COVID-19 Left Tenants and Landlords Scrambling

VOLUME III

By Shamontiel L. Vaughn

(Angela Rose and Deirdre Paige contributed research and interviews to this post.)

With more than 45 million infected with coronavirus (COVID-19) and 734K fatalities, COVID-19 is reportedly the worst pandemic in the United States, bypassing the 1918 Spanish flu. The results of this virus outbreak have left health care providers overworked, hospitals understaffed, and led to so much overcrowding that in some cities (like Houston) staff had to set up tents outside because all hospital beds inside were taken.

But it wasn’t just the healthcare industry that got hit hard; unemployment from the worldwide health pandemic resulted in at least 8.8 million jobless people total, with the unemployed stats as high as 13% by the second quarter of 2020 before falling to 6.7% in the fourth quarter. In this bunch were tenants scrambling to hold on to their own jobs while juggling their utility bills, day-to-day needs and rent.

Meanwhile, property owners had similar financial concerns in their private lives and were still held responsible for paying the mortgage and property taxes for their rentals—even when their tenants couldn’t. And when the federal moratorium came into play and banned landlords from evicting tenants who couldn’t or didn’t pay rent, landlords were stuck wondering what to do next.

Even after the moratorium expired, landlords are still confused about the correct process to evict and/or collect past rent.

Timeline of Moratorium

March 27, 2020

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) launched.

July 24, 2020

CARES Act was set to expire. Tenants could not be forced to vacate their homes until 30 days following the moratorium’s expiration.

September 4, 2020

The Centers for Disease Control and Prevention (CDC) eviction moratorium took effect to extend tenants’ stay.

December 31, 2020

CDC’s eviction moratorium was scheduled to end but continued on.

January 31, 2021

CDC’s eviction moratorium was scheduled to end by this date but continued on.

August 26, 2021

The Supreme Court blocked the CDC from continuing to enforce the federal eviction moratorium although President Joe Biden’s administration supported the extension.

What the Expiration of the Federal Moratorium Means for Landlords Now

The federal eviction moratorium expired after landlords victoriously challenged the order with the Supreme Court, claiming their bills need to be paid and asserting tenants have access to more than $46 billion in federal funds to help pay rent.

The problem with that stance is that only $3 billion of those funds has made it to tenants, according to CNBC, primarily because each state has chosen its own individual way to disburse aid. And the longer it takes for tenants to receive funds, the longer landlords are left picking up the bag.

"On one hand, there were many tenants who lost their main sources of income due to the pandemic crisis, which in turn affected their ability to pay for basic needs like monthly rent,” said Shina Coleman of Lone Star Evictions in Woodlands, Texas. “And on the other hand, there were landlords who are still today bearing the expenses from lost rental payments while trying to maintain their own households."

As virtual conferences became the go-to for work-from-home employees and families and friends trying to keep in touch, it also became the go-to for eviction cases.

"Just a few months into the enacted moratorium, we [had] already received an influx of phone calls from exasperated landlords seeking assistance with evicting their non-paying tenants,” Coleman continued. “They are out of money. They're tired."

Landlords are now looking at their local laws to determine steps to initiate evictions. In addition to state laws, there are specific criteria preventing landlords from evicting.

On October 7, 2021, the U.S. Department of Housing and Urban Development (HUD) issued an interim rule prohibiting any evictions of tenants for non-payment from HUD-subsidized housing and properties with tenant-based rental assistance without a 30-day notice.

Landlords across the nation with federally backed mortgages—including Fannie Mae and Freddie Mac (FHFA); Federal Housing Administration (FHA); U.S. Department of Agriculture (USDA); and Veterans Administration (VA)—must wait 30 days after issuing an eviction writ or notice to vacate before enforcing any evictions.

Multi-units (with five or more units) are also covered from immediate tenant evictions, late fees and other penalties, and any demands to pay back rent in one lump sum, as long as the landlord’s mortgage is covered by federal forbearance.

Cash for Keys, Other Alternatives to Collect Past Rent

Several cities in Texas, including Austin and Dallas, are enforcing local bans on evictions despite the Supreme Court ruling in favor of landlords. A “notice of proposed eviction” must provide tenants with the “right to cure” any late payments within a 60-day turnaround. Austin also extended its city moratorium to December 31, 2021.

In Dallas, landlords are required to issue a "Notice of Possible Eviction" that includes information on rental assistance programs to tenants, and gives them a minimum of 21 days to negotiate payment agreements. Tenants who qualify for COVID-19 related financial hardships are allowed 60 days to pay late rent or start a payment plan with landlords.

“[Landlords] should serve their notices early,” said attorney Melvin Sims, Esq., from the Tenants Rights Group, LLC. “Consider cash for keys to entice the tenant to vacate voluntarily. It may ultimately be a cheaper option and a more pragmatic business decision for the landlords."

Cash for keys is when landlords offer a cash payment for tenants to vacate the home. This can be a solution where everyone benefits—tenants receive a small amount of cash and dodge eviction; then landlords can find paying tenants and avoid costly legal fees.

"Landlords should be pragmatic,” Sims continued. “Evaluate the costs of becoming embroiled in months-long eviction litigation versus the costs of waiving back rent or even potentially paying a problematic tenant a little something to vacate."

Landlords interested in this should check with their state law requirements to ensure all legal procedures are followed. Landlords who have tenants that are paying rent now but still have thousands in back pay can also offer payment arrangements by adding a portion of the past due rent to the current rent.

Cash-Strapped Landlords Head to Court

For landlords who do not have federally backed mortgages, evictions are back in full swing.

“The COVID-19 pandemic has exacerbated the already often combative and volatile landlord-tenant relationship,” said Sims. “The federal, state and local eviction moratoriums effectively removed the traditional pressure valves for landlords faced with tenants in arrears. Now that those federal and state protections are ending, we will see a spike in eviction filings this fall and into the winter.”

As virtual conferences became the go-to for work-from-home employees and families and friends trying to keep in touch, it also became the go-to for eviction cases.

“Many eviction courts have ended in-person court hearings totally and migrated to Zoom court hearings,” said Sims. “Some of those Zoom court calls consist of 70 or 80 litigants online all at once, all trying to have their eviction cases heard and moved through the system. The eviction process has become more burdensome, complicated and unforgiving for landlords due to the new additional notice and filing requirements implemented with the pandemic.”

And while landlords work with their real estate attorneys to recoup lost funds from their tenants, they may want to look to state and local governmental options to see if there are more seamless alternatives.

What the State and Local Government Has Done to Help Property Owners

Programs such as the American Rescue Plan Act provided approximately $9.96 billion for states, the District of Columbia, U.S. territories, Tribes or Tribal entities, and the Department of Hawaiian Home Lands in relief for the U.S.’s most vulnerable homeowners. Although the deadline to apply for those funds passed in April of this year, property owners are looking to state programs as an alternative.

Our Florida Rental Assistance program, a federally funded Emergency Rental Assistance (ERA) Program operated by Florida’s Department of Children and Families, paid out more than $4 million in rental and utility assistance to eligible Florida residents. This program requires the cooperation of both the tenant and landlord. Funds are then paid directly to the landlord or utility provider.

Eligible tenants must earn an income at or below 80% of the area’s median income, have experienced a proven financial hardship and/or be unemployed, and be delinquent with rent or utilities payments (or falling behind) in order to be eligible for this program. The ERA also reallocated funds to help tenants stay in their homes and for landlords to receive due rent.

The Texas Rent Relief Program also can help renters and landlords with costs starting as far back as March 13, 2020. This includes past due, current and up to two months of expected rent costs; past due, current and up to two months of expected utility and home energy expenses; and three additional months of assistance if funds are still available.

For landlords, all payments must be used to satisfy the tenant’s rental obligations and the tenant is required to sign the landlord’s application. Even if landlords choose not to apply, tenants can still attempt to use the Texas Rent Relief Program for unpaid or future rent or utilities.

Hard Decisions for Landlords: Sell or Rent Again?

COVID-19 blinded both landlords and tenants from a health, financial, mental and physical standpoint. While anti-maskers and anti-vaxxers may be in opposition to pro-Moderna and pro-Pfizer activists, there is one opinion they can all agree on. Everyone wants the numbers for COVID-19 and the Delta and Omicron variants to dwindle off the way the Spanish flu, swine flu, SARS and all the rest eventually did.

More than half of Florida residents (59.4%) have already been vaccinated. In Texas, that number is slightly lower at 53%, according to Mayo Clinic. And while the Omicron variant is 70 times more contagious than even the Delta variant, and no vaccine makes residents immune from COVID-19, residents want to get adjusted to their “new normal.”

While property owners and renters don’t have control over a worldwide health outbreak or the fallout, they can control their own interactions to reach calm resolutions.

“I have always been an advocate of keeping the communication lines open,” said Coleman. “Landlords should continue to have calm, controlled conversations with their tenants. Oftentimes, this alone may win them over.”

For landlords who had otherwise honest and responsible tenants, federal and local programs that help with financial assistance may be all that’s needed to get both parties back to where they used to be. Renters need a residence to stay in, and landlords who want to continue renting need reliable tenants. Many are taking steps to cooperate with each other.

For other landlords, their “new normal” means they’ve tapped out and are selling their property to investors. The National Rental Home Council (a Washington D.C.-based trade advocacy group) reports that approximately 23% of small landlords who own one to three single-family homes have made plans to sell at least one property due to difficulties caused by the eviction ban. Two-thirds of those owners previously charged rent that was less than $1,250 per month.

According to Additional NRHC Survey Data:

More than half (54%) of single-family rental homeowners have received less than full rent (59% African American owners and 63% Hispanic owners).

More than 60% of single-family rental homeowners say that rent payment shortages had a negative impact on their own ability to pay ongoing property and maintenance bills.

Eviction moratoria is linked to a decrease in the total supply of single-family rental homes: 79% of property owners sold their property to an owner who will not use the property for rental housing.

While some property owners have waved goodbye to the everyday life of a landlord and others choose to fight the good fight and deal with tenant evictions (as is their right), more than half (56%) of single-family rental homeowners opted for a payment plan for their current residents.

Meanwhile 37% proactively forgave some amount of rent. While at least a quarter of single-family rental homeowners will be stricter with applicant standards as a result of the moratoria, both tenants and landlords can take this experience as a hard lesson they shall never want to experience again.

The Ins and Outs of Working with Investors

While tenants of rental properties focus on factors such as property quality, location and monthly rent, investors may focus on one overarching factor: return on investment. Here’s what Realtors need to know about how investors generally decide whether they want to invest in rentals.

Rental Inspections: Don’t Wait Until Move-Outs Only

Move-in/move-out inspection and periodic inspections are important aspects of managing a rental property. By better understanding what to look for during inspections and how often to schedule them, it is possible for landlords to avoid common mistakes.

Creating a Go-To Contractor List

Agreeing to a contractual relationship, such as a service maintenance agreement, with a vendor could significantly speed up any frantic searches—especially during emergencies and late-night hours.

Navigating Out-of-State Rental Properties

Today’s housing market is a bit of a seesaw. In 2022, the Federal Reserve hiked its benchmark interest rate six times. Higher interest rates mean loans are more expensive for consumers. But no matter what happens with inflation, people need a place to live. This is leading property owners to look for a means of disposable income. And sometimes the real estate investor may choose a property from another state.

Is That Emotional Support Animal Legit?

It can be difficult for landlords to tell if someone has a legitimate ESA or simply a pet. Banning a tenant with an ESA could lead to legal action against the landlord. Fortunately, there are ways that landlords can fairly differentiate between the two to comply with the Fair Housing Act.

Repairs: Who Pays for What?

For a landlord, a rental property is an uphill battle against mishaps, calamities, the hands of time and sometimes nature itself. To guard their investment, property owners must plan ahead, maneuver tactfully and sometimes be prepared to cut their losses.