Tenants stop paying rent so relief fund will foot the bill

New York’s rent relief program was supposed to melt away the state’s multi-billion-dollar rent debt. Instead, landlords say their arrears have only mounted since the applications portal opened.

The owners say some tenants have stopped paying rent in order to qualify for the aid, seizing on the opportunity to get ahead on other expenses.

But with rent relief stalled, landlords such as Jerry Waxenberg are paying the price. Still, he doesn’t fault his tenants for getting help where they can.

“These are not rich people,” said Waxenberg, a third-generation landlord with an ownership interest in 850 units. Most are in the Bronx, where one in four residents live in poverty and one in three are severely rent-burdened.

Normally, about 150 of his units owe more than a month’s rent. During the pandemic, that number rose, then stabilized. It was 201 at the end of January and 206 at the end of May.

But by the end of July, 275 of Waxenberg’s units were behind — a 33 percent increase since the state’s emergency rental assistance program launched. It was his worst month of the entire pandemic, he said.

“It’s probably because they’re anticipating reimbursed rent money,” Waxenberg said. “They’re saying, ‘Look I have some money that I could give to you, but the government’s going to pay the whole thing. And you know what? They’re right. I understand that. It’s a matter of either paying the rent or paying for food, transportation or whatever.”

But Waxenberg also has bills to pay. By the end of July, past-due rent for his portfolio had topped $1 million.

“Tell me how we’re paying real estate taxes July 1 and water and sewage July 31,” he said. “I can see us losing the buildings.”

The program — known as ERAP — covers up to 12 months of back rent and three months of future payments. It was built to help tenants hit hardest by the pandemic. To qualify, they must have accumulated arrears after March 2020, have received unemployment benefits or lost income, and make no more than 80 percent of the area median income.

However, with the pandemic ongoing, newly missed payments can qualify for reimbursement. That has prompted some tenants to withhold rent to get extra months of relief.

One landlord observed that tenants who stopped paying — protected by an eviction moratorium — will get more aid than those who scraped together the rent despite hardship.

“Some of these people broke their back the last 15, 16 months paying on time when it was tough for them and now they can’t get anything out of it,” the landlord said. “We’ve also seen people stop paying right now just to try and grab some money.”

The owner’s firm, which rents to middle-income tenants in Brooklyn, Queens and Manhattan, has seen arrears rise over the past two months. Some tenants who were current on their rent asked the firm to submit an ERAP application saying they owed rent so they could get aid. The requests were denied, according to the firm.

Data support landlords’ anecdotal accounts. New York City and state figures show that rent collection fell in the month that ERAP launched. Statewide, rent payments for June dropped by over 3.3 percent, the largest month-over-month decrease since at least April 2020, according to the property management company Real Page.

Meanwhile, city landlords have seen arrears spike. In mid-May, 55,000 owners said 11.1 percent of their portfolio owed more than two months’ rent. By mid-June, 40,000 owners reported 16.3 percent had fallen that far behind, according to a survey by landlord group Community Housing Improvement Program. A spokesperson for CHIP said that the organization did not feel comfortable attributing the jump to the launch of ERAP.

When asked whether ERAP was supposed to let tenants use the rent aid to catch up on other bills, Assembly member Linda Rosenthal said the intent was to help people who can’t pay their rent — regardless of their motives for applying.

“Do we really want to force people to starve? I don’t think anybody wants that,” she said.

Legislators did not anticipate that the program would be burdensome and potentially disastrous for some owners, as it has been for Waxenberg, because of tenants maximizing their aid and the state struggling to distribute it.

Rosenthal stressed that speeding up disbursement, as Gov. Andrew Cuomo promised to do July 26, would get the program back on track so that tenants and landlords can be made whole.

But with New York’s rent debt exceeding $3.29 billion and only $2.7 billion in relief funds to go around, every month of delay widens that gap.

“It’s probably not enough money,” said Rosenthal. “That’s why it’s important for everyone to apply as quickly as they possibly can.”