The potential economic ramifications of the coronavirus pandemic touch nearly every aspect of people’s lives but the actual extent of the difficulties remains unclear as America slowly eases the restrictions and attempts to bring some semblance of normalcy. Among the questions is how the rental market will respond when temporary measures expire.
America’s original focus was on containing the spread of the disease through business closures and restrictions, but the resulting loss or reduction of income has sent shockwaves that in some cases go beyond the ability of unemployment benefits and business loans to keep up.
Many renters already were hard-pressed to afford their monthly payments before the pandemic struck. The government stepped in to offer temporary rent deferral and to prohibit evictions for non-payment of rent during the crisis, to give the economy time to stabilize, but at the end of the deferral period, tenants will owe both the postponed payments and their ongoing rent. Landlords will regain the ability to evict tenants for non-payment of rent.
Some are predicting that it will result in a higher homeless population, and that landlords will not be able to pay their property taxes, adversely affecting municipal revenues. Some officials are suggesting that the government should step in and cover the rent, making payments directly to the landlords.
“Funding for landlords’ loss of rent would definitely help alleviate some of the financial burdens,” said Kevin Lacasse of New England Family Housing, a New Hampton-based company that owns and manages more than 600 rental units across the state, from Berlin to Rochester and Claremont.
Lacasse said that Bank of New Hampshire has offered a six-month payment deferral on loans, but the interest continues to accrue and will be added to the remaining payments after the six-month period.
“Tenants can get assistance to pay their rent through increased unemployment, city welfare, and other options, however, there is no relief for landlords,” Lacasse said. “The economic ramifications due to the COVID seem to be far more hard-hitting than the virus itself.”
Governor’s Panel
The federal CARES Act allocated $1.25 billion to New Hampshire to address problems associated with the coronavirus pandemic. Governor Chris Sununu established the Governor’s Office for Emergency Relief and Recovery (GOFERR) with two advisory boards to help allocate the funds where they are most effective. One is the legislative advisory board and the other is the stakeholder advisory board. The Governor has retained the final decision on how to distribute the CARES Act funding.
The stakeholder advisory board heard from certain housing organizations at the May 7 GOFERR meeting and the legislative advisory board heard from housing advocates and officials at the May 8 meeting. The meetings covered several proposals to stabilize the state’s rental market and to help homeowners when the moratorium on evictions and foreclosures expires.
The directors of Housing Action NH and NH Legal Assistance testified of a pending eviction crisis due to tenants lacking the the ability to pay when the moratorium expires. Dean Christon, executive director of the NH Housing Finance Authority, said the state needs to commit between $25 and $100 million to rental market stabilization.
Asked about those proposals, the communications director for the governor’s panel referred questions to the state attorney general, who sent a tersely worded response: Tenants are required to pay all back rent, and landlords have protection against foreclosure through Executive Order 4, and can work with their banks to make arrangements.
In addition to rental housing, GOFERR heard about concerns for homeowners who may not be able to make mortgage payments, and about homeless shelters that may be overwhelmed with newly homeless citizens who were evicted.
Lacasse said some his tenants have already refused to pay rent, and that there were a few evictions in process when the eviction moratorium came down. “Those tenants continue to live rent-free,” he said, adding that he is seeing the problem across the state, with little difference between Berlin, Bristol, Franklin, Rochester, Rumney, and Claremont.
“We are working with tenants on a case-by-case basis, and are willing to work out payment plans as required,” Lacasse said. “Yes, we have had some tenants simply default as well.”
Municipal Impact
Bristol Town Administrator Nik Coates said his town has not seen much of an impact on revenues so far: People have continued to pay their water and sewer bills and make automobile registrations. He said Welfare Officer Kelly Lacasse has reported normal seasonal activity.
“We’re on track with all our permits, about the same number this year as in past years, so there’s no slowdown in people building,” Coates said. “There were six calls from contractors in the last few days, and Mark [Bucklin] at the transfer station is overwhelmed, like a typical summer.”
“I’m not trying to paint a rosy picture,” Coates continued, “but all things seem to be normal under the circumstances.”
That does not mean that the town has not had to make adjustments to the pandemic. Bristol received $74,000 for COVID-releated expenses, and the state has said towns can overspend their budgets if necessary. Coates said they have spent about $12,000 of the funds for the extra cleaning and sanitizing necessary, and the town purchased laptops for employees so they could work from home.
There have been savings in custodial services, which were reduced to one day a week, and because most people are working from home, the electricity and heating costs are down, Coates said.
“Everyone got laptops,” he said, “so they’re coming in one or two days a week, although [Town Clerk/Tax Collector] Raymah [Simpson] comes in more frequently. We’re all just working differently right now.”
He added that, while they have not imposed a spending freeze, they are not spending on things that are not wage-related or emergency expenses.
Coates said Water and Sewer Supervisor Jeff Chartier got worried when Freudenberg-NOK laid off workers because the manufacturer is the town’s largest customer. “He played out a worst-case scenario, based on them being completely closed, and calculated they could run 90-100 days without having to borrow from their reserves,” Coates said. “They’re down to one shift, so they won’t have to dip into their reserves.”
He added that non-Freudenberg collections are where they normally are.
“The strategy right now is to limit spending as much as possible so, come September and October, we’ll be able to see where we are. My advice to the Select Board is to beef up the overlay to prepare for abatement requests. We have a healthy overlay so should be able to weather it this year.”
He noted that tax bills will be going out in a couple of weeks, and those payments will be a good indicator of where things stand. “Right now, we’re guessing,” he said.
Federal Guidance
Current guidelines from the federal government state that funds from the CARES Act can help communities care for their homeless populations, and offer consumer grants to prevent evictions, as long as the grants are covering expenses incurred due to COVID-19.
“As a general matter, providing assistance to recipients to enable to meet property tax requirements would not be an eligible use of funds,” the guidance states, “but exceptions may be made in the case of assistance designed to prevent foreclosures.”
The DLA Piper Real Estate group has offered advice to landlords facing rental issues, including applying existing security deposits to the rent owed as a way of mitigating the impact of deferred rent payments. Another option is to extend the lease period by a month for each month owed.
Ultimately, it may require a range of options, including additional federal support, to stabilize the rental market and preserve housing.
