Feb 05

At my company, we have tenants on bi-weekly, weekly, and alternative pay dates because I have long known the cost to us when a renter fails.

The alternative pay date can be a legal gotcha under Fair Housing. Let’s say a renter receives Social Security Disability, and their check arrives on the 3rd of the month and you have a pay before the 1st policy that has a late fee or unrealized discount after the 1st. If the renter asks you to change their due date to the 4th so that they can receive their payment and get it to you and you refuse this “reasonable accommodation” or may be in violation of Fair Housing.

Dec 22


https://www.jsonline.com/story/news/2020/12/22/landlords-tenants-say-rent-assistance-needed-part-eviction-ban/3932908001/

“I  don’t think a landlord should be expected to shoulder the burden of taking care of a property for several months or a year,” when a tenant stops paying rent, said Dawn Anastasi, a landlord who owns 18 properties on the northwest side of Milwaukee. “It’s not the tenant’s fault, but it’s not the landlord’s fault either.”

Even with the rent assistance, landlords will be left holding the bag for much of the unpaid rent, predicted Tim Ballering, treasurer of the Apartment Association of Southeastern Wisconsin.

“The unpaid rent will never be paid, let’s be honest about that,” Ballering said, noting that even when a tenant is evicted the landlord seldom collects the past due rent. 

As a result, Ballering, who is also a landlord, predicted a spike in the number of local landlords who sell their properties to large absentee rental companies.

“Is that a good thing or a bad thing?” Ballering asked. “That depends on your views. Do you think that the small American farmer being driven out by large corporate farmers is a good thing?”

Heiner Giese, attorney for the association, said the $25 billion in rent assistance will be helpful though he agreed it would likely only last a couple of months.

Giese noted that the federal bill will allow landlords to file for rent assistance, unlike other rent assistance programs that require the tenant to apply

Giese, who is also a landlord, said he has seen cases where tenants signed the required CDC declaration that protected them from eviction but then did not apply for any rent assistance.

“They would just say he’s going to evict me anyway, so screw it,” Giese said.

Dec 20

How do landlords think unemployed people will pay rent?:

…an average of 8% of renters don’t pay rent in normal times. During the coronavirus crisis to date, that share has gone up to 15 to 20% of renters not paying.

“But generally, I think we need a better approach instead of just pitting owners versus tenants,” he says. Both the tenants and landlords need some larger, holistic fix from the government that acknowledges that there just isn’t as much money flowing through the system as there should be.

Nearly 12 million renters will owe an average of $5,850 in back rent and utilities by January, Moody’s Analytics warns. Last month, 9 million renters said they were behind on rent, according to a Census Bureau survey.   

The over $70 Billion in unpaid rent, as reported by Moody’s will cripple many housing providers and will cause a housing crisis that will impact both tenants and municipalities for years, if not decades.  In May of 2020 Milwaukee property values finally recovered from the 2008 Great Recession. 

Less than 2.5% of rent judgments are paid in Milwaukee County five years after the eviction.  And eviction judgments represent only a small fraction of the unpaid rent.  In surveying owners, we see on a high end 42% of their lost rent is included in eviction judgments, with most owners reporting less than 10%.  Some owners never pursue money judgments. So the million dollars a month in eviction judgments represent somewhere between $28.5 million to $100 million a year in money that should go into housing but does not.  I peg the number at least to be $48 Million a year in lost rent in one county.  This is just insane. 

The right answer is for the government to step up to the plate and create a portable housing voucher to cover a portion, to all, of the rent /housing costs for people below a certain income, similar to food stamps.

Instead, the government pits tenants against landlords in a zero-sum game where one must lose for the other to win. In the end, this makes housing more expensive or limits choices.

This has been a problem long before COVID. In 1991 I was interviewed by the New York Times on evictions. I asked the reporter, “On $574 a month, how do you buy tennis shoes for the kids, clean shirts for school, and still pay your rent?” Nothing has changed much since then. $574 was the AFDC (now W2) payment amount. Twenty years later in an NYT interview, my comment was basically the same:

“On $673 a month, how do you buy tennis shoes for the kids, clean shirts for school and still pay your rent?” Mr. Ballering said.” 
https://www.nytimes.com/2010/02/19/us/19evict.html 

Some suggest canceling mortgages and rents, thinking that this equivalent and will prevent the economic failure of housing.  Sadly, it will not.

The average mortgage payment is 36-39% of gross income. The average owner earns 7-9% of gross income for their investment of capital, financial risks, and physical efforts.  If you stop mortgage and rent payments, as well as prevent owners from being paid for their investment and efforts, there is still 52-57% of gross rent that is needed to cover other operating costs such as sewer, water, property taxes, maintenance, insurance, etc.

In Milwaukee, for most properties, the City takes a far bigger cut of the rent in property taxes, and sewer/water bills, than the owner gets to keep.

If you read the Brookings report, you will see this plus the “local economic multiplier” effect of wages and other monies expended by owners.

The Census Bureau reported in 2018 that, on average, every unit generates almost $1,200 in wages. Those wages, the property tax money, etc, circulate throughout the community many times over.

Here’s what scholars believe will happen if there is a moratorium without rental assistance; https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3641859 It goes into the economic impact on housing and the cost borne by other current and future tenants. It is an informative read.

Dec 08

We are trying to get a handle on what percentage of uncollected rent is not reflected in eviction judgments.  Any data you share will be aggregated and will not identify you when we share our findings.

This information should be only for your Milwaukee County rentals.

  • How much rent went uncollected?
  • How much of the uncollected rent was included in eviction judgments? Do not include damages or money judgments that were not part of an eviction.
  • OPTIONAL:  How many units do you own or manage in Milwaukee County?

You can email me directly

There is an average of about a million dollars a month in Milwaukee County eviction judgments.  Our initial survey shows this represents somewhere between a quarter and a tenth of the total unpaid rent, which in turn means your tenants who are paying as they should are paying an extra $49 to $123 per month to cover those tenants that do not pay.  

Five years after the eviction has concluded only 2.5% of eviction judgments are paid.

Tim Ballering
Tim@ApartmentsMilwaukee.com

Oct 27

WI evictions are down statewide by 28% year to date through September 30th. In Milwaukee, that percentage is slightly higher, at just under 31% reduction.

A telling part is that August evictions were much lower than last year, despite the state’s moratorium being lifted.

This drop in evictions occurred even while reported collections are down by 12-16%. In talking to property owners, I’ve been told by many they have pulled back on maintenance, some suffering the impact to the point they have forgone insurance, utility and mortgage payments.

The impact on the other side will be higher housing costs for all as owners fail, or try to make up for losses in the future.

Aug 30

A published research paper that found:

“Our research shows that in order to keep rental housing affordable and sustainable for low-income families, lawmakers have to walk a fine line in determining what will benefit the tenant and what may ultimately be detrimental to them,” Shen said. “On the surface, strict landlord regulation sounds good for tenants, but our paper points out, the solution isn’t that simple. The research suggests that conventional thinking on the issue of more regulation may have the opposite effect on tenants.”

“Though advocating for tenant rights seems noble and the right thing to do, the resulting consequences could have a devastating impact on this vulnerable population,” Shen said. “Our research indicates that if landlords aren’t allowed to evict, rent will likely increase to compensate for their losses. The housing supply would diminish, though the demand would still exist. These landlords may choose alternative investments if owning property is no longer feasible. A reduced housing supply would mean less competition, which would drive up the cost of rent for everyone.

Coulson, N. Edward and Le, Thao and Shen, Lily, Tenant Rights, Eviction, and Rent Affordability (July 4, 2020). Available at SSRN: https://ssrn.com/abstract=3641859 or http://dx.doi.org/10.2139/ssrn.3641859
Aug 22

I grabbed a few of the more pertinent paragraphs, but he article is a worthy read in its entirety.
 
https://www.nytimes.com/2020/08/21/business/economy/rent-tenants-evictions.html

  • Instead of an avalanche, the appropriate metaphor might be a receding tide that is exposing layers of financial insecurity.
  • Even before the pandemic, about 25 percent of tenants were paying at least half their pretax income for housing.
  • Even as corporate landlords report little change, smaller landlords are reporting declining collections and in many cases expect to use loans and personal savings to cover shortfalls.
  • Partly this is because these landlords have less access to capital than large corporations, but buildings like duplexes and triplexes — the kinds of properties that many small landlords own — tend to be more affordable, so they attract lower-income tenants, who have been hit the hardest by the pandemic. 
  • Several tenants haven’t paid rent. Others are making partial payments and asking for extended payment plans. “At the beginning of the pandemic, I expected what I’m seeing now,” [the landlord] said.
  • Avail, a platform that helps small landlords manage their properties, recently surveyed about 5,000 tenants and landlords and found that 42 percent of tenants and 35 percent of landlords were pulling money from savings and emergency funds to make it through the pandemic.
Jul 30

An article from Bloomberg that concisely lays out the two main problems facing rental housing and tenants.

The U.S. had a pretty “stingy” safety net when it came to housing before the pandemic, said Mary Cunningham, vice president of the Metropolitan Housing and Communities Policy Center at the Urban Institute.

….

But over the long-term, rental revenue will decline because of missed payments and lower occupancy as tenants look to save money by doubling up with others, Pawlowski said. Landlords could end up missing more than $22 billion in rent over the next four months, according to the Stout analysis.

$22 Billion in loses will impact rental housing costs and availability for years

Jul 24

[Edit: The WI case permitted a $50 late fee. A $75 late fee was not found excessive in one owner’s Milwaukee County Cases. ]

Late fees and security deposits are two points of friction in housing.

A question was asked, ‘How much should I charge for late fees?’

The WI Court of Appeals that allowed a $50 late fee in 1993.

It is a Fair Housing violation to charge late fees to tenants that seek a reasonable accommodation based on a disability. A prime example is an SSI recipient who receives their check on the 3rd of the month. There are a number of federal cases that owners have lost because they were inflexible on this point.

We stopped charging late fees on April 1st, 2020, prior to the moratorium. We did not charge any late fees for July, despite it again being legal to do so for most tenancies. (It is illegal to charge late fees for CARES Act covered properties until August rent and illegal to charge late fees if you are receiving mortgage forbearance on a federally insured mortgage)

Normally we have a due on the first, late on the 5th policy. At the close of business on the 5th, we charge a $15 late fee. If the rent is still not paid by the 12th, there is an additional $35 late fee, for a maximum of $50 late fees in a month. Our staff can forgive one late fee per tenant per year without asking for permission. We also do not charge late fees for tenants who are on a payment schedule, for example, they pay twice a month to coincide with their payroll.

Per diem (daily) late fees are problematic and can violate usury laws. For example, a $25 a day late fee after the fifth is $625 if the tenant misses a month.

Jun 28

The NYT article is title is “Lori Lightfoot, mayor of Chicago, on who’s hurt by defunding police.” But it has a lot to do with rentals from what I perceive as a very liberal politician’s view.

I would take the Chicago Housing Solidarity Pledge as it is what my company is already trying to do.

From the NYT’s article interview with the Chicago Mayor:

As a result of what we’ve all been going through, a lot of us, I think, have been reconsidering some of the fundamental assumptions we had about our government and economic system. Have you? Are you thinking differently now about things like rent control? [6]

When I think about rent, I think about it in the context of the entire ecosystem. The problem is mortgages that have to be paid and the banks that hold those mortgages and whether they’re going to give any forbearance. I think about landlords who are under pressure to pay their mortgage, their utilities, their property taxes. I think about renters and how stressed they are, worrying about being able to pay but also about possible evictions and what impact that is going to have on their credit rating. So the way I think about public policy is not individual levers and solutions in isolation. I try to look for the balance. Many times, there’s a solution lurking in the center.

So where might there be a solution for helping people who are struggling to pay rent because the economy cratered?

One thing that we did here is we brought together banks, landlords and people representing renters into what we called a solidarity pledge.[7] It’s voluntary; it’s not mandatory. But we put a lot of emphasis on saying: “Be good neighbors. Give each other grace and space in this difficult time.” That means not filing evictions. Not penalizing people because they can’t pay their mortgages or their rent. Be engaged in conversation to find common ground. We heard from all the actors that they were engaged in a lot of these conversations already. But by me, as mayor, publicly challenging them, it moved a conversation that was in the backroom to a more public reckoning.

Don’t you think that a voluntary “solidarity pledge” could just give landlords the cover of paying lip service?

You’re underestimating the level of activism here in Chicago. Any instance in which people feel there’s been a deviation, they are not hesitating to call it out. But of course, not everybody’s taking the pledge.

————

6 Rent control has been banned in Illinois since 1997.
7 In addition to the solidarity pledge, Lightfoot recently proposed a prohibition on landlords’ eviction of a tenant without first allowing the tenant five days to deliver a “notice of Covid-19 impact” outlining financial hardship brought on by the pandemic. Delivery of the notice would then earn tenants an additional week for negotiation.

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