Joseph is CEO of TenantCloud, a cloud-based property management solution that helps landlords maximize revenue from rental properties.
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The pandemic has gone on longer than any of us could have ever imagined. Most of us are still living, working and existing solely in and around our homes. Many of those homes are rentals where families are struggling to pay their rent. With the federal eviction moratorium having originally expired at the end of January 2021, landlords are also hoping for some relief as they have had to carry the expense of both their own households and their renters’ households in regards to mortgages, insurance and property taxes.
The American Rescue Plan (ARP) is President Biden’s new $1.9 trillion stimulus package that would provide tenants and landlords with a chunk of financial relief. The proposed bill slates $25 billion for rent assistance and $5 billion for assisting with utilities, but also imposes another eviction moratorium until the end of September 2021. Given the eviction ban is limited to federally guaranteed properties, those same borrowers are also eligible for forbearance through September 2021. At the time of this writing, the ARP has been passed by the House and is waiting to be voted on by the Senate.
The stimulus package will provide an additional $25 billion (for a total of $50 billion) to the Emergency Rent Assistance initiative that was founded in January of this year. Each state and city also has the ability to create their own unique programs in that they can add to the minimum requirements set by the federal statute. Most states created their programs in mid-2020 after the first stimulus bill passed, with the expectation that there would be limited funds available. The fledgling programs have now provided a tremendous outflow of funds as states have received a minimum of $200 million, with maximum amounts being proportioned based on each state’s population. The funds are specifically slated to help tenants pay their outstanding rents in an effort to reduce the estimated $70 billion in back rent being carried by landlords across the country.
How Landlords Can Get The Most From These Programs
If you are a landlord, you should make use of federal and state programs however you can, but it’s important to know the different requirements between the various programs providing rent assistance. Differences in the programs seem to coalesce around the following topics:
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1. Support rent only in arrears or include future rent as well.
2. Number of months in arrears a tenant or landlord can apply for in funding.
3. Ability to apply multiple times or just once.
4. Applications are based on a lottery or on a first-come, first-served basis.
5. Self-certification or review process.
6. Landlord participation is or is not a requirement.
Addressing the first four differences, the National Low Income Housing Coalition has put together a great spreadsheet for reviewing all state programs and breaking them down into their many functions and limitations. As programs receive additional funding, there is a chance the requirements will be changed and become more flexible. Programs that allow for future rent to be paid and the ability to apply more than once are the most flexible, while limitations arise from the number of months that can be paid for rent in arrears. Programs that currently use a lottery system might change to a more first-come, first-served basis as the funding extends original expectations. With this in mind, be sure to keep up with any changes and verify that you meet any necessary requirements before applying for funding.
The final two differences between the various programs deserve a closer look.
Self-Certification
Self-certification seems to be a larger point of distinction. Self-certification is based on how much an individual is impacted by the pandemic and household income levels. Certification would require applicants to provide documentation proving income levels, which would assist in avoiding any wrongful awards but would also slow the program’s ability to deliver the much-needed funds. Common documentation for programs not requiring self-certifications includes letters of termination from work, furlough letters, evidence of reduced hours or even medical bills that show expenses incurred in relation to the pandemic. Before you begin the process to request aid, make sure to have these documents in order.
Landlord Participation Requirement
Finally, the landlord participation requirement is rare but it exists. These requirements vary and involve landlords making concessions to agree not to evict, or in some cases, to forgive portions of back rent, meaning landlords will be left holding the bill. While this puts landlords in a difficult position, it makes sense, as communities don’t want to give landlords a lot of money only to have them turn around and evict the tenant right after. However, the federal program allows for local programs to pay all the arrears, so it’s up to the local programs to make the necessary adjustments to support landlords.
Unfortunately, landlords have carried the cost of much of the rent debt across the country, with little to no assistance. Banks have provided some allowances for landlords to restructure debt, but this in no way indicates loan forgiveness by the bank. A debt restructuring takes the outstanding interest payments, including fees, and adds them to the total outstanding balance of the loan. Sometimes this comes with an interest rate adjustment. Whereas rent forgiveness means landlords take rent debt and “make it go away.” Landlords should do their best to avoid debt restructuring it if they can, but if not, it’s better than a foreclosure. If they do the restructuring then it may come with an interest rate adjustment but will always put the interest on the end of the total amount owed. It’s not great, but again, it’s better than a foreclosure.
Though landlords have the title that goes back to serfdom times, that doesn’t mean the job comes with the same regal opulence. Based on a Hamilton Project study a third of all landlords of single-family rentals are from low-to-moderate income households, with 20% of their income coming from their rentals. Whether they are landlords due to industry trade or utilizing real estate investing to boost their retirement savings, the landlord community has some indirect resources available that vary by region.
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