Landlords versus renters – not as simple as it looks

Governor Andrew Cuomo has extended for another two months his original 90-day order suspending evictions in New York state for failure to pay rent.

Cuomo said that landlords who face utility bills and mortgages can turn to banks and federal programming for help.

He also said that officials will ban any late-payment fees and allow renters to use their security deposits as payment.

“Everyone is just making do, and everyone has hardships,” he said during his daily briefing Thursday. “We just want to make sure the people who are most vulnerable are protected.”

There’s more at the link.

This is very useful to those who’ve been laid off or furloughed.  They’ll at least have roofs over their heads for the next few months, while they figure out how to make a living.  However, it doesn’t excuse them from actually paying the rent they owe.  If they don’t pay for five months, until August 20th, and then expect to go on as before, they’re in for a big surprise.  I’m sure landlords will be applying for eviction orders as soon as they’re legally able to do so, and kicking out those who haven’t paid, and suing them for rent arrears.

Landlords are in a terrible position over this.  They’ll be portrayed as evil and mean and greedy for insisting on payment:  yet they have to pay mortgages on their properties, and insurance, and rates and taxes, and pay for repairs when necessary.  Without rents coming in, how can they do that?

I’m not a landlord, but I know several small investors who rent out property as retirement income.  One of them owns an apartment block with 36 units (not in New York state, but the same principle applies).  His tenants (many of them still working) have gotten together and sent him a round-robin letter, telling him flatly that they’re going on “rent strike” until the crisis is over (even though many of them are still working and able to pay).  The rent they pay is his only retirement income apart from Social Security.  What’s he to do now?  He can’t sue them or apply for eviction orders, because local courts are closed during the coronavirus pandemic shutdown.  His bank will insist on payment of his mortgage, under threat of foreclosure;  and the city will want its rates and taxes, or they’ll suspend his license to do business.  Talk about being between a rock and a hard place!

It’s all very well for Governor Cuomo to tell landlords to “turn to banks and federal programming for help”.  Banks may not be interested in helping:  they want their money too.  Federal programming is not always available – many who’ve applied for small business loans have heard nothing so far, or have been turned down.  However, landlords are a relatively small class of voters.  Those who rent from them are a much larger class.  Therefore, the politicians will pander to those with the greatest number of votes.  Others are left holding the short end of the stick.

I think we may see a wave of landlord bankruptcies in the not too distant future, as banks and others foreclose on their properties.  That’ll be a very strong disincentive to others to invest in rental property in future, for fear of the consequences if anything goes wrong.  Over time, that’s likely to prove very negative for the rental property market as a whole, diminishing the supply of housing units and driving up costs for everyone.  I wonder if Governor Cuomo bothered to think about that before issuing his edict?



  1. This is truly the rock and hard place for landlords… I think you're right, many will go under and the properties will be sold, putting the people on the street.

  2. It isn't that easy. Luckily, I am in a place where I can afford the payments, but many are not.

    – I can't declare bankruptcy, because the property is owned by my corporation, but I had to personally guarantee the loans. Declaring bankruptcy would involve me losing my own house as well as the rental.
    – My profits are not that great. I invested $100K of my own money in a home while taking out a $135K loan for the balance, for which I collect $20,400 a year in rent. By the time I pay taxes, insurance, lawn and pest service, principal and interest on the loan, licenses, compliance filings, etc, I wind up with just about $2,500 a year in profit, and I still have to do any repairs from that.

    If that property doesn't generate rent for a month and a half or so, I lose money. The margins are thin.

  3. Since when have New York politicians cared for the needs of landlords.

    Just look at the whole fixed-rent system of Rent Control. Where landlords can't increase rents even though the City and State have increased tax burdens, required expensive refurbishments and rebuilds, and increased licensing fees.

    Or the spectacular stupidity of forcing 'historic building' status on landlords, which then requires them to spend huge amounts of money to bring the buildings up to 'historic status' or get the building seized by the city or state.

    Sorry, just because the people are short of rent money (though most rent strikers aren't, either because they have jobs or because their rent is paid by the state or fed governments) doesn't make them not responsible for their rents.

    If one can have a Social Security Disability meeting over the internet, or Bond Hearings over the internet, then one should be able to push evictions through virtually. Or any other civil filings.

    Once again, just like with guns, those playing fair are being punished for the actions of scofflaws.

  4. Yet another example of the simple fact that there is nothing wrong with Governor Cuomo that a quick dip in molten steel wouldn't solve.

  5. If Governor Dracula thinks the current Corona virus situation will get him elected President, he is sadly mistaken. His lust for power is just too obvious, and no one wants a President that looks that much like a blood-sucking vampire.
    If I were a landlord in NY I would quit paying the utility bills and taxes and declare bankruptcy immediately or just walk away. Let the property be seized and let the government run it. Starve the beast.

  6. Peter – For your friend, he needs to check out the rules where he is located. And various apartment associations have free letters to address a "rent strike" that can be sent to tenants.

    Letters could contain:

    1. Fact Rent Strike is illegal, and it will affect their credit.
    2. They will be evicted.
    3. Rent is still owed
    4. He can ask for proof of Coronavirus impact from tenant.

    What is allowable varies from city, county, and state. LA I heard just passed something, if you do it wrong, $10K fine per incident.

    There are lots of webinars and updates out there your friend can watch for free with ideas.

  7. The best two days of my life were when I got rid of my last rental and my ex-wife.—ken

  8. I would find out the actual law in my area and write an appropriate letter to each tenant signed on the rent strike letter.

    Guess what, I will sue each of you for breach of contract, past due rent, full term of the lease, costs of lawsuit, interest on the unpaid rent AND any and all losses incurred due to not being able to pay my mortgage. AND you WILL be evicted as soon as the courts are open.

  9. Economically according the Bank of England, this will be the worst crash in three centuries!

    The ideal plan for the people at the top is to sell rentals to China and live off money so what if US people are serfs in their own nation. This may well not be disable as mobs of heavily armed people make poor serfs.

    Ultimately it doesn't matter if folks like dogsledder walk away the State or or Local governments will just take rentals at a nominal market value of a hundred bucks or so and rent them out. California did a bit of this with marginal motels using them for the homeless.

    Its sub optimum but between abandoned commercial properties and way behind rentals , the government can house nearly everyone, no problem.

    Ultimately private property really isn't a right, its a luxury in tine of deep crisis and if it comes between private owners and millions of well organized rent strikers , folks like Charlie are humped. The State will void your rights or give them nominal service,

  10. We only have a couple rental properties, but my wife and I refuse to use debt, so they have no mortgages. We could have almost a dozen properties, if we used conventional wisdom and bought rentals every time we could come up with a down payment, and counted on renters to "pay our mortgage", but debt is risk, and we decided to go much slower.

    Consequently, I'm not sweating bullets like other landlords. If one of my tenants doesn't pay, my cashflow is only negative for insurance and taxes. We sleep better at night, too.

    All debt is risk, never kid yourself otherwise! You can never predict what string of events will bring Murphy to destroy everything you've worked for.


  11. "Landlords are in a terrible position over this. They'll be portrayed as evil and mean and greedy for insisting on payment: yet they have to pay mortgages on their properties, and insurance, and rates and taxes, and pay for repairs when necessary."

    Oh dear. If you listen carefully, the world's smallest violin is audible in the background, playing a lament for landlords who have borrowed money to be in their position, and would chuck you on the street if it weren't for the fact that the law now doesn't let them.

    "He can't sue them or apply for eviction orders, because local courts are closed during the coronavirus pandemic shutdown. His bank will insist on payment of his mortgage, under threat of foreclosure; and the city will want its rates and taxes, or they'll suspend his license to do business. "

    If he "knows" that these people are still working, that is information that he should take to his own, well, "landlord," i.e. the bank, whose money he has borrowed, and in the process, understand what his freeloading tenants are maybe doing. They might be sympathetic to him. They might not, but they are more likely to have access to the courts at a later date, and are more likely to have the resources to enforce these debts if they are due.

    "All debt is risk"

    Exactly. What if it's your turn?

  12. Wealth transfer from private to government. As landlords go out of business the government will have to take over or having many more people now homeless. The fact that this can build bureaucracy and allow the government to save people from evil capitalists is icing on the cake. The banks will not suffer, the government will bail them out (how many precedents are we up to?)

    I know a guy who rents and he has been playing the debt game. Right now he estimates 40% of his renters can't (not won't, they are unemployed) pay rent. I was considering getting into the business and was looking at the margins, he is in a net loss position in a big way.

    Stand by, the water is running away from the beach. The tsunami is building. Plant a garden, food is going to be the next issue.

  13. The statement of Generalissimo Cuomo is symbolic of the attitude of the democrats regarding those who pay the taxes that support their communities. They can pound sand.

    Rental properties are revenue generators for local governments. Land taxes represent 50 percent or more of the revenue a community relies on to provide services to its citizens. Here is where the paradox lies.

    The renters use these services. Not the rental owners. Even if there is a rent strike, the renters still receive these services. The community suffers the loss of revenue if the rental owners cannot pay their land taxes which are based on their properties being rented.

    This entire Covid19 pandemic has been nothing more than kick the can down the road as far as how to pay for the costs we have incurred. No matter where you say the funding will come from, ultimately it is the citizens, all of them, that will pay the piper.

    The best bet is to open the economy back up and deal with the fall out. At least the playing field will be more level than it is now.

  14. Hubby loved the rental business but left it to me but I'm down to just one but have an attorney answer any statement of "I won't pay the rent" because they believe they are going to just get free rent. But go on written record with a way to help them resolve the problem. Offer people still working a 15/20% discount for 3 months. Tell all renters if you bring a copy of their unemployment + $600 payment I'll work with you as long as a % of rent is paid each month. But the key is to work with them and let them think that they are getting a "good" deal. At least you have something coming in rather than nothing. But they must sign a repayment agreement for when they go back to work. Don't demand all at back rental at once but a % each month. If they won't agree then it's eviction time. Document everything. And if necessary go to the media in your local area and explain how you've structured helping your tenants at this terrible time and encourage other landlords to work with their renters. I've used similar ways when I had multiple units and had renters who had an emergence and couldn't pay. But always with documentation and a portion. I'll help but I won't be naive.

  15. The wife and I have been landlords for decades. It is an interesting look into human nature. I guarantee that NONE of those tenants that are months behind on rent will get caught up. They'll continue to not pay until the landlord gets an eviction (probably months given the backlog). It's cheaper for them to move than get caught up. In our experience, "working with a tenant" never works out. Either other expenses come up and they don't keep their end of the bargain, or they skip out once they get back to work and never get caught up. In either case, the tenant resents you for expecting them to pay what they owe. Renters are, for the most part, not like you and me. They are inherently bad with money. If they were better with money, they wouldn't be renters because they would understand that they are just a down payment away from owning it for less each month than they pay to rent it.

  16. @RocketmanKarl: of course, the possibility that they're saving up for that down payment has apparently escaped you.

  17. Glassglass you are right. But is it not possible that tenants might want to do what is right? Starting with that assumption (and backstopping for the rest) might be just the ticket.

    Especially if you can show your own eviction notice: "If I don't make these payments" (from your rent) I lose the property and you'll be on the street. "

    Most renter deal with %&$# Property Management companies, and would probably be willing to end up on the street if that lot finally got what is coming to them

    It's the financialization of every thing via unaccountable middle-men.

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