Misinformation Monday - Mom & Pop Landlords

Taking a break from taxes (but don't worry, we still have PLENTY to talk about there) to discuss a mythical creature all over the news since the 2019 rent laws, and even more in the pandemic: the mom and pop landlord.

While they do very much exist, they're often used as political props rather than actually listened to or supported. In NYC in particular, the vast majority of rental units are owned by larger organizations, for a multitude of reasons.

Are there plenty individual landlords? Yes. But are they the majority? No. And we need to stop pretending there is a one size fits all solution when there is so little similarity between Joe Shmo and E&M Associates, the same way there's a difference between a tenant who actually can't afford rent and one who wants something for free because it's "only fair," if his neighbor is getting a break.

And we need to stop making this a faux-moral conversation pitting sides against each other, instead looking at solutions that will actually benefit everyone. 

xo

Anna

What's the Deal?

Headline after headline is riling people up all over the country, talking about how the eviction moratorium unfairly hurts "mom and pop" landlords who are unable to pay their bills, mortgages, and expenses. Ignoring the fact that this assumes the owner could replace the evicted tenant with someone else paying enough to cover these expenses, there are other issues with this narrative. Namely, that this type of landlord is the majority and that the eviction moratorium/tenants are the issue rather than a total lack of government support.

Nationwide, a little less than half of all rental units are owned by individuals, including 70% of 1-4 unit rental properties. In NYC, the data shows that on 10% of rental units are owned by a single building/unit owner, and 72% of rental units are owned by landlords with at least 6 buildings. I'm not going to call anyone who owns 6+ NYC properties a "mom and pop" operation.

Because these numbers come from HPD they likely do not include individual condo or co-op sublets or 2-family homes where the owner rents one unit, but include 100% of buildings 3-family or above. Many co-op and condo sublets are not individuals, either, and even if we say that 15% is single-property-owners, that is still a TINY fraction of the city as a whole. 

Institutional/investment landlords are also more likely to own rent regulated units, and are responsible for far more evictions. This is relevant because what everyone is freaking out over is the eviction moratorium, and again, small landlords are being used as props. When I work with an individual owner I am much more cautious about accepting a tenant than with a large company that has a certain element of risk built-in and attorneys on retainer. Which group do you think is more upset that their attorneys' hands are now tied? Which group do you think has the money/time/desire to evict in the first place?

Of course, our government is doing fuck all (technical term) to actually help -- it's easier to parade people around and use them to criticize "lazy" tenants than it is to find a solution -- when they could be either providing aid to people in the form of UBDI or to these small landlords in the form of mortgage and property tax/utility cancellation. They're choosing to do neither.

Yes, let's continue to give the Catholic Church billions of dollars in tax payer money despite the fact that they do not pay taxes. That's a much better choice than giving people $2,000/mo.

From the comment sections on many of these articles, white, middle to upper class Americans loooooove these stories, leaving incoherent responses blasting "socialist" tenants "with no savings" who should just "get a job and be responsible." So of course these magazines and papers, whose readership base is largely made up of these people, continue to publish the same story ad nauseam.

Some of them have good information, but many are written in a misleading way to get a certain emotional response, hiding the actual data between paragraphs of sob stories.

Again, I'm not trying to paint landlords like they're horrible or deserve to go bankrupt, but if a company like Blackstone (who I always pick on because ugh) is trying to increase its portfolio during the crisis, why should taxpayer money go to "bailing it out?" I also know firsthand that they did NOT reduce rents for tenants struggling to pay, and will come out of the crisis with more money and property than they had before.

Why Does This Matter?

Because there is a false dichotomy where either the landlord or the tenant is somehow at fault, allowing the government to abdicate responsibility in a crisis, and there is a false equivalence between all kinds of landlords. There's a stupid narrative that tenants are lazy freeloaders or all landlords are evil. The reality is, obviously, somewhere in between. 

It's frustrating because it's complicated, and Americans HATE complicated. Even the tenant advocacy groups calling for the city to "cancel rent" make exceptions for smaller landlords, but you won't see that in these clickbait articles. And just because a landlord is institutional doesn't mean it's BAD; it just means it doesn't need the same kind of support (and not all small landlords are good, either). 

The small landlords deserve a break. I'm not sure the institutions do. You can argue that's unfair, but literally nothing about our society is fair or equal at the moment. If the recovery is K-shaped, aid can be, too. I'm not even a proponent of "cancel rent;" I think that providing cash to people in the short term, directly and consistently, that they can spend on rent would solve the problem far better and everyone, landlords and tenants alike. But if we aren't going to do that, we gotta work with what Congress actually will do (read: almost nothing). 

And in that vein, if we do have state funds specifically earmarked for rent replacement, then rather than doing what NY has done thus far and put the onus on struggling tenants, many of whom don't speak english or know how to navigate complicated processes or even have access to the internet, put the onus on the LANDLORD to show need for aid. 

Further Reading/Watching

For more, please check out the links below.

Time - Millions of Tenants Behind on Rent, Small Landlords Struggling, Eviction Moratoriums Expiring Soon: Inside the Next Housing Crisis (article)

Medium - Examining the Myth of the “Mom-and-Pop” Landlord (blog)

Gotham Gazette - Crown Heights Tenants Say Prominent Brooklyn Couple Tried to Illegally Evict Them (article)

WTF, NYC? - Mid-Pandemic Tax Lien Sale

UPDATE: At the 11th hour the sale was postponed.

I have long thought the answer to NYC’s housing crisis, which is increasingly becoming a nationwide housing crisis, is to make the path to home ownership easier. Our over-dependence on rentals, which stems from a larger issue of viewing real estate strictly as an asset class rather than a home, is unsustainable. If we keep going down the monopoly landlord conglomerate root we will be, to use an industry term, fucked. 

But what I find even more frustrating than how hard we make it for people to get on the first rung of the real estate ladder is how we then try to rip people off.  

A well-known example is the type of predatory lending that led to the ’08 housing and financial crisis. Buyers were duped into purchasing homes they could not afford, only to have them foreclosed on and lose their asset, savings, and having to rebuild their credit. Of course they made bad investments, but they did not know what they were getting into, because the lenders were acting irresponsibly. 

Another example that I’ve discussed before is the forcible taking of people’s homes, especially people of color, by burning them completely to the ground (see: Tulsa) or through legal government intervention (see: Seneca Village, Columbia’s campus expansion). 

But there’s another fun way that the government takes homes away from their owners: lien sales. The government will put a lien on your house if you don’t pay your property taxes, a lien if you don’t pay your water bill, a lien if you don’t pay the fines for any violations. Sure, I get it, makes sense in theory. But in practice it’s a huge problem for anyone who isn’t earning a ton of money who lives in an area where home values are increasing. Think about an owner who purchased their home 20 years ago and now lives on fixed income. Although they are likely making the same amount they were before, their tax burden has increased significantly with the home prices in the area. They may no longer be able to pay these taxes AND keep the home in good repair AND pay for all the other utility expenses. Once they get behind on payments there is little chance of coming back — you need to pay everything owed and any interest or late fees on top of it. The situation snowballs.

And don’t get me started on the fact that the hotel lobby has successfully blocked Airbnb from being allowed in the city. I understand the arguments against short term rentals, especially in buildings where you share walls with your neighbors, but you can’t have it all ways. You cannot simultaneously keep someone from using a completely legal service to help pay the monthly costs on something they own, keep raising their costs, AND on top of all this do nothing to fix wealth inequality. If you want to charge women of color who own homes the same taxes that you charge a white man who owns a home, then PAY HER THE SAME AMOUNT. Add to this other elements like racist appraisals keeping people of color from taking advantage of lines of credit or refinancing (or selling at the same price as a white neighbor) and you have a racist system that keeps home ownership out of reach. 

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So what de Blasio, unsurprisingly, is doing is auctioning off, in the MIDDLE OF A PANDEMIC, the homes of people who are already struggling to make ends meet. The auction is tomorrow, Friday, September 3rd. His justification, that the city just really needs that potential $50m right now, falls flat when you realize the NYPD budget is $11 BILLION and he just approved the budget with that number (despite all the lies claiming that the police were defunded a billion dollars). I truly do not understand de Blasio. He has managed to piss off every single person in NYC regardless of their beliefs. It’s honestly quite impressive. 

Here’s what the city’s website says about the tax lien sale: 

“When you do not pay your property taxes, water bills, and other charges against your property, these unpaid charges become tax liens that may be sold in a tax lien sale.

Each year, the Department of Finance sells tax liens. If your property has unpaid debt that qualifies for a lien sale, we will sell your lien debt (the amount owed) to an authorized buyer. A lien servicing company, on behalf of the buyer, adds more fees and interest to your debt, so it is much better to take care of your debt before we sell the lien.”

And who is going to buy these liens and add said fees and interest? Companies like Blackstone, that will then foreclose on many of them and turn them into rentals. We will be removing more and more New Yorkers from the “American Dream” as we consolidate all our housing stock into a rental portfolio owned by a small handful of companies. Remember the game Monopoly? It was supposed to be a warning, not a playbook for how to run a society. What. The. Fuck. Is. Wrong. With. You. 

Dozens of elected officials have begged de Blasio to remove properties with fewer than 4 units from the sale, and postpone it until after the winter, when we expect to have a surge in COVID. Their please have fallen on deaf ears.

From Channel 11 News: ‘New York Attorney General Letitia James explained those companies can charge homeowners "mandatory 5% surcharges, legal fees and most of all a 9-18% interest rate that compounds daily.”’ 

You cannot come back from that level of compound interest if you already couldn’t pay the liens in the first place. This is forcing people out of their homes in the middle of a pandemic. I don’t have an answer for what to do. This is disgusting, and it’s more of the same.

"The outcome of this process is not a mystery: more New Yorkers, many of whom owned their homes outright or benefitted from significant equity, will lose their homes to foreclosure, depriving them of their single most valuable asset and dramatically destabilizing their lives," the letter states. "Others will be compelled to sell under duress during an undoubted drop in the housing market."

New York, we can do better. 

xo

Anna