THE NEUTRAL ZONE
Following mass layoffs due to COVID-19, families, businesses, and real estate owners have started to defer their rent payments to landlords. The resulting deterrent has even caused some real estate owners to turn over their properties to investors rather than paying off their current mortgages. As the push to continue remote work increases, landlords fall victim to further economic endangerment.
Consequently, landlords have faced pressure from the mortgage payments that they owe and are not receiving annual income toward. The hierarchy of leniency is getting squashed at the top of the chain, which is where banks lay. Furthermore, climbing vacancy rates put landlords in an even more divisive situation.
Despite the impending financial burden on landlords, a domino effect has placed banks within a similar crisis. The current political option being pursued to temporarily prop up real estate is a bill comprised of direct income transfers to homeowners and renters as well as more direct bailout measures – a $3 trillion Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act introduced by Speaker Nancy Pelosi. A $75 billion mortgage relief and $100 billion rental relief included in the bill would allow low-income earners and borrowers to claim forbearance for up to a year. Additionally, the bill could aid in the Fed’s ability to lend to mortgage servicing companies, which could result in the Fed’s ability to set up a new emergency lending facility to owners of rental residential properties.
Another Real Estate Crash Is Coming – Jacobin Magazine – 5/19/2020
The COVID-19 crisis, like the subprime mortgage crisis a decade ago, has sparked major public interventions to stabilize the financial markets. But the Fed isn’t stepping in to bail out the real estate sector — and the big losers are set to be ordinary households.
This First-Time Homebuyer Needs Rent To Keep His House. But His Tenants Are Broke. – FiveThirtyEight – 5/18/2020
Concepcion’s situation points to a somewhat prickly issue amid the coronavirus outbreak: Landlords are often seen as multimillionaires who can weather financial storms because they own so much property. But the reality is that about half the rental properties in the U.S. belong to landlords who own no more than 10 properties, and many of those 8 million individual landlords rely on the nominal rent they collect.
Texas is restarting evictions. Is it too soon? – HotAir – 5/19/2020
Now that Texas is moving through the reopening process and people are going back to work, tenants are going to be expected to pay (and in many cases catch up on) their rent. The question went before the state’s highest court already and allowing landlords to begin evicting delinquent tenants has been approved. But questions remain as to whether this shouldn’t have been phased in a bit later in the process.
WeWork wants a rent break. Its customers do, too. – The Business Journals – 5/19/2020
Many professionals and small businesses that use WeWork have not been able to go to the office for weeks because of stay-at-home orders and are seeking relief on the rent they owe but they say WeWork has been unwilling to cut them much slack as they grapple with plunging revenues.
David Winzelberg on Twitter, 5/19/2020: Tenant: “We have been crushed by this unforeseen and unforeseeable event.” Landlord: “I don’t believe it’s my responsibility to lend money to a company owned by a multi-billion-dollar private equity firm.” https://t.co/M4KUCntJqQ
Kristin Annable on Twitter, 5/19/2020: Landlord says he’s owed thousands in rent, as Manitoba sheriffs won’t enforce eviction order during pandemic https://t.co/WYDAILQ9ox by @cbarghout
MLex on Twitter, 5/18/2020: The US Federal Reserve’s current stress tests on the largest banks include an assessment of the potential effect of the pandemic on commercial real estate: https://t.co/KGNlThOelN by @nroland #covid19 #financialinstitutions #regulation
Paul Colgan on Twitter, 5/18/2020: “Expect banks to shrink their footprint to save on rent. Big business will slash spending on information technology too. For seven weeks almost none of it was necessary, as employees used their own.” @Adam_Creighton notes reshaping of industries coming https://t.co/elbtu8UBBA