss of rents and utility payments, the losses have been significant for his company and its equity investors on their approximately 40 assets.
“The federal government essentially took our contractual rights and threw them out the door,” he added.
TMG hasn’t adjusted its eviction policy in recent months because “the county has adjusted it for us,” Harkness said. “They keep delaying court-hearing dates so we are not eager to offer additional adjustments.”
Harkness said that because TMG was “very proactive” and offered a flexible payment plan (three payments within the month with no late fees), it has maintained its delinquency rate at or below where it was pre-COVID. It averages 2%, “which is exceptional,” he said.
“If the moratoria are extended, we will continue to do so,” he said. “Eviction moratoria are county by county for us and, so far, we are not affected as our delinquency and number of evictions we’ve filed has not spiked at all.”
Check the Numbers
RealPage’s deputy chief economist and vice president of asset optimization Jay Parsons wrote in mid-July about the many reasons he believes that unprecedented evictions are not imminent.
“Eviction ‘tsunami’ forecasters rely on questionable math,” Parsons wrote. “Apartment renters are paying rent at near-normal levels. In June, 95.9% of market-rate apartment residents paid rent by the end of the month—off only 0.1 point year over year, according to the National Multifamily Housing Council’s tracker based on more than 11 million actual leases. Courts are unlikely to move quickly on evictions and state and local moratoriums are much broader than the CARES Act.”
Parsons also mentions that Fannie Mae and Freddie Mac are providing additional protections, and property managers are offering unprecedented payment flexibility. He believes that Americans are economically better off than media reports suggest and that “Congress eventually should figure it out.”
Tina Oswald, executive director of the Resident Relief Foundation (RRF), which supports residents facing eviction, said she’s seen a dramatic increase in applications for assistance in general.
In July, RRF received more than 200 applications. For comparison, for the months of January and February 2020, it received 20 applications. Since March 16, more than 2,100 applications have been filed. The application form and criteria are posted on its website.
RRF contacts the property manager to independently verify tenancy and make sure there are no lease violations or too many late payments. Due diligence requires basic documentation, such as two months’ bank statements, pay stubs, etc. and if the individual meets all requirements, a grant is paid on their behalf directly to the property per the rental terms.
“While government and policymakers have tried to address this with the CARES Act and other assistance programs, those programs don’t cover everyone,” Oswald said. “The federal moratorium on evictions that expired July 24 only includes properties backed by federal funds and covers just 30% of the rentals in the United States.
“Even if is extended, a majority of renters are left with no protection at all. The various rental assistance programs across the country typically apply only to those whose income is under 80% of area median. [We are concerned about] the millions of people left out of any assistance opportunities at all.”
Oswald appeals to the private sector to support this cause, particularly at the apartment association level. She points to Colorado’s lead to raise funds that will apply exclusively in its state. The Colorado Apartment Association has raised more than $125,000.
Paula Cino, vice president of construction, development, and land-use policy at the National Multifamily Housing Council (NMHC), said, “It’s clear that apartment residents across the country are facing significant distress. Based on our discussions with our members, we don’t expect an eviction cliff. … We are supporting our members with new resources on eviction mitigation practices and a template they can customize to share federal, state, and local resources to help provide financial, food, and employment assistance.”
Those resources offer guidance to apartment operators on taking action in the case of potential evictions, such as communications with residents. Some residents struggle to understand the eviction process. By communicating, the owner can explain the process, the timing, and what a moratorium actually means, as well as point these residents to potential rent assistance resources.
“Above all, though, we need Congress to enact rental assistance and to continue the enhanced federal unemployment assistance to keep people housed,” Cino said.