COVID-19

How missed rent payments could affect the affordable housing supply

Amy Scott Aug 12, 2020
Heard on: Marketplace
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A banner at a rent-controlled building in Washington, D.C., illustrates the plight of many tenants and landlords during the current economic disruption. Eric Baradat/AFP via Getty Images
COVID-19

How missed rent payments could affect the affordable housing supply

Amy Scott Aug 12, 2020
A banner at a rent-controlled building in Washington, D.C., illustrates the plight of many tenants and landlords during the current economic disruption. Eric Baradat/AFP via Getty Images
HTML EMBED:
COPY

Christopher Wallace is still collecting this month’s rent for the hundreds of apartments his firm manages in Washington, D.C., and he isn’t optimistic.

“Since this all started in March, it’s been progressively getting a little worse,” he said.

Late or skipped payments aren’t the only problems, said Wallace, who works for Fred A. Smith Management.

“I think a lot of people, if they’re unable to pay, what they’re doing is moving out and moving either back home or moving in with other people,” he said. “We’ve seen a lot more vacancies than we normally would get this time of year.”

Most of Wallace’s buildings are known as Class C properties. They tend to be older, have fewer amenities and serve low- to moderate-income tenants. And research shows tenants in these buildings are struggling to pay the rent at much higher rates than tenants in higher-end properties.

According to the insurance company LeaseLock, by mid-July owners of Class C buildings had collected only 37% of rent, down from 54% as of mid-June.

“Those groups of people who are most affected by unemployment and layoffs — it’s the same population who are also residents of Class C apartments,” said LeaseLock’s Rochelle Bailis.

She expects the numbers will get worse this month, after Congress allowed emergency unemployment aid to expire.

When those tenants can’t pay, their landlords may have to sell or face foreclosure, said Jenny Schuetz, a fellow at the Brookings Institution. That could permanently reduce the stock of affordable housing.

Investors could swoop in, renovate and raise the rent. Or, “if the landlord isn’t collecting rent, they can’t do things like fix the plumbing and fix the roof,” she said. “Some of these buildings just may become uninhabitable.”

The need for affordable housing was already dire before this crisis, Schuetz said, and once it’s gone, it’s hard to replace.

COVID-19 Economy FAQs

Are people still waiting for unemployment payments?

Yes. There is no way to know exactly how many people have been waiting for months and are still not getting unemployment, because states do not have a good system in place for tracking that kind of data, according to Andrew Stettner of The Century Foundation. But by his own calculations, only about 60% of people who have applied for benefits are currently receiving them. That means there are millions still waiting. Read more here on what they are doing about it.

Are we going to see another wave of grocery store shortages?

Well, public health officials are warning that we could see a second wave of the virus before the end of the year. And this time retailers want to be prepared if there’s high demand for certain products. But they can’t rely totally on predictive modeling. People’s shopping habits have ebbed and flowed depending on the state of COVID-19 cases or lockdowns. So, grocers are going to have to trust their guts.

What’s going to happen to retailers, especially with the holiday shopping season approaching?

A report out Tuesday from the accounting consultancy BDO USA said 29 big retailers filed for bankruptcy protection through August. And if bankruptcies continue at that pace, the number could rival the bankruptcies of 2010, after the Great Recession. For retailers, the last three months of this year will be even more critical than usual for their survival as they look for some hope around the holidays.

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