About 30% of small rental property (SRP) owners reported declines in rent revenue of over 10% last year, with landlords and tenants of color disproportionately hard hit during the pandemic, according to a new study by the Terner Center for Housing Innovation at the University of California at Berkeley.
Approximately half of the owners of small rentals did not see rent revenue declines due to the COVID-19 crisis while about 13% reported rising rent revenue in 2020.
Authored by Terner Center postdoctoral scholar Nathaniel Decker, “The Uneven Impact of the Pandemic on the Tenants and Owners of Small Rental Properties” offers new insight to how the owners and residents of SRPs fared during the past year.
Roughly half of U.S. renters live in small rental properties, and the majority of these developments are owned by nonprofessional landlords who typically only have one or two properties. The study defines SRPs as one- to four-unit properties, including rented condominium units.
The report notes several troubling trends, including the sale of SRPs. Owners of about 13% of the units covered in the recent survey reported that they were forced to take steps to sell off one or more units as a result of the pandemic.
Small rental properties have been shown to often be more affordable than other market-rate housing, and sales could have long-term consequences for the stock of lower-cost properties and properties in high-opportunity neighborhoods.
Looming Evictions
While many tenants missed rent only temporarily and have since become current, about 15% had severe delinquencies of six or more months. The median arrears owed by tenants was about $2,200, but estimated back rents were wide ranging, with some tenants owing $4,000 or more.
The study notes that while most tenants have continued to pay rent through the pandemic, there is concern about renters that are still behind on rent, who are disproportionately low income or Black.
With the federal eviction moratorium scheduled to end at the end of July, landlords in most states will have the opportunity to initiate or proceed with cases regarding nonpayment of rent, says the report.
Decker’s study suggests that the SRP landlords most likely to bring these claims will be those with tenants who have deep arrears of more than six months. That could put between 229,000 and 1.2 million households living in small properties at risk of eviction. Not all of these households will be evicted, but there likely will be a substantial increase from the typical evictions filed in a year.
The study also reveals that SRP owners were not tapping into emergency relief programs. Of owners who reported a COVID-19-related rent delinquency at the surveyed property, only 7% reported that they had examined a pandemic rent-relief program and chosen not to participate, while 68% reported that they had never even examined rent-assistance programs.
During the pandemic, SRP owners have responded to the loss in rent revenue in different ways.
About 40% reported adjusting their policies, including making the due date more flexible. About 9% of owners lowered rent for a month or more, and 6% had forgiven some amount of past-due rent.
In addition, a drop in revenue led owners to cut maintenance and other expenses. Interviews revealed that maintenance was a challenge even for owners who did not have reduced rent collections. The pandemic caused many tenants to spend more time at home using appliances, kitchens, and bathrooms more frequently than they did before the pandemic, which owners reported added to wear and tear and also made it more difficult to schedule maintenance.
