Sep 09

Axios has a good article on the health of small businesses, well if you read it good is not a thought that comes to mind…

Failure of small businesses is bad for both commercial landlords, and because 49.2% of America’s private-sector employees work in a small business, it will impact the long term viability of residential rentals as well.

Source: https://www.axios.com/small-business-confidence-goldman-sachs-74ba6e69-ad0e-4cb5-bee3-d03445b2a30e.html

From the SBA

Small businesses make up:
99.7 percent of U.S. employer firms, 64 percent of net new private-sector jobs, 49.2 percent of private-sector employment, 42.9 percent of private-sector payroll, 46 percent of private-sector output, 43 percent of high-tech employment, 98 percent of firms exporting goods, and
33 percent of exporting value.

Source: U.S. Census Bureau, SUSB, CPS; International Trade Administration; Bureau of Labor Statistics, BED; Advocacy-funded research, Small Business GDP: Update 2002- 2010, www.sba.gov/advocacy/7540/42371

Aug 30

Matt Desmond’s op-ed piece in today’s NYT is a prime example of the over-emphasizing of relative differences in eviction filings:

In the last week of July, eviction filings were 109 percent above average levels in Milwaukee.” 
— https://www.nytimes.com/2020/08/29/opinion/sunday/coronavirus-evictions-superspreader.html

If one narrows the range enough, picking and choosing that which fits their predefined scenario, one can use otherwise factual data to say anything. 

A more accurate reflection of what is happening in the Milwaukee rental market is eviction filings are down by 26.6% YTD through 07/31/2020, despite an anecdotal 8-12% greater than normal non-payment. Rent has always been the financial elasticity in the “C” market, be it Christmas gifts, car repairs, or job loss.

If too many owners fail because they cannot collect enough rent to cover expenses, housing opportunities will only become more restricted and expensive. Municipalities will also fail as they “eat” three to four times more rent dollars in property taxes and municipal utilities than typical owners receive for their efforts and return on investment. 

Many scholars are warning of such widespread failures in the rental market. One example: 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

In national interviews dating back to 1991, I’ve pointed out the near impossibility of paying rent for those with limited income. While the older articles are not online, here is a NYT interview from a decade ago:

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.” ($673 was the W2, welfare, cash benefit at the time)
— https://www.nytimes.com/2010/02/19/us/19evict.html

Sadly nothing has changed in these 30 years. 

I fully agree with Desmond’s statement buried near the end of the op-ed, “Eviction is not a solution to landlords’ fundamental problem of maintaining rental income. Rent relief is.”  I would have been pleased to see this as your closing call to action.

The COVID crisis presents an opportunity for housing advocates, whether from the tenant or property owner perspective, to jointly push for a long term solution, which Matt Desmondinitially advocated for; portable housing vouchers.

Aug 23

Bold highlights are mine:

https://www.zillow.com/research/zillow-weekly-market-report-27151/

 

Previous Zillow research found that this recession’s wave of layoffs disproportionately affected renters, and now the unemployed are having even more trouble paying their bills. The National Multifamily Housing Council’s rent payment tracker showed a two-percentage point increase in the share of renters who had not paid August rent as of August 13, compared to the same time in 2019. While many renters are currently covered by eviction moratoria, very few can expect rent forgiveness or extensions on the same scale, or structured similarly, to the forbearance policies that have protected homeowners. Consequently, many renters are moving out and looking for other shelter when unable to pay rent. Millions of young adults, predominantly 18-25 year-olds, moved back in with their parents or grandparents this spring. And as detailed above, many of the most financially secure renters in the Millennial generation are taking advantage of low mortgage rates to jump into homeownership. 

Aug 07

I encourage everyone to download and read the following published research paper

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3641859

“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.

Aug 03

Halting evictions during the coronavirus crisis isn’t as good as it sounds

Read the whole thing, but here are some tasty nuggets

To protect renters from losing their homes, a growing number of cities and states have put a temporary halt on evictions, meaning that landlords cannot evict tenants who fall behind on their rent. While this may buy renters more time, a moratorium on evictions could cause ripple effects that further hurt local economies. But there is a more effective way to help renters by giving them cash that replaces lost income, while also supporting small businesses and local governments.

RENT HAS IMPORTANT MULTIPLIER EFFECTS IN THE LOCAL ECONOMY

Rent checks don’t just line the pockets of fat cat landlords—they also contribute to essential government services and other workers’ wages. If many households are simultaneously unable to pay rent, the economic impacts will be felt throughout the local economy.

The first entity that gets paid by a monthly rent check isn’t the landlord—it’s the local government. Property taxes have a higher priority even than mortgages; if a landlord falls behind on both property taxes and mortgage payments, the local government’s claim supersedes the lender’s.

Landlords are also responsible for paying building-wide utilities, including water and sewer fees, garbage and recycling collection, or gas and electricity for common areas. These are essential services that must remain functional even during the pandemic.

Additionally, many of the expenses incurred by landlords are actually the wages of other workers. Keeping an apartment building functioning, safe, and clean requires the efforts of maintenance and housekeeping staff. Larger buildings typically employ on-site workers, but even small properties have ongoing needs which they may outsource to local contractors, like plumbers or electricians. As rent payments dwindle, small landlords will defer some maintenance needs—which means poorer quality housing for all tenants in the building and loss of employment for maintenance workers.

 

Jul 30

The recording is at:

Newsmakers: Evictions in Wisconsin During COVID-19

It was a great program, and worth watching.

Discussion topics

  • Statistical comparison of eviction numbers from the first six months of 2019 vs. 2020.
  • A forecast for the remainder of 2020 for landlords and tenants.
  • Potential long-term effects on housing as a result of COVID-19. 
  • Potential fallout from a national eviction moratorium.
  • The rent strike movement’s effects on potential investors in rental property.

Discussion panelists

WisconsinEye senior producer Steve Walters will host the panel discussion with the following panelists:

  • Heiner Giese, lobbyist for the Apartment Association of Southeastern Wisconsin (AASEW)
  • Chris Mokler, director of legislative affairs for the Wisconsin Apartment Association (WAA)
  • Colleen Foley, executive director for the Legal Aid Society of Milwaukee
  • Joe Murray, director of political and governmental affairs for the WRA
Jul 06

We may wish to address the impact that fireworks have on housing and insurance before 2021.

There were 140 reported fires over the Fourth of July weekend 2020 (07/03/2020 to 07/05/2020 inclusive) 

The same period last year (07/03/2019 to 07/05/2019 inclusive) had 60 reported fires.  

Even when you include the weekend after the 2019 Fourth (07/03/2019 to 07/07/2019 inclusive) there were 81 fires reported

MPD/MFD fire calls 

07/03/2020 to 07/05/2020 140  (3 days)
07/03/2019 to 07/05/2019   60  (3 days)
07/03/2019 to 07/07/2019   81  (5 days to include the following weekend)

Jul 05

Below is the letter the Apartment Association sent to Mayor Barrett, President Johnson, and the Common Council on June 15th, 2020. We have yet to receive a response, but still hopeful that those representing housing providers are included in designing a meaningful solution to these problems

Dear Mayor Barrett

We are pleased that Milwaukee is considering offering financial help for tenants who are struggling to pay rent, and we would like to be a part of the process. We have been working with a coalition that includes Community Advocates, Legal Action, Legal Aid, and Mediate Milwaukee. The AASEW can bring valuable experience and insights to this effort, and we hope you will strongly consider our offer to participate in your deliberations.

While we applaud Governor Evers’ $25 million Wisconsin Rental Assistance Program, it represents approximately $30 of assistance per rental unit in Wisconsin. We believe the size of the rental population in Milwaukee and the financial fallout from the COVID-19 pandemic may necessitate a more robust response.

In our view, sustainable rental housing is critical to the well-being of Milwaukee. Nearly six in ten, 58.2%, of Milwaukeeans live in rental housing.[i] In some neighborhoods, such as 53233, the number of renters exceeds 97%. The success or failure of neighborhoods and rental housing are closely tied. Currently, Milwaukee offers some of the most affordable metropolitan rents in the nation, a significant advantage compared to similar-sized communities in the country.

However, if landlords cannot collect rents and continue to cover the operating expenses for their properties, the impact could be worse than the 2008 housing crisis. “The economic impact of the Great Recession and mortgage foreclosure crisis has had a significant, detrimental, and ongoing effect on City households.” DCD 12/2019.[ii] Foreclosure filings in Milwaukee County were three times higher in 2009 than last year.[iii] From 2008 through 2010,16,000 Milwaukee properties were in some stage of foreclosure by lenders and the City.[iv] In those two years, the tax base lost almost $2 billion in value, with a resulting $16.7 million loss of tax revenue. The resulting demolitions had a large impact on the City’s budget due to the cost of razing along with the impact on the property tax and municipal services collections.[v] The neighborhoods where those properties were located suffered long-term damage. We continue to feel that impact even today, and we certainly hope to avoid a similar outcome in the future.

Rental Housing is the largest small business in Milwaukee, with over $10 billion[vi] invested in the City. Rental properties account for more than $700 million dollars per year of economic impact, starting with $270 million[vi] paid in property taxes.

In 2018, the Census Bureau found the yearly mean operating costs, excluding mortgage payments, per unit for rental properties was $5,270. [vii] Milwaukee’s rental housing contributes $1,198 in wages per unit, $161 Million per year. But more than direct wages are involved. There is also the local multiplier effect because the wages paid to employees of Milwaukee landlords are a major economic factor in the well-being of the City and its residents.

These numbers highlight the critical importance of a healthy and vibrant rental housing market in Milwaukee. We hope you will accept our offer to participate in the upcoming process to deal with the fallout from the COVID-19 pandemic and Eviction Moratorium this year. Thank you for your consideration, and please feel free to use the contact information above for any clarifications or questions you may have.

Sincerely,

Ron Hegwood
President
Apartment Association of Southeastern WI, Inc

[i] https://data.census.gov/cedsci/table?g=0600000US5507953000&layer=VT_2018_040_00_PY_D1&t=Housing%20Units%3AOwner%2FRenter%20%28Householder%29%20Characteristics&tid=ACSDP1Y2018.DP04&vintage=2018&hidePreview=true&cid=B25008_001E

[ii]Section 2: Housing Needs and Demand Housing Affordability Report Department of City Development  |  December 2019

[iii] State’s Foreclosure Rates Have Plummeted » Urban Milwaukee

[iv] www.sewrpc.org/SEWRPCFiles/HousingPlan/Files/foreclosure-in-milw-progress-and-challenges.pdf

[v] Tom Barrett wants to spend $2.4 million on home demolition, rehab

[vi] MPROP assessor records April 2020

[vii]  https://www.census.gov/data-tools/demo/rhfs/#/?s_byGroup1=12&s_tableName=TABLE4

Jun 17

https://www.cnn.com/2020/06/16/success/rents-are-dropping-us-cities-coronavirus/index.html

“I’m seeing rents are down 10% to 20%, with higher-end and luxury units taking the biggest hits,”

Considering that the typical owner’s net operating income after mortgage, taxes, insurance, utilities, repairs, employees, is 7-9% there will be a lot of failures, of both owners and municipal budgets.

Jun 11

Housing Choice Voucher Wait List. A random lottery will be held from the applicants with 3000 families to be added to the waitlist.

Why will only 3,000 applicants be selected in the lottery to be on the wait list?

The wait list will be limited to 3,000 applicants so that they will have a reasonable expectation that they may receive a Housing Choice Voucher within a 2- to 3-year time period.

This shows how great the need is for expanded rent assistance.

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