If you want to share this or any other housing concerns with your elected officials, go to democracy.io and enter your address. The site allows you to write to both your US Senators and your Congressperson at the same time without searching for their emails or finding who represents you.
We should be asking for housing assistance to prevent the failure of both renters and housing.
If you do write – I’d appreciate if you send me a copy to Tim@ApartmentsMilwaukee.com
74.4 % of rental properties owned by individual investors. Source: https://www.census.gov/newsroom/press-releases/2017/rental-housing.html and in an easier to read format in this report from Harvard: https://www.jchs.harvard.edu/blog/who-owns-rental-properties-and-is-it-changing
55% of rental units as owned by part-time landlords: https://www.avail.co/education/articles/state-independent-landlords-2017
Rent debt will be $25-34B by January 1st. https://www.ncsha.org/resource/current-and-expected-rental-shortfall-and-potential-eviction-filings/
roughly 10 – 14 million renter households — home to 23 – 34 million renters — were behind on their rent by a total of roughly $12 – $17 billion as of September 14, 2020.
These renters will owe $25 – $34 billion by January 2021,
(from a chart just below the P1 fold)
More State-Specific info at: https://assets.aspeninstitute.org/content/uploads/2020/08/chart3_fsp.png
Local economic multiplier of rent payments from a report by Brookings Inst.
RENT HAS IMPORTANT MULTIPLIER EFFECTS IN THE LOCAL ECONOMYRent 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.
Cities and counties rely on property taxes from all their constituents—individual homeowners as well as owners of apartments, offices, and other nonresidential properties—to cover the cost of providing public services. Although local governments could defer property tax payments during the current crisis, the pandemic is already stressing local government budgets. Cities are front-line providers of health care and emergency services, and also need money right now to feed children whose public schools are shut down and care for older adults and vulnerable populations.
https://www.brookings.edu/blog/the-avenue/2020/03/25/halting-evictions-during-the-coronavirus-crisis-isnt-as-good-as-it-sounds/
Census reports that the average rental unit generates $1,198 per unit per year in wages.
https://www.census.gov/data-tools/demo/rhfs/#/?s_byGroup1=12&s_tableName=TABLE4&s_type=2
Mean Payroll Costs for Employees Per Housing Unit 1,198
We can fix evictions for what it costs to allow the problem to continue
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.
Impact of the 2008 housing crises on Milwaukee
The following is from a letter we wrote to Milwaukee’s mayor. It outlines some of the economic factors of rental housing and the harm that will come if there is a mass failure. In 2008 smart money could see prices rising over a two and a half year period at a rate not sustainable by wages. In 2020 the economy was screaming, then two weeks later it stopped. The suddenness of the event is a recipe for disaster.
If action is not taken to avert this, the aftermath of 2008 will look like a walk in the park on a sunny day.
A December 2019 Milwaukee Dept of City Development report stated “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.[ii]Section 2: Housing Needs and Demand Housing Affordability Report Department of City Development | December 2019 https://storymaps.arcgis.com/stories/eb043b089173407aa469eba948dd9601
[iii] State’s Foreclosure Rates Have Plummeted » Urban Milwaukeehttps://urbanmilwaukee.com/2019/07/11/states-foreclosure-rates-have-plummeted/
[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, rehabarchive.jsonline.com/news/milwaukee/barrett-wants-to-spend-24-million-on-home-demolition-rehab-b9933176z1-211401301.html/
Household debt was at a moderate level relative to income before the public health shock, but many households have lost jobs and seen their earnings fall. As many households continue to struggle, loan defaults may rise, leading to material losses.
https://www.federalreserve.gov/publications/files/financial-stability-report-20201109.pdf
An important piece from DSnews
In an opinion piece published on the Informed Comment website, John Buell, a former professor at the College of the Atlantic, observed that an after-effect of the COVID-19 pandemic’s economic trauma will weigh on the housing market as homeowners and renters struggle to keep up with housing costs.
“If foreclosures and evictions are standing in the way of recovery, it is also safe to say that the draconian cuts in budgets of state and local governments translate into wage reductions and/or unemployment for public sector workers and thus more pressures on the housing market,” Buell wrote. “If homeowners and government workers are not able to create sufficient demand to restore economic growth the federal government must step in. State governments are constitutionally prohibited from borrowing for daily expenses.”
Read the National Housing Coalition letter to Congress and the Senate. It is a worthy read, even if you are disinclined to reach out to your elected officials, but you should call/write your Senator and Congressperson.
Who are my Senator and Congressperson, you ask?
Find my Congressperson
Find my Senator
No harm in asking your local elected officials to support these efforts as well. You can find your State Senator and Representative on the Wisconsin Legislature home page. The search box is on the right, just below the picture. Tell them you understand they do not directly control Federal legislation, but ask if they could please talk to their party about this.
Also no harm in presenting this to your local elected officials. They hold more political power than many believe. In Milwaukee those folks are:
Mayor Barrett
Common Council
County Supervisors
What are you waiting for… Go make some noise! 😉
The recording is at:
It was a great program, and worth watching.
WisconsinEye senior producer Steve Walters will host the panel discussion with the following panelists:
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. 😉
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.
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.
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.
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:
The NY Mag has an excellent, sorry depressing, article about “Dr. Doom” Nouriel Roubini prediction of an extended depression.
In September 2006, Nouriel Roubini told the International Monetary Fund what it didn’t want to hear. Standing before an audience of economists at the organization’s headquarters, the New York University professor warnedthat the U.S. housing market would soon collapse — and, quite possibly, bring the global financial system down with it. Real-estate values had been propped up by unsustainably shady lending practices, Roubini explained. Once those prices came back to earth, millions of underwater homeowners would default on their mortgages, trillions of dollars worth of mortgage-backed securities would unravel, and hedge funds, investment banks, and lenders like Fannie Mae and Freddie Mac could sink into insolvency.
His predictions for 2020 are far more dire
A decade later, “Dr. Doom” is a bear once again. While many investors bet on a “V-shaped recovery,” Roubini is staking his reputation on an L-shaped depression. The economist (and host of a biweekly economic news broadcast) does expect things to get better before they get worse: He foresees a slow, lackluster (i.e., “U-shaped”) economic rebound in the pandemic’s immediate aftermath. But he insists that this recovery will quickly collapse beneath the weight of the global economy’s accumulated debts.
An amazing story of the lead up to the housing bubble
http://www.workingre.com/interview-appraiser-who-brought-down-countrywide/
Among the many firms and individuals who acted irresponsibly, and maybe criminally, perhaps none did so with such flair and recklessness as Countrywide Financial. Before its rescue-sale to Bank of America (BOA), Countrywide was the largest mortgage lender in the United States.
The Milwaukee Journal reports that Representative Evan Goyke has introduced a series of bills to address foreclosures. The 5 bills as described by the authors are:
- Realtor Incentive Bill (LRB-3010) – This bill seeks to create an incentive for realtors to sell properties that have a foreclosure judgment and a sale value of less than $50,000. It is our hope that this incentive will attract realtors to invest more time and energy in the foreclosed home markets and neighborhoods. The bill would remove income tax reporting requirements for the commission income made by a realtor working as the agent for either the buyer or seller of the property.
- Demolition Bond Bill (LRB-2431) – This bill is designed to ensure that municipalities do not bear the financial burden of demolition of a property when the lender initiates a foreclosure action. The bill would require, as a matter of civil procedure at the time of filing a foreclosure action, that the plaintiff in the matter post a demolition bond of $15,000. The bond will be held by the clerk of courts for the county in which the foreclosure action is filed. In the event that the property is neglected, deteriorates, and becomes a blighted property in need of demolition, the $15,000 demolition bond will be applied for the cost of demolition. In the event that the property is no longer owned by the plaintiff in the foreclosure action, the demolition bond shall be returned to the plaintiff. Similarly, in the event that the foreclosure action is dismissed, the demolition bond shall be returned to the plaintiff.
- Security Lighting Bill (LRB-2774) – Under current law, mortgagees may file a foreclosure action against a borrower when the borrower meets certain criteria regarding non-payment. The plaintiff mortgagee in the lawsuit must pay a filing fee with the appropriate county clerk of courts to initiate the lawsuit. In general, these fees are used to pay the operational costs of the court. Under this bill, the filing fee for each foreclosure action is increased by $50.00 with the additional filing fee being routed by the county clerk of courts to the designated department for installation of lighting on existing abandoned homes. The lighting that shall be used shall generate and regenerate its own power through solar energy (as by definition, the existing foreclosed homes do not have electricity running to them). The lighting will help deter theft and vandalism to abandoned properties.
- HOME GR/OWN Bill (LRB-2368) – Earlier this year, the City of Milwaukee was a finalist in Former Mayor Bloomberg’s Philanthropies’ Mayors Challenge, which was a competition created to inspire American cities to generate innovative ideas that solve major challenges and improve city life. Milwaukee became one of the top finalists based on the City’s innovative idea to transform foreclosed properties into community assets that improve public health and spark economic opportunity. Unfortunately, Milwaukee was not chosen as one of the recipients of the reward, but we feel this should not deter Wisconsin from pursuing the goals of the challenge.
- Property Stabilization Bill (LRB-3431) – Current law does not allow municipalities or lending institutions the authority to enter into a property that is subject to a foreclosure action. When the property is abandoned, this may lead to deterioration of the property, which greatly decreases the property’s resale value and places additional burdens on local property tax payers. This bill seeks to extend authority to a municipality or lending institution to enter the foreclosed property and address any possible problems within the property, such as winterizing the plumbing. This bill also seeks to extend civil immunity to agents of either the municipality or lending institution engaged in the rehabilitation or repair of the property, so far as the agent is acting in his or her official capacity in carrying out actions allowable under this bill.
Something must be done to address this problem. But remember we are at this point because the government at many levels encouraged the purchase of homes by buyers who were ill prepared for homeownership and without the financial resources to weather the smallest of storms. These policies drove sales prices to unsustainable levels. We now pay the price.
At this point many of the vacant foreclosures need to be bulldozed as they have been gutted by thieves looking for a few dollars in copper to buy their next fix.
Rep. Goyke’s proposals, while good for starting a conversation, for the most part are unwise.
I doubt the IRS is on board with the non reporting of commissions.
The demolition bond has the potential of causing far greater problems than it cures. Already today banks are refusing to take possession of foreclosed properties. Many owners believe they were foreclosed upon and moved out only to find the city hunting them down for fines and fees because the banks never took possession. One such case, Bank of New York v. Carson, recently was heard by the Court of Appeals.
We;ve already seen cases where the lender has sued on the note, but as civil cases rather than foreclosures, leaving the title in the buyer’s name along with the liens for mortgages and the court judgments. Mr Goyke’s proposed bond will cause more incentive for banks to do this, creating a larger amount of Zombie housing, i.e. housing that can never be sold due to the liens and title problems.
I do however like the proposal to install solar powered security lights, if they are vandal proof.
