As we approach winter, we are living through an alarming spike of coronavirus cases, and while a vaccine has been approved in record time, it will likely take several months to reach all Americans. While we remain vulnerable, our economy – both nationally and here in Massachusetts – is lagging. In order to stave off a wholesale crash and the distress that comes with it, we must do everything in our power to keep apartment residents current on their payments and ensure a stable housing market in the state and across the country. Failure to do so could lead to another 2008-style collapse, when the housing market took down the entire economy with it.
Though the stock market has rebounded from its precipitous drop at the onset of the pandemic, millions remain unemployed. According to the Massachusetts Office of Labor and Workforce Development, nearly 26,000 residents filed an initial claim for unemployment insurance during the first week of December. Since March 15, more than 1.6 million claims have been filed in the commonwealth.
In a rare act of bipartisanship, Washington came together in the early months of the pandemic to pass a comprehensive relief package, which included direct assistance to millions of Americans as well as expanded unemployment insurance. The bold move helped renters stay current initially, but relief funds have since dried up and the expanded unemployment benefits have expired.
Now, millions of unemployed Americans have been unable to keep current on their rent and mortgage payments. The National Multifamily Housing Council, which represents apartment owners, developers and managers, found that 25 percent of renters failed to make their complete rent payment by the end of the first week of December, a 5 percent drop from the previous month. And a Moody’s Analytics study revealed that 12 million renters owe an average of $5,850 in back rent, totaling $70.2 billion.
Eviction Moratorium Only Delays Inevitable
Since the initial relief package, the federal government’s response has been to impose a sweeping federal eviction moratorium on top of dozens of state and local moratoria enacted shortly after the crisis began. However well-intended, eviction moratoria only kick the can down the road for renters who are amassing untenable levels of debt that they will struggle to ever make good on. They also leave property owners struggling to keep up with their mortgages, insurance and real estate tax payments used to fund ongoing local government expenditures – let alone maintenance and property personnel costs.
With missing rent payments, many property owners are teetering on the brink of economic ruin. Without assistance directly to renters that keep them current on rent, many property owners will be forced to sell or default on their mortgages and lay off staff, removing desperately needed units from the marketplace at a time when they are keenly needed.
As of this writing members of Congress have passed, but President Donald Trump has not signed, a second stimulus package, including expanded unemployment insurance and rental assistance. The current package includes $25 billion in assistance for renters – a significant figure, to be sure, but just a third of the back rent still outstanding. Nevertheless, it is an important step in the right direction.
Follow Massachusetts’ Example
Washington should look to the bipartisan example set on Beacon Hill to provide relief to owners and tenants. In October, the Baker Administration announced a $171 million plan aimed at diverting evictions through expanded rental assistance, mediation and rehousing programs. The program increased the maximum Residential Assistance for Families in Transition (RAFT) benefit available from $4,000 to $10,000 per household, with $100 million available for the program this fiscal year.
Landlords who own up to 20 units are now able to apply directly for RAFT/ERMA funding on behalf of eligible tenants who are behind on rent. A free mediation program the administration helped launch with the Office of Public Collaboration has been available for landlords and tenants since Nov. 16. Most recently, House and Senate leaders made substantial investments in housing subsidies and allocated $50 million more for RAFT funding as part of the state budget.
Massachusetts cannot do it alone. Failure by Congress and the president to get relief to renters will have a cascading effect. Renters themselves will fall further behind on their payments and dig themselves deeper into debt. Housing providers will, in turn, struggle to pay their mortgage and expenses, including payroll for their employees and contractors. And when property owners have to sell off assets or, worse, default on mortgages, it will be felt throughout the economy.
It’s time to act fast and prepare. In the remaining days of this session before the end of the year, lawmakers in Washington are acting with a sense of urgency. Speed and efficiency are critical. There is no time to waste.
Robert E. DeWitt is vice chairman and CEO of GID, a Boston-based real estate developer, investor and operator. He also is the former chair of the National Multifamily Housing Council.