Just a Landlord

[Thank you to Joe Murray for the research]

First, let me preface this that in general, I feel that Governor Evers has done well in the distribution of housing aid during the pandemic.

However, his proposed budget has a number of concerning provisions.  And how the heck does Wisconsin allows laws unrelated to spending to be part of a budget is well beyond me.

• If passed, municipalities will be able to restrict how you screen, what you can charge, prohibit showing occupied units, making certain you lose a month or more between tenants, limit charging for damages, limit or prohibit security deposits and allow for rent abatement for minor issues.  
• If passed municipalities will also be able to enact their own eviction moratoriums.
• If passed, you will be inhibited from evicting for criminal activity. That should make other renters and neighbors feel safe — Not!  
• If passed you can be required to disclose code violations “regardless of whether the landlord has actual knowledge of the violation“

Actual details are below.  
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Local landlord-tenant ordinances

Current law prohibits political subdivisions from enacting certain ordinances relating to landlords and tenants. Political subdivisions may not do any of the following:

1. Prohibit or limit landlords from obtaining or using certain information relating to a tenant or prospective tenant, including monthly household income, occupation, rental history, credit information, court records, and social security numbers.

2. Limit how far back in time a landlord may look at a prospective tenant’s credit information, conviction record, or previous housing.

3. Prohibit or limit a landlord from entering into a rental agreement with a prospective tenant while the premises are occupied by a current tenant.

4. Prohibit or limit a landlord from showing a premises to a prospective tenant during a current tenant’s tenancy.

5. Place requirements on a landlord with respect to security deposits or earnest money or inspections that are in addition to what is required under administrative rules.

6. Limit a tenant’s responsibility for any damage to or neglect of the premises.

7. Require a landlord to provide any information to tenants or to the local government any information that is not required to be provided under federal or state law.

8. Require a residential property to be inspected except under certain circumstances.

9. Impose an occupancy or transfer of tenancy fee on a rental unit.

10. Current law also prohibits political subdivisions from regulating rent abatement in a way that permits abatement for conditions other than those that materially affect the health or safety of the tenant or that substantially affect the use and occupancy of the premises. 

The budget bill eliminates all of these prohibitions.

Local moratorium on evictions

Current law prohibits political subdivisions from imposing a moratorium on landlords from pursuing evictions actions against a tenant. 

The budget bill eliminates that prohibition.

Notification of building code violations

Under current law, before entering into a lease with or accepting any earnest money or a security deposit from a prospective tenant, a landlord must disclose to the prospective tenant any building code or housing code violations of which the landlord has actual knowledge if the violation presents a significant threat to the prospective tenant’s health or safety. The bill eliminates the condition that the landlord have actual knowledge of such a violation and that the threat to the prospective tenant’s health or safety be “significant”; under the bill, the landlord must disclose to a prospective tenant a building code or housing code violation, regardless of whether the landlord has actual knowledge of the violation, if the violation presents a threat to the prospective tenant’s health or safety.

The budget bill eliminates these provisions.

Terminating a tenancy on the basis of criminal activity

Current law allows a landlord, upon providing notice to a tenant, to terminate the tenant’s tenancy, without an opportunity to cure the tenant’s default, if the tenant, a member of the tenant’s household, or a guest of the tenant 1) engages in any criminal activity that threatens the health or safety of other tenants, persons residing in the immediate vicinity of the premises, or the landlord; 2) engages in any criminal activity that threatens the right to peaceful enjoyment of the premises by other tenants or persons residing in the immediate vicinity of the premises; or 3) engages in any drug-related criminal activity on or near the premises. 

The budget bill eliminates these provisions.

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.

Before the COVID crisis, I was unaware that pre-filing eviction mediation was an option and only vaguely aware that mediation was an option during an eviction case. Many of our evictions resulted in stipulated dismissals, as do 46% of the evictions in Milwaukee County.

We learned of Mediate Milwaukee simultaneously through the Apartment Association’s collaborative work with Community Advocates, Legal Aid, and Legal Action; as well as my staff researching information for our tenant resource page at apartmentsmilwaukee.com/r/

Near the end of the moratorium, my company tried Mediate Milwaukee with two tenants that were three or more months behind in rent.

The resulting agreements were similar to what we would have accepted in a stipulated dismissal, with the added benefit of someone knowledgeable being there to help the tenant navigate funding options and assistance applications.

Based on our initial positive results, Affordable Rental Associates implemented a new internal policy. Before filing an eviction for non-payment, we refer the tenants to Mediate Milwaukee. Mediation first is now a standard business practice and will continue beyond the COVID crisis and moratoriums.

Pre-filing mediation benefits everyone. 

• Tenants avoid having an eviction on their record, often with similar or more extended payment agreements than they would receive in a stipulated dismissal. 
• Landlords benefit as they avoid the cost of eviction, and tenants who work with Mediate can better navigate funding options that allow them to stay in the unit, avoiding vacancies and rerenting costs to owners. 
• The Court benefits by a reduction in caseload, many of which are ultimately settled by stipulation.
• We all benefit from the reduction in conflict. It was pleasantly surprising that some previously rude tenants became polite to my staff during mediation.
• Plus, tenants and owners who enter into mediation will avoid the need to debate in Court whether a CDC declaration is factual.
• Where needed, we have utilized Mediate Milwaukee to re-engage with tenants when issues arise with compliance with an agreement, often stabilizing the situation.

If mediation is explored early in the delinquency, there is little to no downside for the property owner. There are also, albeit lesser, benefits to both parties with post-filing mediation. Nonetheless, it can often result in a continued tenancy or at least a more agreeable move-out. While court-connected mediation will continue to be of value to all parties, the real opportunity for change is to promote pre-filing mediation as the first option to eviction for the Milwaukee rental owner community. It could cause a paradigm shift for the benefit of all. 

The Apartment Association of Southeastern WI, which I’ve been a board member of for over three decades, has become a strong proponent of mediation benefits. We had a general membership meeting on October 1st to encourage owners to try mediation as an alternative to eviction.

There have also been many recent articles on the use of mediation for eviction prevention in other communities. One that I found interesting was https://citymonitor.ai/housing/what-is-eviction-mediation

https://www.greaterohio.org/publications/2020/11/4/local-interventions-for-eviction-prevention-and-why-they-are-needed

The Greater Ohio Policy Center (GOPC) has released Local Interventions for Eviction Prevention and Why They Are Needed, a guide for laying the groundwork to support Ohio renters and prevent evictions related to the COVID-19 crisis. 

Experts anticipate a tsunami of evictions to begin in January 2021. Given the limited state dollars available and the uncertainty of additional federal dollars, local governments must take the lead to protect their residents. This Working Paper profiles interventions from around the state in order to provide ideas and templates for communities that need housing stabilization programming.

https://static1.squarespace.com/static/59396fee59cc6877bacf5ab5/t/5fa3267c92abc63d53774755/1604527743492/Local+Rent+Assistance+Working+Paper.pdf

Some interesting concepts.  One is Pay and Stay, which I would support:

Community Spotlight: Pay to Stay Ordinance, Village of Yellow Springs Under “Pay to Stay,” a landlord is obligated to accept back rent (including reasonable late fees and court costs) up to the point where the bailiff is knocking on the door to begin physically removing tenants’ belongings. Pay to stay prevents a landlord from evicting a tenant where the tenant can pay back rent and reasonable late fees prior to the eviction judgment. If the eviction has been granted, the tenant can stop the eviction by paying back rent, reasonable late fees and court costs.

Featuring: How To Navigate Eviction Moratoriums

We are excited to announce Attorney Tristan Pettit’s Landlord Boot Camp will be held on November 14th, 2020. 

Due to recent changes impacting the CDC National Eviction Moratorium, we delayed the event to include the most timely information on navigating the current Moratoriums. 

The Saturday, November 14th event will be held as a live-streamed webinar from 8:30 AM -5:00 PM with live Q & A from 5-6 PM. 

Enjoy these advantages of the new virtual format:

• Attendees will receive a searchable PDF Boot Camp manual, making it easier to search and reference items in the future.
• A recording will be available to attendees for 14 days after the event to re-watch portions that you want a deeper understanding of.
• Attend the event from the comfort and safety of your home. 
• As in prior Boot Camps, the live Q & A session is part of this event.
• You will receive all of the same information normally presented in Landlord Boot Camp PLUS the latest information on navigating the CDC and CARES Act eviction moratoriums. 

For pricing and registration click here:  

https://aasew.org/event-4043452

www.aasew.org

These are the reasons we need to unify as an industry.  Read the full, well-written piece at:

https://www.nydailynews.com/opinion/ny-oped-landlords-are-people-too-20201007-zqsmvkptgjcyjkzbmwojhh7r7y-story.html

“Landlords are the devil incarnate. “F–k landlords.” “Cancel rent.” “Kill the landlords. “Landlord (sic) are a disease.” These inflammatory words come from social media postings, but it is not unusual to hear them at the protests and riots that have become routine in recent months. In addition, there have been marches specifically crafted to promote the rent-strike movement — a movement that suggests a tenant, even when she has the ability to pay, may choose instead to withhold the money and place the funds in a shared escrow account. Small business owner, Roni von Henschen says, “I know people who aren’t paying even though they can afford it. I don’t know why. Maybe they figure they can live month after month for free since evictions are banned.”

https://assets.aspeninstitute.org/content/uploads/2020/08/Evictions-Data-Update-August.pdf

• Providing shelter and services to a family experiencing homelessness can cost local governments $10,000,[1] which is more than the $9,120 average annual cost of one housing voucher to the federal government[2] 

1. Evans, William, James Sullivan, and Melanie Wallskog. “The Impact of Homelessness Prevention on Homelessness.” Science, 333:6300 694–6999, 2016. https://science.sciencemag.org/ content/353/6300/694.full.
2. U.S. Department of Housing and Urban Development. “Snapshot of Housing Choice Vouchers, 2016,” June 2018, https://www.huduser.gov/portal/elist/2018-june_08.html. 

I will respectfully submit that it is in the tenants’ best interest to allow Small Claims Court to hear disputes regarding potentially improperly filed CDC Declarations.

If owners are deprived of their right to challenge the validity of the declaration in civil court, the alternative is the use of the criminal justice system to pursue perjury charges, as contained in the CDC order. Remembering that the Declaration signed by the tenant begins and ends with an acknowledgment of criminal penalties:

I certify under penalty of perjury, pursuant to 28 U.S.C. 1746, that the foregoing are true and correct:
…
I understand that any false or misleading statements or omissions may result in criminal and civil actions for fines, penalties, damages, or imprisonment.

While on the surface it may appear unlikely law enforcement will get involved,  Wisconsin Statutes Chapter 781 and 783 provide for extraordinary remedies to compel officeholders to comply with the law.

So far my company has received one CDC declaration.  It is from a tenant on SSI (no job to lose or medical expenses to pay).  We have not received a WRAP or Community Advocates assistance application to sign.  So clearly this is at a minimum, defective and likely fraudulent. 

The Law of Unintended Consequences.

Back 20 years ago or so (I show it as April 2001)  Legal Action of Milwaukee successfully argued that properties held in LLCs had to be represented by an attorney in eviction actions.  This was successful at stalling a number of evictions the month or so surrounding the court’s decision, as owners scrambled to hire attorneys.  

Owners did not want attorneys.  This was an added cost to cases that there was little chance of recovering the unpaid rent, in a fairly low margin industry.

Tenants were harmed by this as the dynamic shifted from unrepresented landlords facing tenants with Legal Aid/Legal Action attorneys, to many landlords being required to have attorneys.  The added cost to the evictions made it harder for owners to work out deals with tenants and ultimately more expensive for the tenant.  

It also often resulted in the owner not being at the hearing, why spend half a day in court if I’m paying a guy in a suit and tie to do it for me, making it less likely a deal would be struck.  In the years prior to the ruling, most owners looked like Monty Hall filling stips and negotiating with tenants.  http://emmyonline.com/the-master-deal-maker-monty-hall

Even though the law changed a couple of years ago, most impacted owners still use attorneys because this shifted their standard operating procedure to use attorneys. 

Of course, the best course for owners and occupants alike, is for additional rental assistance funding.

https://shepherdexpress.com/news/features/the-new-eviction-moratorium-is-half-the-solution-but-is-it-e/#/questions

This issue will affect both parties. Heiner Giese, an attorney with Apartment Association of Southeastern Wisconsin (AASEW) says, “The question is, how are these people going to get paid? Will people lose their housing? What will landlords do in the meantime about municipal water bills, taxes, insurance or maintenance.”