With Tenants Who Won’t Pay or Leave, Small Landlords Face Struggles of Their Own

With Tenants Who Won’t Pay or Leave, Small Landlords Face Struggles of Their Own

August 12, 2021

ABI Bankruptcy Brief

With Tenants Who Won’t Pay or Leave, Small Landlords Face Struggles of Their Own​​​​​​

Advocates for renters celebrated last week when the Biden administration effectively extended a Centers for Disease Control and Prevention ban on most evictions. But for some small landlords — struggling to pay mortgages and taxes — it was the last straw, the Washington Post reported. The CDC’s ban legally protects only renters who have suffered financially because of the pandemic, who are at risk of homelessness and who meet other criteria. But landlords say some tenants are abusing the eviction ban to live rent-free. Others cannot be evicted for any reason because of state and local rules enacted in response to the pandemic. In general, it’s a great time to be a real estate owner, as residential property values have risen dramatically in many parts of the country. But as with many of the emergency policies passed in response to the pandemic, the evictions ban has had disparate effects on large and small companies. Many corporate apartment chains catering to white-collar workers are raising rents and booking enormous profits; an index of publicly traded apartment chain stocks is up 43 percent through Friday. Meanwhile, some mom-and-pop landlords are giving up and deciding to sell, though at what scale is difficult to determine.​​

Weekly Unemployment Claims Fall to 375,000 and Return Near Pandemic Low​​​​​​

New applications for U.S. unemployment benefits fell in early August almost to a pandemic low, signaling that fewer people are losing their jobs despite another surge in coronavirus cases, MarketWatch.com reported. Initial jobless claims dropped by 12,000 to 375,000 in the week ended Aug. 7, the government said today. New claims had fallen to a pandemic low of 368,000 last month before a temporary increase that was likely tied to seasonal swings in summer employment. New claims were little changed in most states. They fell the most in New Mexico, while California and Michigan posted the biggest increases. Meanwhile, the number of people already collecting state jobless benefits slid by 114,000 to a seasonally adjusted 2.87 million. Altogether, some 12.1 million people were reportedly receiving benefits through eight separate state or federal programs as of July 24.​​

Analysis: Millions of Americans Are Unemployed Despite Record Job Openings​​​​​​

The number of available jobs since May has outnumbered Americans looking for work. One factor is a mismatch between where people want to work and which industries are hiring, according to a Wall Street Journal analysis. The hardest-hit industries have yet to recover to pre-pandemic levels, when 63% of Americans were in the labor force. In July, there were 5.7 million fewer jobs, on a seasonally adjusted basis, than there were in February 2020, according to Labor Department data. The number of people trying to get back into the workforce has rebounded since the early days of the pandemic. The share of adults working or looking for a job has increased slightly from a low of 60.2% in April of last year to 61.7% in July. Part of the problem is a discrepancy between where openings are and which parts of the economy were hit the hardest. Looking sector by sector, service jobs are at a greater jobs deficit since before the pandemic than others. Most July hiring was in services, adding 659,000 of the 943,000 total jobs, but well short of the 8 million openings in June. (Subscription required.)​​

Black Farmers Facing 'Extinction' Fight for $5 Billion in Promised Aid​​​​​​

Congressional aid for disadvantaged farmers that was authorized earlier this year as part of President Biden's $1.9 trillion coronavirus relief law is being challenged in the courts by white farmers, preventing roughly $5 billion from reaching Black farmers who are in desperate need of financial assistance, The Hill reported. Five months have passed since President Biden signed his sprawling American Rescue Plan into law, which included funds to help socially disadvantaged farmers — of which about 25 percent identify as Black — in an effort to remedy the government’s long history of discrimination against Black farmers and those of color. But shortly after the U.S. Department of Agriculture’s (USDA) Farm Service Agency made preparations to send debt relief letters to eligible farmers in May, the move was met with lawsuits from white farmers and groups who argued that the eligibility requirements were discriminatory. A judge in Wisconsin granted a restraining order, while a Florida judge issued a preliminary injunction. Those two actions have left the aid in limbo as litigation plays out. U.S. District Judge Marcia Morales, a George W. Bush administration appointee who issued the Florida-based ruling against the debt-relief program, said the main section of the coronavirus aid bill pertaining to farmer relief does “not appear to contain any of the hallmarks of a narrowly tailored race-based affirmative action plan.” She said it instead “appears to create an inflexible, race-based discriminatory program.” But for many Black farmers, time is of the essence. John Boyd Jr., president of the National Black Farmers Association, says many of his members are “not going to be able to hold on” for a lengthy court battle over the aid.​​

Commentary: Will the Pandemic Productivity Boom Last?​​​​​​

Since the second quarter of 2020, labor productivity — the amount of output per hour of work — has risen at a 3.8 percent annual rate, compared with 1.4 percent from 2005 to 2019. New data published on Tuesday showed that the trend persisted this spring, with a 2.3 annual rate of productivity growth in the second quarter. A different way to look at it: Since the pandemic recession bottomed out in the spring of 2020, the nation’s gross domestic product has more than fully recovered, with second-quarter output 0.8 percent higher than before the coronavirus pandemic, according to a commentary in the New York Times. The number of jobs decreased 4.4 percent in the same span. Productivity growth accounts for most of the wedge between those. What is less clear, though, is how much this growth represents real progress toward deploying the workforce in ways that will make Americans richer over time. It’s a murky story — like any attempt to connect big-picture productivity numbers to what’s happening in the guts of the economy — but crucial for understanding the economic outlook for the 2020s. In terms of economic output, not all jobs are created equal. A worker in a well-managed factory with state-of-the-art equipment produces more economic output for each hour of work than a counterpart in a poorly run place with worse equipment. The differences are even starker when you compare productivity across sectors, and that’s where there is a clear pandemic story. Many more job losses were in low-productivity sectors than in higher ones.​​

Fannie Mae Aims to Make Home Loans More Accessible​​​​​​

Mortgage finance giant Fannie Mae is making it easier to include rent-payment history as part of the mortgage approval process, a move intended to help borrowers with limited credit histories get better access to home loans, the Wall Street Journal reported. Fannie Mae said that starting next month it will help lenders factor in borrowers’ history of rent payments when weighing those applicants’ qualifications. Fannie Mae doesn’t require lenders to consider rent history if a borrower has a credit report and score that meet the company’s criteria. But credit reports often don’t include residential rent payments because most landlords don’t report the data to credit-reporting firms. As a result, renters’ credit scores, which are based on information in their credit reports, don’t reflect that data. The issue has been problematic for consumers with limited borrowing histories, who have difficulty getting approved for affordable credit. “In some markets, it’s just as expensive to rent as it is to own,” said Hugh Frater, Fannie Mae’s chief executive. For many renters, “they have the history of making payments, which in my opinion should be equally and fairly considered in their ability to pay a mortgage.” The changes to Fannie Mae’s underwriting system, which are scheduled to go into effect Sept. 18, will allow it to automatically identify rent payments from applicants’ bank account information. (Subscription required.)​​

Next Week: ABI's 2021 Virtual Midwest Regional Bankruptcy Seminar to Examine Current Economics and Continuing Effects of COVID-19, Disparate Treatment of People of Color in Bankruptcy, Subchapter V and More!​​​​​​

Starting next Thursday, top experts from the Cincinnati area will gather to discuss top bankruptcy issues at ABI’s 2021 Virtual Midwest Regional Bankruptcy Seminar. The workshop, being presented on an innovative virtual platform, will assemble the region’s top insolvency professionals for two days of engaging sessions and networking. A faculty of outstanding judges, academics and practitioners will present workshops on the key trends in the industry, with concurrent sessions looking at key business, consumer and skill-focused topics. Attendees will also have the opportunity to earn 7.75 hours of CLE credit, including 1.50 hour of ethics, and will have access to program recordings until September 20.

Sessions at the Midwest Regional Bankruptcy Seminar include:

•    Case Law and Rules Update
•    Commercial Session: Out-of-the-Ordinary Out-of-Court Restructuring Issues
•    Consumer Session: “Stop Where You Are: A Bankruptcy Has Been Filed. But Don’t Just Stand There!”
•    Disparate Treatment of People of Color in the Bankruptcy Process
•    Judicial Town Hall
•    Current Economics and the Continuing Effects of COVID-19
•    Subchapter V

Register today!

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New on ABI’s Bankruptcy Blog Exchange: CFPB Servicing Rule Aims to Stave Off Another Foreclosure Crisis

The impending termination of government aid for struggling homeowners is expected to spark a flood of foreclosures as early as next month, but the mortgage industry hopes a recent Consumer Financial Protection Bureau rule will help limit the damage, according to a recent blog post.

To read more on this blog and all others on the ABI Blog Exchange, please click here.

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