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
May 24

I was invited by TMJ4 to talk about the end of the WI eviction moratorium on Friday. I cannot find a link to the show, but here are my notes and a picture from when my granddaughter happened to catch the broadcast when she was watching tv. It must have been one of her homeschooling assignments. 😉

My notes for the interview. Unfortunately I was not able to make all my comments.

How are you working with tenants?

Most important is communication. Tenants need to talk to their landlords. The sooner the better.

Our company has posted a list of resources for tenants on our website at:
ApartmentsMIlwaukee.com/r/  

Despite dire predictions by attorneys for Legal Action, we do not anticipate a large increase in overall evictions.

What may be surprising to some, rental owners do not like evictions. It is in both parties best interest for a resolution.  Successful landlords need successful tenants. Every eviction is costly to landlords in terms of lost rent and often damages.  Evictions are costly to tenants as it impacts their future housing and is disruptive to their lives.

If tenants have resources to pay rent, then there will be no eviction crises when the moratorium is lifted.  Governor Evers just announced $25M Wisconsin Rental Assistance Program will go a long ways to providing those resources and preventing many evictions.  

Most owners did not charge late fees for April, well before the prohibition against late fees was issued.  

We are seeing greater than 85% of tenants have paid their rent in full for April and May and generally timely.

As would be expected, some tenant took advantage of the moratorium and did not pay rent when they had an ability to do so.  Many people are in better financial position today than they were three months ago due to the enhanced federal unemployment and stimulus money.  

Our company and many other landlords are working with Mediate Milwaukee to attempt to resolve some of these issues without filing for eviction.

Are you worried about how the rest of the year looks?

Absolutely. Landlords need to collect their rents in order to survive. If landlords do not survive, tenants and municipalities suffer.

The real fear is, unless something dramatically changes, that August and September will be far worse due to the expiration of the enhanced federal unemployment, the stimulus money being spent, and those employers who received the SBA Payroll Protection Program grants will no longer be required to keep those employees.

Any substantial disruption in rent collections will cause an impact on not only the property owners, but also on future rental housing costs.

Milwaukee and other communities have recently furloughed employees due to COVID’s impact on their budget.  This comes well before we will see the impact of COVID on payment of property taxes, sewer and water and reductions in collections of other city fees.    

We can look at  2008 and see how that impacted Milwaukee’s housing for years after. The City ended up foreclosing on hundreds of properties, with many having been vandalized to the point they were razed.  Milwaukee continues to have a huge number of tax foreclosures today, even in what was one of the best economies in history. It will only get worse now due to COVID.  This is not only a burden to the cities but also reduces future housing choices for tenants.

Picture of one of Sherrena (from Desmond’s EVICTED) properties on 10th & Center that was foreclosed upon shortly after the 2008 crises.  It burned in April 2018 and was finally razed in November 2019. (Photo by Heiner Giese)

There are predictions that the COVID housing impact will be far worse than the Great Recession. The 2008 bubble was predictable and the build up to it was over a couple of years.  Many people in the housing industry realized the prices of real estate at the time was unsustainable and those people were not harmed. 

COVID brought the economy to a sudden and unpredictable stop.  No one was prepared, and many businesses will not return.  

What resources are available to landlords?

Not many.

Landlords with very specific mortgages may forgo payments, but interest may still occur.  Mortgages are only a fraction of the operating costs.  Nearly an equal amount is paid to the municipalities in taxes, sewer, water, and other fees.  Maintenance is a large portion of the owners’ expenditures as is insurance and other operating costs.

Here is an infograph from the National Apartment Association:

Dec 04

Over on the ApartmentAssoc@groups.io email discussion list Mike writes:

Fortunately the facts are not as laid out in the post.  The article makes this clear.   “Property taxes” would not go up 64-128% under the proposals being considered.  The MPS portion of the property tax bill would go up by those percentages, not the whole bill.  The increases are still substantial – I estimate 25-50% of the whole bill.  If we landlords want to be involved in the political process we must arm ourselves with facts to avoid embarrasing ourselves and damaging our cause. 

Mike is correct, the percent of increase is the school portion. The original Journal article, which I based my comments on, stated:

“For a home assessed at $300,000, that would push property tax bills from $2,874 to $4,716 on the low end and $6,723 on the high end — increases of 64% and 134% respectively.”

Milwaukee Journal article as it appeared on 11/19/19

The Journal article has since been rewritten to “school property tax”

This represents an annual tax increase of $921 to $1925 on an average Milwaukee home.

I stand by my original comments of the dire consequences this will cause to our market.

Dec 03

From Rebecca Knox at Brew City REI Club

********Brew City: If you are concerned about the MPS referendum suggesting a SIGNIFICANT PROPERTY TAX INCREASE 64-128% and want to relay your thoughts on this, the LAST MEETING with the task force will be at 5:30 p.m. at Bradley Tech High School, 700 S. 4th St, Dec. 10.
********

All of the meetings will be open to the public. The panel is expected to make a recommendation to the school board in December 🤨😲 This is the last meeting they are having.

We spoke to District 4 elected MPS board member, Annie Woodward and she said there are a lot of agendas going on and encourages everyone to share their opinions.

The current conversation across our industry is Evictions.

What will happen to tenants who are already near failing, when tax bills force widespread rent increases?

What will happen when rental owners, who are already operating on slim margins, cannot find tenants that can pay the increased rents that mirror the increased taxes.

What will happen to homeowners who are barely keeping up with expenses today?

If property taxes double, which is the mean predicted increase, Milwaukee, and Milwaukee alone, could easily see a foreclosure/failure rate comparable to 2008.

Owners in the rest of the metro will be unaffected, making rentals and homes there more valuable and desirable, furthering the exodus from, and the decline of, the City of Milwaukee.

The Journal reported just two weeks ago of the harm caused by 28% of City workers leaving the city for the burbs.

Nov 29

From the Milwaukee Journal :

A new report from RENTCafe found that West Allis registered a 14.6% increase in average rent rates from just one year ago.

Per RentCafe, Milwaukee saw a 4% increase. Their report for WI is at:

https://www.rentcafe.com/blog/rental-market/local-rent-reports/wisconsin-rent-report-october-2019/

4% for Milwaukee sounds about right. 14.6% for West Allis is surprising.

But if the proposed MPS budget goes through with its expected 64-134% property tax increase, then I expect that Milwaukee rents will skyrocket, all the while profitability will decrease.

Jun 20

Since yesterday’s post on Milwaukee rent stats I’ve spoken to a number of people, both landlords and tenant advocates, who felt rents had significantly increased in Milwaukee over the past couple of years.

I took a look at this using Rent-O-Meter’s rent analytic tool.  (I highly recommend this tool for accurately  setting residential rents) In moderately priced neighborhoods both on the Southside and Northwest, their data is showing that for two bedroom units rents have actually dropped quite a bit from 2016.  Three bedroom unit rents remain stable.

Not sure what to attribute this to.  There has been a softening of occupancy levels over the past year or so, which nearly always causes price corrections.  No money/low money mortgages are reappearing.  That temporarily drives up vacancies, but as we saw in 2008, that bubble pops.

 

 

Rent-o-Meter data NW Milwaukee

Rent-o-Meter data NW Milwaukee

Jun 19

Rents have not changed significantly in Milwaukee (2008-2012) compared to 2013-2017)

What has changed significantly is the number of people paying over 35% of their income in rent.  That percentage DROPPED from 50.1% in 2008-2012 to 45.9% in 2013-2017.

While there is still room for improvement, it looks like the financial status of Milwaukee’s tenants is improving.  This is a good thing for all.

Table is from the US Census Data:

Milwaukee Rental Data From US Census

Milwaukee Rental Data From US Census

Dec 02

Last week my son sent me the following text:

I read this from time to time and thank you for it

The Public Policy Forum a few months back said Milwaukee’s really short of low-cost rentals. If more people went into the business, researchers said, it could help. Yet Ballering, who’s owned for 32 years, told his son to find another occupation: “It’s such a difficult business,” said Ballering.

“There’s better things to do with your life.”

Not what a city in need of rental housing wants to hear from entrepreneurs who provide it.

Source: http://archive.jsonline.com/news/opinion/59534347.html/

The back story:

My son was nearing high school graduation.   I asked him what his plans were.  He said that he was going to follow me into the rental business.  He was initially upset with me when I told him no.  Today he is happy as a partner at a major marketing firm.

Although being in rental housing has done well for me, it is a harsh business.  There is little to no appreciation for the amount of work and risk involved. Many who enter the industry leave broke and broken. Your properties get damaged, your tenants do not pay and, to quote the late Rodney Dangerfield, we get no respect.

The government, who would benefit from successful rental housing, seldom support us or gives us the tools we need to succeed.  As an urban housing provider, you become responsible for the misdeeds of your tenants, while those who commit crimes are often not prosecuted.

There is an eviction crisis.  Yet instead of putting resources towards the causes, poverty and social issues, those claiming to want to solve the problem are providing more resources to free legal helps so that the nonpaying or disruptive tenant can stay a month or two longer due to an undotted i or uncrossed t.

So, yes, being a marketing professional seems like a much better life.

Jul 03

Milwaukee Journal has an article about Milwaukee’s new ordinance that requires deconstruction, as opposed to bulldozing, pre 1929 single families and duplexes.

A Milwaukee ordinance went into effect in January requiring single-family homes and duplexes built in 1929 or before to be deconstructed.


The extended timeline and need for more workers causes deconstruction to often cost nearly twice as much as demolition.

Bloomberg just had a piece on how recycling in general is failing.

Similarly a decade ago or so one of the Milwaukee TV stations followed a couple of DPW trucks full of recycling bin plastics to a landfill. The response was they were ‘just storing them underground’ until they could reuse the plastic.

None of these well-meaning things work as government mandates, but often take off when they are profit motivated.

Look at the electric car. Great for the environment but little interest among the general population. Then along came Musk with his Tesla Roadster. Not a utilitarian, save the planet vehicle, but a quick, sharp looking sports car that enthusiast liked, oh and it also happened to be electric. That changed the topic. His later vehicles are like little high tech spaceships from the Jetsons. Today, there is even Formula E racing, similar to F-1. The buying public, including gearheads, is now getting excited about electric cars and all the major manufactures are racing to beat Tesla. Soon gas may be a thing of the past.

Deconstruction will only work well when there is similar economic motivation to do so, such as a marketplace for used lumber and consumer desire for the materials.

But deconstruction of older properties has the additional problem that many of the materials cannot be reused due to containing lead, asbestos and who knows what other chemicals that will prevent its direct reuse.

 

Feb 01

You now are required to install 10 year sealed battery smoke detectors in Milwaukee. We have the law in a large part because Kiddie, the smoke detector manufacturer,  lobbied hard in Milwaukee for the law.

The sales literature claims the life to be ten years from the activation. Now if the ten year detectors actually worked for ten years, without being removed, disabled, or the battery dying they would be a bargain for owners compared to replacing batteries once a year.  However, will they?  I doubt it.

The marketing of a ten year detector may in fact cause more problem as home owners and perhaps some landlords will think ‘Okay, this January 2018, I’ll make a note on my calendar to replace the detectors in December 2027.’ and not continue to check them annually at least.

 

Let’s be clear: You still need to check the ten year units, just as you did with the regular units.

A worrisome fact is they have an “off” selector that drains the battery and permanently disables  the unit. From their literature

 

Q: How do I disable my alarm?
A: Remove the alarm from the mounting plate by rotating it counterclockwise (as indicated by the arrows on the cover of the alarm). Next, on the back side of the alarm, locate the area marked with a long arrow on the product label. Break through the label with a screw driver and turn the screw to the “OFF” position. This will deactivate the alarm, stop the end-of-life warning and render the alarm safe for disposal by draining the battery.
IMPORTANT: Deactivation of the alarm is permanent. Once the alarm has been deactivated, it cannot be reactivated or mounted back onto the mounting plate and will no longer detect smoke or carbon monoxide. This is why it’s imperative to replace your alarm immediately.
The ten year warranty only covers repair or replacing the unit, not the damage caused by them failing to work in a fire seven years from now,  your labor to replace them or even the postage to and from the manufacturer.  Some highlights of one warranty:

 

The obligation of [manufacturer] under this warranty is limited to repairing or replacing the alarm or any part which we find to be defective in material, workmanship or design, free of charge, upon receiving the alarm with proof of date of purchase, postage and return postage prepaid,
 
 In no event shall the Manufacturer be liable for loss of use of this product or for any indirect, special, incidental or consequential damages, or costs, or expenses incurred by the consumer or any other user of this product, whether due to a breach of contract, negligence, strict
liability in tort or otherwise.
 
The Manufacturer shall have no liability for any personal injury, property damage or any special, incidental, contingent or consequential damage of any kind resulting from gas leakage, smoke, fire or explosion.
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