image
      Home             Survey             Blog             News             About             Contact      

Introduction to the study

February 03, 2021by Jane Rongerude
image

OVERVIEW

Residential tenants face particular challenges in the face of disasters and economic downturns, challenges that have been amplified to unprecedented levels with the COVID-19 pandemic. Signed into law on March 27, 2020, the “Coronavirus Aid, Relief, and Economic Security” (CARES) Act placed a 120-day moratorium on evictions in federally financed multifamily rental properties as well as fees and penalties related to non-payment of rent in an attempt to prevent a potential national housing crisis. A direct federal intervention of this scope into local housing policies was unprecedented, however, it left the larger problem of rental housing stability unaddressed. Most rental properties in the United States are privately owned. Although anecdotes of rich, extractive landlords abound, many rental property owners report relying on rental income to pay mortgages, maintain the property, pay property taxes, and generate income. The Act included a provision for forbearances up to 90 days for federally-backed mortgages, but otherwise left property owners to find their own solutions for addressing rental income shortfalls. Many have turned to cities, counties, and other institutions for support.

The Act, along with a patchwork of similar state statutes, created temporary housing relief for many renters by ensuring that they could remain in place. However, in neighborhoods dominated by rental housing of any kind, stability requires that landlords remain solvent. Over 94 percent of the approximately 20 million landlords in the US own properties worth less than $1 million in value, with about 64 percent owning properties with a value of $200,000 and less (Rental Housing Finance Survey, 2018). About 41 percent reporting having debt, including 16 percent with a debt-to-equity ratio greater than 80 percent (Rental Housing Finance Survey, 2018). In other words, the vast majority of landlords in the US own fewer than 4 units, and a significant proportion are responsible for servicing debt associated with their rental units.

The CARES Act addressed housing stability in three ways. First, it temporarily increased people’s incomes through the stimulus payments and increased unemployment benefits). Next, it offered forbearance to mortgages with federally backed loans. Third, it temporarily paused evictions and penalties related to nonpayment of rent. We ultimately do not know if this was adequate support for renters. This study focuses specifically on the landlord as a mechanism for understanding the effects of COVID and COVID-related policies on rental housing stability. Were the income supplements enough to cover tenants’ lost wages? Did landlords work with delinquent tenants, essentially passing on their forbearances? Are we facing an eviction cliff, where evictions will spike when the moratoria expire? Is there another foreclosure crisis on the horizon as landlords are unable to meet their debt obligations?

Why study property owners?

Landlords must manage revenue shortfalls while fulfilling financial obligations like paying mortgages, insurance, taxes, and wages and benefits to their employees. The housing stability of tenants and landlord’s ability to tackle financial challenges are ultimately intertwined. Thus, understanding landlord characteristics and decision-making is essential for managing housing stability during a crisis and facilitating a future housing recovery. In an attempt to better understand how the pandemic is affecting rental property owners, this dashboard provides current information related to:

  • The current financial and organizational characteristics of residential landlords;
  • How the COVID disaster has impacted the finances of residential landlords;
  • The assistance programs that residential landlords have used to address their current challenges;
  • The other ways they have responded to the crisis (for example, forgoing building maintenance, renegotiating leases, etc.).

The long-term impacts of the COVID-19 pandemic on rental housing stability remains unknown. But, property owners, renters, and local officials continue to feel the strain. Improving our understanding of residential landlords' constraints can help shape policy responses to housing insecurity during the pandemic and for future disasters.

METHODS

Study Areas

This project focuses on four mid-sized US cities: Minneapolis, MN; Cleveland, OH; Tampa, FL; and Des Moines, IA. These cities have diverse housing stocks, socioeconomic characteristics, and political orientations. More importantly, each offers unique state and local responses to the COVID-19 housing crisis. We selected cities with municipal ordinances that require landlords to register their properties with the city. Without these rental registries, identifying rental properties and their owners' contact information would be cumbersome and time-consuming, making it difficult to complete this phase of the study promptly. In addition, we also looked for cities with diverse populations, housing markets, and housing stocks.

Data and Methods

In this project, we administered an email survey of residential landlords to collect data on the characteristics of landlords and their properties, including rent, revenues, operating expenses, and outstanding debt. We used the residential rental registries from each city to contact landlords to participate in the online survey. The survey covered four broad areas:

  • General demographic characteristics about the property owner including age, race, ethnicity, income, and profession;
  • General business characteristics including units in their portfolio, operating income and expenses, outstanding debt, and ownership structure;
  • How the COVID-19 pandemic and subsequent economic recession has impacted property owners’ businesses (e.g. whether tenants have stopped paying rent or organized rent strikes, whether they have had to lower rent to fill vacancies, and what steps, if any, they have taken to improve building sanitation), and;
  • Support they may have received from lenders or COVID-related federal, state, or local programs.

In addition to the initial surveys, we will be conducting follow up interviews with a subset of survey participants to gain a more fine-grained understanding of the stress that they are experiencing in the rental property businesses. We will also be interviewing local housing stakeholders in each of our four study sites.