The three-month extension of the federal eviction moratorium announced Monday could put some additional strain on multifamily servicers, and how well they’ll bear up depends on the effectiveness of government relief.
About 3.4 million renters consider themselves at risk for eviction due to nonpayment, but with $45 billion in rental aid from recent stimulus packages and other forms of pandemic rescue funds, the number affected could be closer to 130,000 to 660,000, according to a Zillow report Monday.
The multifamily delinquency rate has held up better than other income-producing sectors thanks to
“The key to all of this is how fast assistance gets into renters’ hands,” said Mike Flood, senior vice president of commercial/multifamily policy at the MBA.
Multifamily relief distribution has not been quite as straightforward as the payment suspensions available upon request to many single-family homeowners with loans, and a former CEO of Freddie Mac recently warned that the lag in multifamily relief efforts could make the apartment sector’s recovery
Congressionally-approved rental assistance has been doled out through the Treasury to the states, so how quickly it reaches intended recipients may differ by jurisdiction.
Also, the forbearance offered by Freddie Mac and Fannie Mae on multifamily loans is only indirectly extended to renters. Landlords who postpone their payments on Fannie or Freddie mortgages for coronavirus hardships have to promise to allow their tenants to do the same for rents.
The multifamily market ultimately may need a framework more equivalent to single-family forbearance in that it gives renters a model for making property owners whole on missed payments without putting inordinate strain on any of the parties involved, according to the Zillow report.
Plans that amortize back rent into ongoing rent payments with interest after eviction bans end may be one solution, the report suggests.
In a scenario where a tenant owes a total of $9,000 on six months of back rent on a $1,500 per month lease and leaves the apartment vacant for an additional six weeks, a landlord can lose $11,625.
In contrast, a two- or three-year repayment plan at a 6% rate could keep renters in their homes and allow landlords to be repaid over time with interest at $9,573 or $9,857 respectively. However, property owners would need a cost-effective source of funds available to do this.
Meanwhile, there are questions about how well landlords have been fulfilling mandates to give their renters relief and comply with the eviction ban extended to June 30 by
“Evicting tenants in violation of the CDC, state or local moratoria, or evicting or threatening to evict them without apprising them of their legal rights under such moratoria may violate prohibitions against unfair and deceptive practices,” Consumer Financial Protection Bureau Acting Director Dave Uejio and Federal Trade Commission Acting Chair Rebecca Slaughter said in a joint press release on Monday.
“We will not tolerate illegal practices that displace families and expose them — and by extension, all of us — to grave health risks,” they added.
With the states rapidly working to distribute vaccines as well as rental relief, there is some hope that health risks could dissipate, the latest extension of the federal moratorium could be the last and renters will eventually be able to make good on their payments, according to Flood.
“As long as the rental assistance flows, we keep getting shots in arms, and we get everybody working again, our belief is there shouldn’t be a need for any further eviction moratorium,” he said.
