Apartment Renters And Landlords Both Feel Bite Of New Virus Economy
Apparently, a few unscrupulous Chicago-area landlords are practicing “rent gouging” in the middle of the coronavirus pandemic, apartment renters complain.
A senior citizen on a fixed income and forced to “shelter-at-home” recently was attempting to renegotiate her steep monthly rent increase for the next six months. She was notified of the rent hike by email less than two weeks before the expiration of the lease. Previously, she had a one-year lease for her one-bedroom unit.
The landlord claimed the reason for the rent increase is the expected hefty real estate tax increase coming with the second installment of the 2019 Cook County bill, which is due August 1.
Rental experts say the landlord should have given the senior renter at least 60 days prior notice about the rent hike. And, under the stress of the virus pandemic, it might have been a good idea to forgo the rent increase until next spring when the crisis hopefully is over.
Under pressure from rent relief advocates, on April 29, Mayor Lori Lightfoot unveiled a
“Chicago Housing Solidarity Pledge,” which calls for landlords to consider grace periods for rent payments, written repayment plans and no late fees. It also urges lenders to give landlords grace periods on mortgage payments, issue neutral reports to credit agencies, and suspend foreclosures.
Small “Ma-and-Pa” landlords generally are not having a good year in 2020. With thousands of tenants losing their jobs, weathering 20% to 40% pay cuts or going on no-pay furloughs, the biggest threats to owners of small apartment buildings are vacancies and non-payment of rent.
It is important for renters to remember that the typical Chicago landlord is not a huge corporation that enjoys a strong financial cushion.
Recent hefty real estate tax increases on Chicago’s North Side have depleted building landlord operating accounts. And then there are those sky-high bills from the city of Chicago for water, sewer and garbage removal, and seemingly endless maintenance expenses.
One owner of a North Side 4-flat was hit with a $4,200 bill for replacement of a commercial hot water heater that quit functioning, and spent another $2,800 to sand and varnish damaged wood floors, for refinishing kitchen cabinets and installing of a new exhaust fan and light fixtures.
Surveys show that the typical small landlord owns 32 rental units and does not have enough money in the bank to weather a long-term loss of rent, a recent Chicago Sun-Times editorial reported.
On the positive side, 84% of apartment households made full or partial rent payments by April 12, according to a national survey of 11.5 million professionally managed units in the U.S. And, 79.7% of Class-C (small-property) apartment renters paid their April rent.
However, only 52% of renters surveyed said they would be able to pay May rent in full, according to another survey by Grace Hill. Four of 10 renters surveyed said they intend to move in the next six months.
Some bad news came from Zumper’s National Rent Report, which noted that Google search volumes for apartments for rent were down between 10% and 35% during the last week of March in its top cities. Apartment search reports have rebounded 17% by late April.
In a survey from RentCafe.com, despite the coronavirus threat, 62% of renters said they plan to move as soon as they find an apartment, and almost half said they didn’t have any concerns about relocating during the pandemic.
However, a record-breaking 30 million Americans have filed for unemployment benefits in recent weeks, included more than 737,000 in Illinois. Others experienced pay cuts, were put on furlough or are working on reduced hours. Large sections of the U.S. economy remain shut down as states have ordered non-essential businesses to stay closed.
In addition to vacancies, a small landlord’s biggest worry is paying the mortgage if some or all tenants stop paying rent. Hopefully, a new Freddie Mac forbearance directive could ease that worry for some landlords.
Homeowners and resident owners of small investment apartment buildings seeking forbearance can get relief. If Freddie Mac owns your loan, under new mortgage-relief guidelines you will never be required to make up missed payments in a lump sum.
“Our policies offer a number of options to bring borrowers current, including repayment plans, resuming normal payments or lowering your monthly payment through a modification,” said David Brickman, CEO of Freddie Mac. “We encourage homeowners facing hardship to work with their loan servicer to identify the plan that’s appropriate for their unique situation.”
Owners who can’t pay their mortgage are entitled to up to 12 months of forbearance. Servicers will start with a shorter plan and reassess to see if an extension for up to 12 months is necessary.
Once the hardship has been resolved, there are several options for borrowers to repay the money owed, including:
• Full repayment, known as reinstatement, where you pay back the missed payments and quickly get back on track.
• A repayment plan, which allows borrowers to catch up gradually in addition to paying regular monthly payments.
• Payment deferral or modification of the loan, to keep monthly payments consistent and add the borrower’s missed payments to the end of the mortgage.
• Modification of the loan, to reduce a borrower’s original monthly payment amount.
Loan servicers will reach out about 30 days before the initial forbearance plan is scheduled to end to determine which assistance program is best or if additional forbearance is needed. However, borrowers need to ask the loan servicer if their credit score will be impacted by the new forbearance guidelines.
Borrowers who believe they are not being offered proper repayment options can reach out to the Consumer Financial Protection Bureau. Consumers looking for additional resources can visit Freddie Mac via www.MyHome.com.
For more housing news, visit www.dondebat.biz. Don DeBat is co-author of “Escaping Condo Jail,” the ultimate survival guide for condominium living. Visit www.escapingcondojail.com.