Landlords battle rent strikes across the U.S.

As the “cancel rent” movement gains traction from New York to Kansas City, property owners are organizing and counteracting

TRD NATIONAL /
May.May 15, 2020 07:00 AM
As the “cancel rent” movement gains traction from New York to Kansas City, property owners are organizing and counteracting.

As the “cancel rent” movement gains traction from New York to Kansas City, property owners are organizing and counteracting.

Holding a yellow rope to keep six feet apart, tenant advocates in Missouri slowly wound their way to the governor’s mansion in April.

After a series of virtual demonstrations, and even a protest where activists parked on the shoulder of a major highway between Kansas City and St. Louis, the advocates were calling on Gov. Michael Parson to suspend rent and mortgage payment obligations and halt evictions statewide. The group, KC Tenants, carried a large poster labeled “Eviction Notice” and attached it to the mansion’s front gate.

“We are taking a risk because we have no other choice,” said Wilson Vance, one of the group’s tenant organizers, about the escalation from virtual to in-person demonstrations. “The stakes are just really high, so it’s time to turn the heat up.”

Similar protests have sprouted up across the country as unemployment claims surge to more than 33 million since March and tenants find themselves unable to pay rent. According to We Strike Together, an organization that has been tracking the national movement, more than 190,000 rent and mortgage strikes have surfaced since the pandemic hit.

“Ultimately, all tenants are going to need to pay.”

Diamelyn Cepero, Miami Real Estate Attorney

It’s not clear how many tenants have withheld rent, but the data available paints a somewhat promising picture for property owners. Roughly 80 percent of 11.4 million households surveyed by the National Multifamily Housing Council reported that they paid all or part of their rent by early May, according to the landlord trade group. But multifamily lenders have reported significant declines in collections, especially among lower-income tenants.

Washington’s Coronavirus Aid, Relief and Economic Security Act has provided some help to tenants by sending out stimulus checks and supplementing unemployment benefits by $600 a week through July 31.

While advocates argue this relief doesn’t go far enough, real estate groups counter that little has been done for landlords, who have temporarily lost the ability to evict tenants in several states including New York, Florida, California, Pennsylvania and Colorado.

And as state governments face mounting pressure from advocates and elected officials to respond more boldly to the pandemic, property owners face not only rent shortfalls, but uncertainty over whether they will receive relief if rent strikes gain traction.

In response, landlords have lobbied for breaks on property tax and mortgage payments. And in the extreme, even threatened to withhold property tax payments to put counter pressure on elected officials.

“It all trickles down. Rent pays the landlord, who pays the property taxes, which pays for our first responders,” said Diamelyn Cepero, a real estate attorney in Miami. “Ultimately, all tenants are going to need to pay.”

Targeted strikes

Calls for a mass rent strike started to emerge in several cities in April. In New York, the tenant coalition Housing Justice for All set out to coordinate the efforts of financially-strapped tenants to pay rent and target buildings owned by specific landlords, including Related Companies and Kushner Companies. The group deemed that these and other owners could weather the financial hit.

“Tenants are unable to pay rent, period,” Cea Weaver, a tenant organizer with the group, said during a video panel hosted by The Real Deal in early May.

“When we say rent strike,” she added, “what we are saying is that we’re turning a moment where people cannot pay into a moment of political activity and turning our individual inability to pay into collective action, calling on the government to intervene.”

On the same panel, real estate developer Francis Greenburger countered that point.

“People who are without need — to give them relief is nonsensical,” said the longtime developer and industry advocate. “Let’s identify the real needs, and let’s address them though government help, through private help, rather than some blanket approach that makes the problem five times worse than it is.”

But the tenant movements are gaining momentum. The New York petition now has more than 15,000 signatures. And a national rent strike map has documented nearly 200,000 actions, according to Maurice Weeks, co-executive director of the advocacy group Action Center on Race & the Economy.

In Pennsylvania, the Philadelphia Tenants Union decided in favor of a strike but not all of its members agreed that it was the right strategy. Some said that younger, more left-leaning members pushed through a vote without sufficient debate, arguing that tenants who withheld rent, especially poor tenants of color, would be vulnerable to repercussions.

In the end, although four members of the Philadelphia Tenant Union abstained from the vote, the measure to strike passed overwhelmingly.

A growing number of landlords around the country are now seizing on the strikes — a tactic ordinarily used by renters to demand repairs and improved building conditions or combat tenant harassment when all other efforts have failed — calling them political opportunism.

“They are looking to change the housing industry. Nothing they are doing helps the tenant today,” said Stacey Johnson-Cosby, president of KC Housing Alliance, a landlord group in Kansas City. “They are sacrificing all those people in the name of social movement.”

Real estate groups have also repeatedly recommended that tenants work out repayment plans with their landlords. Johnson-Cosby, who owns 20 apartments in the Kansas City area with her husband, said most of her tenants have paid rent in April and May. Her organization has pitched a temporary eviction-prevention program to the city that would provide a one-time payment of $2,400 for the year to tenants unable to pay their rent due to illness, unemployment or familial crises or any combination of those.

“If I have formerly homeless veterans getting their rent paid, that tells me something,” she said.

Other landlords argue that the growing rent strike movements and calls to cancel rent around the country — the latter of which has received support from U.S. Rep. Alexandria Ocasio-Cortez and Sen. Bernie Sanders — will come back to bite tenants, property owners and even state and local governments.

One online petition headlined “Property Tax relief or Tax strike,” for example, now has more than 4,000 signatures supporting a call for the city’s landlords to withhold their property taxes. The Change.org petition blasts politicians for enabling tenants to not pay rent even if they can.

Despite that accusation, New York State Sen. and Housing Committee Chair Brian Kavanagh defended the steps the state has taken. The eviction moratorium is a necessary measure to keep renters from choosing between their home and their health, he said, but should not be confused with a “rent holiday.”

“People have an obligation to pay rent — if they can pay their rent they should,” said Kavanagh. “Similarly, it’s not responsible for property owners to make a point by declining to pay real estate taxes.”

But some say there’s little that can prepare the real estate industry for the potential impact of widespread rent strikes. Even landlords, lenders and property managers relieved by April’s rent collections know that things could fall apart in May.

That’s what Gregg Gerken, head of commercial real estate at TD Bank, foresees — and he warned that financial distress will accelerate if tenants with the means to pay rent withhold it.

“I get concerned with rent strikes,” Gerken, who oversees a $41 billion loan portfolio in the U.S. and Canada. “People are misusing the terms ‘rent deferral’ and ‘rent forgiveness’,” he added. “That’s not what the CARES Act was meant to do. It was meant to help people who need help.”

Questions of authority

Over the past two months, cities and states have handled evictions and calls for rent suspension differently.

While New York halted some evictions for non-payment of rent through mid-August and the city’s rent board recently cast a preliminary vote in favor of freezing rents, other cities and states have left key decisions up to local courts. So far, most local and state governments have shied away from suspending rent or mortgage payment requirements.

In April, the Denver City Council urged the state to suspend rent and mortgage obligations, but Colorado Gov. Jared Polis has asserted that he doesn’t have the legal authority to do so. In a statement to media outlets at the time, a spokesperson for Colorado’s governor indicated that he couldn’t interfere with private contracts. The United States Constitution bars state intrusion into contracts.

Attorney Andrew Pincus, a partner with Mayer Brown who focuses on Supreme Court and state and federal appellate cases, said a temporary suspension of rent would have a better chance of surviving constitutional scrutiny if relief is offered to landlords as well.

“This isn’t a situation where you can say renters are suffering from something that isn’t affecting landlords at all,” Pincus said. “It’s a lot easier for states to take that step if they are offering relief for landlords too.”

Polis had directed elected officials to work with local courts to prevent evictions, which resulted in a patchwork of different policies across the state — and a mounting fear among tenants that they’d be displaced. But facing pressure from advocates, the governor took a stronger stance May 1, barring all evictions for the next 30 days. Still, his executive order specifically states that the temporary ban should not be seen as “relieving an individual from their obligation to make mortgage payments or rent payments.”

“He’s just not doing anything because he’s a landlord himself,” said Desiree Kane, founder of Colorado Rent Strike and Eviction Defense group. “He’s going to make people bleed cash before he helps anybody. He should be ashamed of himself.”

There’s also been some confusion for landlords over navigating the federal, state and individual city eviction rules. For example, Florida has banned evictions through May 17, while the City of Miami did so through May 29. Cepero, the real estate attorney, said there’s been a lack of clarity over what is permitted until those dates. She said attorneys have still been able to file initial eviction paperwork in Miami-Dade County, and that is likely to pick up once the state-level ban expires.

California’s Judicial Council suspended eviction proceedings but hasn’t prevented landlords from filing nonpayment notices to get such cases underway. Similarly, Missouri Gov. Mike Parson has declined to halt evictions statewide, though the state’s Supreme Court and several judicial circuits have suspended or postponed eviction proceedings.

In Kansas City, and Jackson County at large, the execution of eviction judgements have been put on hold through May 15, though the county has commenced hearings by phone to get eviction proceedings underway for when the governor’s order barring the execution of eviction judgements is lifted.

Gina Chiara, executive director and staff attorney for the Heartland Center for Jobs and Freedom, called the practice “unconstitutional” because not every tenant can easily represent themselves by phone without a translator or other type of representation. She said it will lead to a deluge of evictions after May 15.

“When the suspension of judgement expires, there will be a large number of cases that are poised for the execution of judgements,” Chiara said, “meaning the sheriff shows up at the door and forces you out of the house.”

Landlords, unite!

“Landlords can get ahead of this very easily. If you have a tenant who can’t pay rent, don’t be an asshole.”

Eric Orenstein, Rosenberg & Estis

When protesters interrupted Gov. Andrew Cuomo’s daily press conference with airhorns, demanding New York state cancel rent, Cuomo responded with a clear message for rent strikers.

“If you can pay the rent, you should pay the rent,” the governor said during his update on the state’s response to the pandemic earlier this month. “There’s a morality in this.”

But there is still a question about what to do about renters who can’t pay. When asked whether he would cancel rent payments and tax billionaires to make up for lost revenue, Cuomo pointed to the only policy in place in New York: a moratorium on evictions that, at the time, was set to expire on June 15. (A new version of the moratorium was extended through August 20).

Landlords took little comfort in the governor’s silence on the issue of rent. Many property owners reason that the eviction moratorium gives tenants permission to withhold rent, since they wouldn’t face immediate consequences. In a role reversal, some landlords are launching a protest of their own to force legislators in New York to grant property tax relief — or at least decisively denounce rent strikes.

The group of landlords backing the petition to withhold property tax payments says it plans to file a class-action lawsuit against New York City. The action is in response to Gov. Andrew Cuomo’s extension of the state’s eviction moratorium through August 20, though the ban only applies to tenants who have been impacted by Covid-19 or qualify for unemployment benefits.

In early May, the group sent out a press release headlined “We can’t breathe” — a slogan popularized by Black Lives Matter to protest police violence — to draw attention to the plight of property owners. The person behind the petition, who identified himself as Garold Wilder, though public records show the phone number corresponds to Aron Wolcowitz of Bridge Street Equities, told TRD the slogan was meant to refer to the physical symptoms of Covid-19.

“We all know that there are tenants that can pay their rent, many of whom are getting severance, all of whom are getting stimulus checks and increased unemployment,” the petition reads. “They aren’t paying, because [the government] encourages that behavior.”

A spokesperson for the New York City Department of Finance declined to comment on the property tax strike, which has not been endorsed by any of the city’s real estate trade groups.

Jay Martin, the executive director of the Community Housing Improvement program, said he did not recognize any signers’ names, and there is no mechanism for verifying the identities of signatories or the petition organizer. “I completely understand the frustration, but I think it’s as unhelpful as pushing for a rent strike,” said Martin.

Belkin, a principal at Belkin Burden Goldman, said on TRD’s panel earlier this month that he doesn’t think such action is appropriate.

But what do attorneys advise their landlord clients to do if they have a case of tenants on strike? Eric Orenstein, a transaction attorney at the real estate law firm Rosenberg & Estis, suggested they take a proactive approach.

“Landlords can get ahead of this very easily,” Orenstein said. “If you have a tenant who can’t pay rent, don’t be an asshole.”

Common ground?

One thing tenants and landlords do agree on, although they see eye to eye on little else, is that more federal support is needed. But the form that support could take is up for debate.

In New York state, several policy proposals are on the table, though Cuomo has largely avoided addressing them. One bill would create an emergency rental assistance fund to fund housing vouchers, while another hopes to cancel rent and offset the burden with a property tax and mortgage reduction.

Meanwhile, U.S. Rep. Ilhan Omar proposed a bill to cancel rent and mortgage payments until 30 days after the federal state of emergency is lifted — a measure that would surely face opposition in the Republican-controlled Senate.

Without an option to forgive some portion of the rent and mortgage payments, however, it’s not likely tenants would be able to make up the lost payments later. Some tenants were already precariously close to homelessness before the coronavirus crisis. Piling on accumulated costs for the months they were out of work could lead to bad credit and personal bankruptcy, some legal experts say.

“We’re talking about people struggling to pay their monthly rent normally — now they have to pay three months of back rent?” Orenstein, of Rosenberg & Estis, noted.

“All you’re doing is burying tenants in back rent,” he argued. “It doesn’t alleviate the underlying issue: if a tenant can’t pay the rent, they can’t pay the rent.”


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