When the coronavirus outbreak exploded and millions of jobs were shed overnight, it became clear that massive amounts of relief would be needed to prevent an all-out economic meltdown. To this end, an eviction ban was put into place that made it so tenants wouldn't lose their homes on the basis of not paying rent.
Real estate investors with income properties that weren't generating their usual rental revenue got relief, too, in the form of forbearance, which allowed them to pause their mortgage payments. But that only did a limited amount of good, especially for the mom-and-pop landlords who rely on rent payments to cover expenses like property taxes, maintenance, repairs, and their own personal bills.
In fact, recent data reveals that while the federal eviction ban prevented a lot of landlords from collecting rent, mom-and-pop landlords were hit the hardest. And for some, that hit was so bad that they've yet to recover.
Smaller landlords got the worst of it
Data from the National Multifamily Housing Council shows that rent collection rates never fell below 93% during the pandemic. Based on that figure, it would seem like landlords didn't have it so bad when the federal eviction ban was in place.
But that data only stems from professional management companies, not mom-and-pop landlords who may only own a single income property or a few of them. And also, the data treats partial rent payments the same way it treats full ones. For mom-and-pop landlords, collecting 50% of the rent they're owed means grappling with a serious income shortage.
Meanwhile, a report by Harvard’s Joint Center for Housing Studies has more data to share on the impact on mom-and-pop landlords. Specifically, it found that smaller landlords were hurt the most by the eviction ban, with 20% reporting they were owed at least half of the rent they charged last year. By comparison, only 8% of midsized property management companies and 5% of large ones said the same.
Furthermore, that report reveals that mom-and-pop landlords struggled to cover their own bills. Specifically, the percentage of landlords who reported missing at least one mortgage, property tax, or utility bill payment climbed 15% last year. And the portion that put at least one property up for sale rose 10%. In fact, the longstanding eviction ban hurt mom-and-pop landlords so badly that 12% had to make the decision to sell off their income properties entirely and exit the real estate business.
Will small landlords recover?
Mom-and-pop landlords whose finances were battered in 2020 may be able to salvage their businesses thanks to an improving economy, expired eviction ban, and slow-moving but existent rent relief program. But for many, the damage may already be done, and it won't be shocking to see the aforementioned 12% statistic climb in the course of the next year.
The protections that were put into place in 2020 were well-intentioned, as the goal was to prevent a massive homelessness crisis and curb the spread of COVID-19. But the long-lasting effect on small landlords is a very unfortunate side effect.