The Looming Rent Crisis
Perhaps as many as 46% of all New York State renters may be unable to pay rent in October and moving forward, according to the global advisory firm Stout Risius Ross, LLC. Nationwide, one in six renters were behind on their payments in September. October looks to be more of the same. For landlords, the last thing we ever want to do is evict a tenant, especially for non-payment of rent. What’s behind these grim numbers? What do the next few months look like in terms of tenants being able to pay rent and changes to our eviction laws?
When the COVID economic crisis struck in March, the United States economy lost over 22 million jobs. That’s the worst labor market performance since the Great Depression. We have recovered roughly half of those lost jobs through September. Unemployment is now down to 7.9% nationally (September number) and 12.5% in New York (August number). The post-lockdown economic recovery has been robust, but dramatically uneven. Black and Hispanic women have been hardest hit, as have industries heavily dependent on close personal interactions like restaurants, retailers, gyms, salons, and live entertainment. Renters (as a broad demographic) are struggling far more than homeowners.
Predicting future economic trends can be dicey, but a few key facts seem clear. One, we are at risk for more lockdowns. Regardless of anyone’s views on this subject, it is simply a fact that in New York State more lockdowns could come if COVID cases rise exponentially. Two, if a COVID vaccine becomes widely available, the odds are strong that many of the 11 million-plus jobs lost over the past few months will return (or new ones will be created in their place). Three, if present trends continue – no more lockdowns, continued economic improvement, a third Federal government stimulus package is passed – more people will have the financial resources to pay rent.
Evictions for non-payment of rent are prohibited nationwide by the Centers For Disease Control (CDC) through the end of the year. If a tenant earns less than $99,000 a year that means, effectively, a landlord’s hands are tied until at least 2021. That does not mean that tenants are not liable for unpaid rent in the future; in theory, they are, but eviction in 2020 is not an option.
There is no “landlord relief” program on the political horizon either in New York State or in Washington, D.C., so the financial pain of the rent crisis falls entirely on real estate investors. We still have to pay our mortgages and upkeep on the rental properties we own, while at the same time our hands are tied to evict anyone for unpaid rent.
Over the next few months, some REIs will be facing severe challenges. How long can landlords hang on with no or reduced income? The rental market must return to a more stable and sustainable position. Allowing people to live rent-free may be required in times of crisis but prohibiting evictions sooner or later spells disaster for everyone.
My hope and belief is that 2021 will see something like a return to normalcy. Once a COVID vaccine is in place, which could be no later than the first or second quarter of 2021, jobs in the hardest-hit industries will return, and the economy will resume robust growth. Until then, we need to ride this short term storm out.
If you have a residential property or properties in Westchester County that you are interested in renting, now is the time to put them on the market. At Sterling Property Solutions, we have a team in place that can answer all your questions and address any challenges. If you are already a landlord and no longer have the time or desire to handle rental property management on your own, we can help. Maybe your current property management company is not giving you the top tier service you deserve. If so, reach out. We are there for you.
Please give me a ring at 914-355-3277 or send me an email at Linda@Sterlingpsi.com. Together, let’s form a plan for you to take full advantage of the current conditions and put in place a robust, long term program for your success.