Vaccination efforts continue to accelerate, restrictions are being lifted as states reopen for business, and the job market is rebounding. Cautious optimism of returning to normal, even a new normal, in the not-too-distant future is growing. Industries devastated by the pandemic, airlines and travel, bars, and restaurants, are poised for recovery.
Despite federal and state financial assistance and other restrictions, there remains one segment of the economy facing a daunting reality in the coming months. When eviction bans are lifted on June 30, 2021, millions of renters will face back rent, rent they may be unable to pay.
According to a January 2021 Census Bureau’s Pulse Survey, more than 10 million renters, 20.8%, were not current on rent payments and at some risk of eviction. More than 18 million respondents are concerned with their ability to pay rent in the future. These are staggering numbers, many times the normal rates. For perspective, consider that during the global financial crisis of 2008, approximately seven million households lost their homes due to foreclosure – over a five-year period.
Although the billions of dollars in rental assistance are welcomed by both residents and housing providers, the eviction moratoriums have merely delayed the inevitable. It is time for the federal eviction bans to end.
Many single-family and smaller landlords are dependent on rental income to maintain their properties and for their living. To date, there has been no government aid for them, and they don’t qualify for unemployment. For these owners, margins can be razor-thin, and when rents aren’t realized, they must dip into savings and retirement funds to manage.
Landlord’s Plight - Trying to Manage During the Crisis
According to the most recent U.S. Census Bureau, single-family homes account for nearly half of all rental housing. Some 23 million rental units are primarily owned by individual investors, not corporations with sophisticated credit models and deep reserves. These smaller landlords rely on rental income to cover the ongoing costs of the property, the mortgage, property taxes, utilities, maintenance, and insurance. In many cases, it supplements their personal income. When rent payments are reduced, or not forthcoming, rental operational commitments and personal bills are still due. Single-family landlords then have to access savings, emergency, college, and retirement funds to make ends meet.
The Latest Update on Financial Assistance and Eviction Moratoriums
For most landlords understanding the financial assistance requirements and eviction restrictions is challenging. Many really don't know what the next step might be. There is little certainty about when they're going to get paid.
On March 29, two days before the lapse of the federal eviction ban, the Biden administration announced an extension of the moratorium through June 30, 2021, and greater enforcement of the moratorium’s “protections.” In California, Governor Newsome also extended the eviction ban through June 2021. He created a State Rental Assistance Program to oversee the allocation of some $2.6 billion in federal rental assistance dollars to assist struggling tenants and small property owners.
Adding to the complexity of navigating bans, restrictions, and disbursements, each state's courts handle them differently. As a result, the duration, extension dates, those who qualify, and other regulations vary by state. To date, nineteen states have enacted some form of renter protection program.
One important note is that the latest stimulus packages will make payments directly to landlords on behalf of renters who have suffered financial hardship due to the pandemic. But, what exactly constitutes a renter’s financial hardship? Some of the qualifiers are:
- Those who have used their best efforts to obtain government assistance for housing.
- Those unable to pay their full rent due to a substantial loss of income.
- Those making their best efforts to make timely partial payments of rent.
- Those who would become homeless or have to move into a shared living setting if evicted.
In addition to the above requirements, one of the following financial criteria must apply:
- Expect to earn no more than $99,000 (individuals) or $198,000 (filing joint tax return) in 2020.
- Have not been required to report any income to the IRS in 2020.
- Have received an Economic Impact Payment (stimulus check).
Tenants seeking relief are required to complete a declaration under penalty of perjury that they meet the listed criteria.
Managing Your Rental Properties in the New Normal
If bans, restrictions, moratoriums, and state-by-state application of these vehicles are the new normal, smaller landlords will be challenged to manage their properties independently. Changes in compliance and regulatory measures, coupled with the overwhelming amount of past-due rents, will increase complexity. Best practices in collection processes and new strategies to improve cash flow and on-time payments as we advance are essential.
The Sperlonga Data and Analytics Solution
Navigating these complex compliance and regulatory issues while maintaining your rental customer relationships, and improving cash flow from rental incomes, requires a sophisticated process and a solution.
Single and multi-family landlords can benefit from Sperlonga Solutions. The Solutions, featuring rental credit reporting, submitting data to consumer and business credit bureaus, is a win/win process. The Sperlonga Data system simplifies administration, reduces past due balances and delinquent accounts, and rewards renters who pay on time.
With Sperlonga’s credit reporting solutions, you elevate rent obligations to the same level as consumer loans or credit card payments. Those renters who pay on time will see increased credit scores, while the scores for delinquent renters will be adversely impacted, in much the same way as not paying their credit cards or car loans on time. Knowing their rent payments will be credit reported is a powerful motivator to keep those payments on time.
Sperlonga is the solution that works! Start credit reporting now.