Landlords worry evictions halt spells their doom: ‘This is how I make a living’
Landlords, especially mom-and-pop investors, say they worry a new federal pandemic order halting evictions for certain renters through 2020 could put an end to their businesses.
And much like the COVID-19 virus itself, a new analysis from the Washington, D.C.-based Urban Institute found that Black and Hispanic landlords are more likely to feel the financial strain, finding they are pausing paying their mortgages at higher rates by asking lenders for forbearances.
That includes David Jones, a Black 56-year-old retired police officer, who owns about 20 units in Detroit and the surrounding suburbs and manages another 150 units for other investors.
Jones has more than $72,000 in overdue rent since this spring on all those properties accumulated during the state's eviction ban, which lifted in late July, he said. To cope, the Detroit resident has already taken out two Small Business Administration loans and sought forbearances on properties he's buying on land contracts, he said.
Now he's worried he'll lose even more income with this month's surprise executive order from the Centers for Disease Control and Prevention banning evictions for those renters who qualify.
“Ultimately, I want folks to stay but at what cost,” Jones said. “You help one segment of society to decimate another segment of society.
“This is how I make a living.”
About a week into the new national eviction ban, landlord lawyers, judges and housing advocates say they are sorting out the effect, which experts say was an unprecedented move for the CDC. Many expect it to face legal challenges in court.
Mary Cunningham, a housing expert with the Urban Institute, said having a nationwide policy is better than a "patchwork" of state bans.
Gov. Gretchen Whitmer lifted Michigan's eviction ban on July 16. Detroit's 36th District Court extended the ban a month longer, but its moratorium eventually ended Aug. 17.
"It’s been a really confusing landscape for tenants and landlords," Cunningham said. "Now you have a pretty authoritative order that says all tenants are protected, and I think that it will be some time before we see if that is true."
Renters covered through the CDC's order must meet certain criteria, including:
- Have an income of $198,000 or less for couples filing jointly, or $99,000 for single filers.
- Demonstrate they have sought government assistance to make their rental payments.
- Affirmatively declare they are unable to pay rent because of COVID-19 hardships.
- Make timely partial payments that are as close to the full payment as the individual's circumstances may permit
- Affirm they are likely to become homeless if they are evicted.
The order doesn't forgive rent and landlords can still charge fees.
There are still many questions about how local courts will enforce it, Cunningham said.
Will they allow landlords to file evictions or freeze them totally? And how will the application process work?
Michigan courts are handling the new order differently, legal aid attorneys said. Some are no longer allowing landlords to file cases and others are still allowing cases and want renters to testify in court that they are eligible. In Detroit, landlords can still file cases, but the process should stop if the tenant gives the landlords the declaration, according to Chief Judge William McConico.
"How the CDC order is interpreted is going to vary by where the tenant lives and what judge they are in front of," wrote Kellie Maki Foster, staff development director for Lakeshore Legal Aid, in an email to The Detroit News. "We are going to keep fighting to keep tenants in their homes."
Many landlords were squeaking by financially, waiting until the state ban lifted, but "now it's just a kick in the teeth again, and it's going to be another four months," said Drew Sygit, president of Real Estate Investors Association of Oakland County.
The percentage of all residential mortgages in forbearance was 7.16% nationally in late August, according to a survey by the Mortgage Banker's Association. That's up from 2.66% in early April.
A 'weight off' renter
While the CDC announcement has brought added pressure for landlords, it has been a lifeline for some tenants.
Jay Kimbrough, 31, of Detroit, was collecting moving boxes and considered staying in a hotel until last week's CDC announcement. Her landlord had taken her to court after she got behind on nearly $3,200 in rent when she quit her second job due to health problems that make her more susceptible to COVID-19.
She was headed for eviction in about a month but now is likely going to be able to stay in her apartment for the rest of the year. She thinks the CDC order caused her landlord to backtrack and agree to participate in Michigan's new Eviction Diversion Program that could pay her back rent.
"I didn't really have a place to go," said Kimbrough, whose main job is as a Head Start teacher in Detroit. "It definitely took a weight off my shoulders."
In July when the state ban lifted, Whitmer announced the $50 million Eviction Diversion Program to pay landlords to keep renters in their homes in the midst of the pandemic. But many advocates predict the money will quickly run out. The program is capped at $3,500 per household for back rent and another $1,200 for future rent.
The Michigan State Housing Development Authority hasn't released data yet on how many renters and landlords have applied and how much money has been spent already. Landlords have to agree to certain stipulations, including forgiving up to 10% of the overdue rent accumulated during the pandemic.
Wayne Metropolitan Community Action Agency, which is handling Eviction Diversion applications in Wayne County, not including Detroit, has paid out about $570,000 to 151 families as of early last week. That's about 12% of the total amount it got from the state.
Another 399 applications were in process and another 481 applications were waiting to be reviewed.
'At least (pay) something'
Jones said he recently became aware of the funds and is starting the application process with some of his tenants who are behind.
In the meantime, he's decided not to put any new renters into his vacant homes because it’s too big a risk they won't pay with the new CDC order, including a home on Piedmont in Rosedale Park, which he typically rents for $1,300 a month.
"I fielded calls all weekend (from people) looking to rent," he said. "I'd rather leave them vacant."
Jones said he has worked with his current renters who come to him and share how they've been financially hurt by COVID-19, and he's planning to discount some of their debt.
But he's frustrated with other renters who are on fixed incomes, through social security or pensions, that haven't been reduced by COVID-19. Several just stopped paying and communicating with him after the state ban was implemented in March.
“I had one lady say, 'The governor said I don’t have to pay the rent,'” Jones said. “I feel bad for a lot of people but at least (pay) something.”
Landlords clearly are hurting financially, but there is "a categorical difference" between the harms landlords and tenants face, Joe McGuire, a staff attorney with the Detroit Justice Center, wrote in an email to The News.
"In the first case, you have some landlords that may be unable to pay their business expenses for a time and possibly lose ownership of some properties to foreclosure," McGuire said. "In the second case, you have a huge amount of people becoming homeless during a pandemic.
"Detroit saw in the years following the 2008 mortgage crisis what large numbers of evictions can do to neighborhoods. We can't let it happen again."
Renters on fixed incomes could have still been hurt financially by other family members who have lost jobs and are no longer able to help them, McGuire said.
Evictions filings in Michigan last month were less than half they were in August 2019, but housing advocates, lenders and landlords say without more federal financial help, the CDC ban will just delay the cases.
As of late August, nearly 26% of Michigan residents reported that eviction or foreclosure in the next two months is either very likely or somewhat likely, according to the U.S. Census Bureau.
Landlords with federally backed loans could apply for up to a year of forbearance on mortgage payments with no late fees through the federal CARES Act, an economic rescue package passed in March. Some banks have agreed to offer forbearance to mortgage holders through the state program MiMortgage.
The Urban Institute found through a recent survey of small landlords nationally that about 20% of Black landlords, 14% of Hispanic landlords, and 9% of white landlords have at least one mortgage in forbearance.
Besides a pause in payments, some lenders are offering mortgage holders the option to make reduced payments or principal or interest only, said Adam DeSanctis, a spokesman for the Washington D.C.-based Mortgage Bankers Association.
Lysa Davis, a former Detroit banking executive, said she doesn't expect mass landlord foreclosures in the short-term. Lenders likely will work with landlords to restructure loans or offer forbearances as long as they’ve had a good payment history and have been complying with rental laws, she said.
Also, larger landlords are more likely to have more than one lender on multi-family properties, which would make foreclosure more complicated, said Davis, CEO of Detroit-based Compliance and Community Consultants, a firm that consults for financial institutions.
“They don’t want the properties,” Davis said of lenders. “They learned a long time ago from the (2008 recession).”
"It didn’t go well. The banks caught hell. They do not want that falling on them again."
Sterling Howard, a Metro Detroit landlord with 150 single-family homes, said his lender has been reluctant to give him a forbearance or change the conditions of his loan.
His rent collections are down 20%. He recently got an SBA Economic Injury Disaster Grant for $10,000, but that's only a small help.
"It's certainly a time of great uncertainty," said Howard, who employs about 30 full- and part-time workers.
"I think people have the perception that landlords are all rich guys."
Howard said he plans on filing for the Eviction Diversion Program but worries it will run out of funds quickly and that the $3,500 cap on back debt is too low. More funding and an easier application process would ensure landlords and tenants aren't pitted against each other, Howard said.
"It's not a position you want to be in when you are forced to evict someone," Howard said. "But at some point, it's about survival."
Jose Diaz, whose family business based in Florida owns 160 single-family rentals in Detroit and the surrounding suburbs, said if renters aren't able to pay in larger numbers, it won't just hurt landlords but Detroit's recovery.
"Potentially, it could be most damaging to the city," Diaz said. "Look at the progress (in Detroit). So many businesses are trying to come here."
Jones said he has investors, including several overseas, who are ready to sell their properties at a loss because of the eviction bans.
“Now they are getting a sour taste,” Jones said.
For renters who made no effort to communicate with him, Jones said he plans on going after the back rent through small claims court, which can garnish paychecks and state tax returns.
“This is not a free pass,” Jones said. “I am not going away.”
For more information: For help finding out if your eviction could be put on hold in the under the new CDC guidelines go to Michigan Legal Help. For Detroit residents, the Eviction Prevention Hotline can be reached at 866-313-2520 or www.DetroitEvictionHelp.com. For those outside of Metro Detroit who need legal representation call Lakeshore Legal Aid at 1-888-783-8190.