By: First Union
How Should You Respond to the "Cancel Rent" Movement
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Unemployment numbers, as many have seen, are the worst they've been since the Great Depression with over 30 million filings for unemployment benefits during April. That said, it is increasingly difficult for those who've lost their jobs due to the pandemic to pay their bills, with their rent and mortgage being among the most expensive. The "Cancel Rent" movement as we come into May is quickly picking up steam. Certainly, in many ways, it is understandable as people are just trying to survive, and yet, there is a flip side to that coin. Landlords and those who own the properties in question are also subject to huge losses if more and more people stop paying rent altogether.
Tenants in cities such as New York, Chicago, and Philly among many others nationwide have banded together, organizing rent strikes and demanding that the government force landlords work with them during this difficult crisis. Consequently, across the nation property owners are responding to such outcries in a variety of different ways.
Some of The Problems that Landlords Face
According to a recent survey, 43 percent of the nation's renters were already dealing with financial hardship and an inability to fully meet their rent obligations even before the pandemic. Needless to say, COVID-19 has made the situation a dire one. Thus, in an already difficult climate, landlords and property owners have to make some incredibly hard decisions moving forward. One problem with canceling rent in the next few months to come relates to security and safety issues. While certainly there are those owners who have ample funds available for property upkeep, this is not the case across the board. Many landlords depend on money gotten from rent to maintain the structures they own, ensure that they stay safe and secure. Without incoming rent, they are having to cut back in these areas which then lends itself to less than optimal building conditions.
And it's not just building maintenance and security that are at stake. Numerous landlords also count on tenant payments to cover mortgage costs, property taxes, and insurance fees. If they cannot meet their obligations, essentially a vicious cycle ensues.
Another issue cited by property owners and landlords across the country is the fact that while yes, there are most definitely those out there who desperately need financial assistance by way of a rent reduction, there are also those who are taking advantage of the situation. There potentially needs to be a system in place for determining who truly needs relief in terms of rent obligations versus those who do still have the ability to come up with their monthly rent.
Potential Solutions for Landlords During this Crisis
Many landlords impacted by tenants who can't pay rent are now turning to the government for help. Alleviating property taxes on relevant properties is one solution according to some experts. This then would erase some of the debt on the landlord's part and thereby allow them to pass on the savings, in essence, to their renters. In New York, for example, it is estimated that 30% of an average monthly rent is paid right back to the city in the form of property taxes.
Some landlords have been reducing rent owed for April and May, potentially into June. This at least brings in some money to cover associated costs, but again, many property owners just can't afford to do this given their financial burden. Others have allowed renters to pay via credit card where they could not before the pandemic. And still, other landlords are agreeing to use security deposits instead of rent owed for May.
How Might This Be Resolved?
Unfortunately, it is incredibly difficult to say how or where the cancel rent movement might end up in the next couple of months. Many of those striking across the country have already skipped their May rent payment. And moving into June given current job numbers, things aren't looking that much better.
The Cancel Rent movement is rapidly expanding, as now there are a variety of social media platforms and channels uniting people across the US in their efforts to put a temporary stop to rent payments during the COVID-19 crisis. People can sign up on various sites and consequently be directed to housing resources that might be able to provide some support.
The question of back rent is also one of the minds of both landlords and tenants. Even if a family or individual gets to skip May and/or June rent payments, there is then the issue of making those payments up. Once the country reopens, once people are back to work, landlords are going to be expecting to collect for the months that were not paid. And yet, we will be looking at the same situation. As people just start getting back to work and begin making money again, they are going to have to play catchup most likely with a variety of bills. Having then to come up with 3 months' worth of rent is going to be nearly impossible. A major focus of the Cancel Rent movement is this question of back rent owed. Proponents of the movement say that unpaid rent should be forgiven. Yet many property owners will then be in a situation where they cannot cover their bills.
All parties—landlords and renters—are beseeching both state and federal governments for help before a true housing crisis emerge even after the pandemic subsides.
At First Union Lending, we work with small business owners to help get them the funds they need to keep their business going. During this difficult time, we understand that smaller company owners, in particular, are being hit hard. We would love to be able to help. Call today to see how one of our business loans might be the ideal solution for you. Let's get started together!