Residential landlords fear that rent collection rates will freefall in August following the expiry of the $600 in supplemental federal unemployment benefits. But a recent California-Berkeley study shows that small-time landlords are already facing financial hardship.
The majority of landlords surveyed have at least one unit where no rent is paid, according to the study, and 39 percent fear they will not be able to cover operating costs over the next quarter.
Berkeley’s Terner Center for Housing Innovation and the National Association of Hispanic Real Estate Professionals, a San Diego-headquartered trade group, conducted the study. It surveyed 380 landlords and property managers in 31 different states between June 29 and July 9, with California home to 22 percent of the respondents.
Of the members surveyed, 80 percent were landlords with portfolios totaling fewer than 20 units.
Of the smaller landlords, one in four have had to take out a loan to cover operating costs, and one in ten responded that less than half their tenants paid rent last month, the survey claimed.
These numbers contrast with rosy figures https://therealdeal.com/2020/07/15/armageddon-on-hold-88-of-tenants-paying-rent/ from the National Multifamily Housing Council, a Washington D.C.-based member organization of larger landlords, often with professional management companies. The trade group reported that rents among their members were down just two percent in July 2020 compared to July 2019.
“This stock of housing tends to attract lower-income and more Covid-vulnerable populations,” stated study author Ben Metcalf.
From the landlord’s perspective, “Some smaller owners are less sophisticated and may not have been as proactive and communicative with tenants as larger property managers have been,” said Daniel Yukulson, executive director of the Apartment Association of Greater Los Angeles.
“There is a perception that smaller owners can be taken advantage of because renters believe they do not have the resources to pursue expensive and protracted legal remedies as do larger owners who often have teams of lawyers on staff,” Yukulson added.
Local landlord groups say the exact number of these small scale property owners are impossible to track due to the preponderance of LLC aliases. Nationally, the Urban Institute has put the number of renters leasing space to these landlords at 25 percent.
Smaller landlords occupy an interesting space in the current debates over landlord and tenant protections. They are literally not counted by the National Multifamily Housing Council’s rent collection survey.
At the same time, California Apartment Association and other local trade groups single out smaller landlords to argue property owners are closer to renters economically than CEOs of sophisticated businesses. CAA CEO Thomas Bannon has warned that one tenant not paying rent to a landlord with a handful of units could be “crippling.”