State and federal moratoriums on evicting tenants unable to pay rent due to COVID-related financial problems were unprecedented. With these laws came funding for landlords, but they were tied up in a bureaucracy that was also unmatched. Landlords waited months before seeing government funding. Many are still waiting. What impact does that have on landlords who own few units who rely on this income to pay their bills?
How Common are Mom & Pop Landlords?
The 2018 Rental Housing Finance Survey, according to the American Conservative, states 48% of the estimated 48.3 million US rental units as of 2017 had one to four units. Most were owned by individuals who also managed them. More than three-quarters, or 77%, of these properties are owned by people who may live in them or lived in them in the past.
These ‘Mom & Pop’ landlords come from all walks of life. They may be young with families or retirees supplementing their income. These owners may be recent immigrants renting to members of their community. Given the sky-high cost of real estate, many may own duplexes with their tenant’s rent making their mortgage payments possible. Not all ‘Mom & Pop’ landlords stay small time. They learn how to make money through real estate and grow their businesses.
How Hard Did Reduced Payments Hit ‘Mom & Pop’ Landlords?
A survey of about 3,000 private landlords in ten US cities (including San Jose) by the Joint Center for Housing Studies of Harvard University found that rent collection between 2019 to 2020 decreased:
- The share of landlords collecting at least 90% percent of their potential rental revenue fell 27%, from 89% to 62%
- In each city, there was a three- to fourfold increase in landlords owed 10% or more of rent by year’s end
- Small and mid-size landlords were more likely to have rental revenues drop by more than half
- 10% of owners with five or fewer units received at most only half of their income during the pandemic
- Small owners were more likely to have tenants behind in payments before the pandemic were significantly more likely to have rental income cut by 50 percent or more. Given they have fewer properties to help them absorb the cost
The survey also found almost a third of landlords deferred maintenance at their properties, leading to lower housing quality and reducing the property’s expected life.
Desperate owners could also sell properties to new owners better able to manage the situation. Many new owners are living in homes that had been rented, which decreases the availability of units and may result in higher rents. If the COVID eviction moratorium and slow payments squeeze ‘Mom & Pop’ landlords hard enough, they’ll be forced out of business, leaving tenants to much larger real estate businesses.
Landlords face legal challenges even in “normal” times. Tenants can have a jury trial for eviction cases. Some law firms representing tenants aggressively market their services with billboards and pamphlets about getting “free rent” during the pandemic.
California’s COVID eviction moratorium extends through January. How well the market and landlords will return to “normal” afterwards remains to be seen.
We’re Here to Help
If you’re a residential rental property owner with severe financial challenges, Anthony Burton can help. No matter why you’re in this situation, we can discuss your options and take steps to address your situation. If you have questions about your economic problems and how we can help, call us at (949) 244-4207 or fill out our online contact form.
