At the National Association of Realtors’ annual conference on Tuesday, property management experts made a case for the federal government to provide rental relief for both residential and commercial tenants amid the coronavirus pandemic.
After the Trump administration issued a nationwide eviction ban through the Centers for Disease Control and Prevention (CDC) in September through 2020, NAR blasted the order because it did not set aside any funding for either renters or property owners. The trade group warned that the moratorium would cause “chaos” in the rental housing sector and “bring more havoc” to the economy. Landlords, apartment owners and housing industry groups launched legal battles against the order last month.
According to information provided to NAR’s board of directors last week, NAR’s Legal Action Committee voted in September to provide $100,000 to support litigation “expected to be filed by the Alabama and Georgia Realtor Associations” against the Trump administration’s order.
“While the Order is helpful in keeping renters in their homes for now, it will create a massive eviction crisis when past payments become due, and will also likely result in raised costs for consumers due to increased rents and maintenance costs,” the committee wrote.
In a session called “How COVID Has Affected Rent Abatement/Evictions” at the Realtors Conference and Expo on Tuesday, experts from the Institute for Real Estate Management (IREM), a NAR affiliate, described what they were dealing with on the ground.
“This has been a horrific situation and really there aren’t any villains in this. Everybody is in dire straits and they need help. The current situation that we have really puts a lot of burden on a landlord because there really isn’t any recourse,” said Barry Blanton, president-elect of IREM and a founding principal of Seattle-based real estate management and consulting firm Blanton Turner.
“No one wants to see their residents lose their homes or their tenants lose their businesses,” added Blanton. “What we need right now is we need help. We need to help our tenants and residents find the resources that are available to them and we need more resources for them.”
Blanton said that at the beginning of the pandemic, requests came in from tenants in residential housing for partial rent abatement, rent abatement after a job loss until they got a new job, rent forgiveness or for making partial payments. His firm felt that the best way to alleviate the fear that was pervasive at the time was to connect clients and tenants to the resources available to them, he said.
Mindy Gronbeck, IREM executive committee member and director of property management at commercial real estate developer Hawkins Companies, said the first thing her company saw at the beginning of the pandemic was panic.
“A lot of our small retailers were crying on the phone, not sure if they were going to make it a week or two weeks or three weeks without any type of income because they’ve been shut down,” she said.
“Our larger tenants, our retail tenants, were sending letters stating, ‘We’ve been closed. We’re not paying you rent.’ It was just an influx of communication of all different levels. It’s kind of crazy. We were spending 10 and 12 hours on the phone a day being counselors to our small tenants and with our lawyers and whatnot and how to respond to the national tenants.”
In March, her company projected that it would likely only get 35 percent of its rent collection in the month of April, though that figure ended up being “significantly higher,” she said.
Gronbeck noted that theaters and nightclubs had been “significantly impacted” by the pandemic, but there had been no legislation so far just to help those businesses.
“With all of them being shut down again, we’re hearing a big cry from those tenants. Fitness centers continue to be impacted, too. The more that these numbers rise, I fear that restrictions are going to be put in place again to where we may be seeing less people allowed to attend the gyms and whatnot that even are right now, which isn’t even 100 percent to what it was pre-COVID,” she said.
“Fitness, entertainment, nightclubs, theaters — those are the ones that I’m most concerned about right now,” added Gronbeck.
Her company offered a lot of rent deferrals in April and some in May. Then it started looking at what tenants were doing to pivot with the times, such as restaurants partnering up with delivery services, and if a business got a Paycheck Protection Program (PPP) loan, the company put language into its deferral agreements that it would get part of that toward rent. Then in June and July, the company started setting up repayment schedules lasting between three months to a year, depending on the deferral.
The company has also started asking its tenants for financial information. “We’ve said, ‘We approve you financially, based on a certain criteria, when you sign the lease. We would like to compare your financials and your sales to what it was when we signed the lease with you.’ So we’re diving deeper into the asks,” Gronbeck said.
“When they want something, we want to see what the real issue is, and if we need to absolutely jump in and help them, we will, we absolutely will. But we want to make sure people aren’t just asking to ask and asking to get something,” she added.
Blanton noted that in the Pacific Northwest, there were a lot more restrictions to what landlords could do much earlier in the pandemic and they’re still in effect.
“The way that we approached this was first with empathy and compassion. We really wanted people to know that we were working with them and not against them,” he said.
His company took a similar approach to Gronbeck’s. “If they were asking for some sort of a rent repayment plan, we needed to understand what their need was, so we did ask for information,” he said.
“In all honesty, our collections on the residential side really have been pretty good,” Blanton noted.
His company also started a COVID task force that assigned several full-time staffers to track health and well-being at each building and to ensure that sanitation protocols were in place.
“Although we did keep everything confidential, we tracked every building, every resident, every employee for any sign of illness at all that they self-reported,” he said.
In regards to the CDC eviction moratorium, Blanton said he thought the intention was “probably good,” but “short-sighted.”
“I think that they wanted to make sure that people weren’t losing their homes and I think that we can all agree we don’t want to see anyone lose their homes due to COVID,” he said. “I think that what they failed to realize was the impact and where that impact was actually going to land or what that impact might be on a long-term basis.”
Rent doesn’t just go toward a mortgage payment, Blanton pointed out, but also covers maintenance, utilities, insurance, taxes.
“If there is going to be a rent moratorium or an eviction moratorium that onus shouldn’t be borne just 100 percent by landlords,” he said.
“In fact, I think that it’s a lot more fair if the federal government funds payments for current and past due amounts that would fall under that eviction moratorium,” he added, explaining that it would help both landlords and tenants because there will be “a pent up demand for evictions” or tenants may have “to start paying back a rather large debt.”
In a press release after the session, NAR President Vince Malta said that NAR supports “rental assistance in lieu of a broad, unsustainable eviction moratorium.”
Asked what she had learned since the pandemic began, Gronbeck said, “Pivoting is probably number one. We had to pivot quick, and sometimes we didn’t even know where we were pivoting to and to what.”
Her firm manages 4.2 million square feet of retail, charter school and office space across 26 U.S. states. In the last six months her firm has been trending 10 to 12 percent higher in rent collection compared to similar national firms because of its willingness to adapt, she said.
“We had to really spend time with each of our tenants. We couldn’t just say ‘no one’s going to get a deferral’ or ‘everyone’s going to get a 30-day deferral.’ We couldn’t say that because every situation was so different,” she said.
Blanton asked Gronbeck a question that some in the audience had been wondering, per the chat box alongside the livestream: “How are you dealing with people who really are trying to take advantage of the system? I think it’s relatively few. I hope it is. But we’ve run into it too on our commercial side where there have been a couple of people.”
Gronbeck said she’d had one situation where a tenant asked for a rent abatement but after looking at the tenant’s financials, they found that their sales were actually higher now than in 2018.
“We pointed out several things in their financials that told us that ‘you really don’t need this, and there are others that truly truly need this.’ [The tenant] pushed pretty hard and came up with some other situations that were going on in his particular business,” she said.
The tenant’s lease was coming up next September, so they worked out a deal whereby he renewed that lease now for five years in exchange for the concession he was looking for, Gronbeck said.
“We were just trying to be creative. If somebody might not need it, but is asking for it, maybe there’s something else we can get,” she said.