Will new coronavirus relief package be enough? Black and Latino landlords could lose big
MIAMI - Susana Lay worked morning through evening with her grandfather while he sold and repaired Singer sewing machines in New York City. She was his "todera" or all-rounder and helped out with everything from collecting bills to wiping the shop floors. Soon, Lay was able to use her savings to buy her first home in her twenties.
One property became six, which were bought with their parents and siblings over the course of three decades.
But with COVID-19, their tenants lost their jobs and couldn't get rent. Lay also defaulted on her mortgage payments and indulged.
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"Day in and day out, COVID is reducing everything I've built," said Lay, now 54, who emigrated to the United States with her Chinese parents from Venezuela after high school.
Mom and pop landlords hurt across the country. They oversee most of the country's 48 million rental units. Black and Latin American landlords are hardest hit and are turning to forbearance during a pandemic that has disproportionately hit their communities as their residents are unable or have refused to pay rent under eviction moratoriums.
According to a report by the Urban Institute, around 12% of landlords with mortgages are lenient. Of these, 20% are black and 14% Latin American, compared to 9% white.
According to a study by Global Investment Bank and consultancy Stout, the total rent owed to landlords nationwide could reach $ 24 billion by January.
"I've come to a point where I should prepare for retirement and go into my golden years," said Lay. "If I worked that hard, I shouldn't worry because all of these properties should give me something."
Black and Latin American landlords have difficulty paying their mortgages
Black and Latin American landlords tend to have lower incomes, own less real estate, still have a mortgage, and are more likely to have problems compared to white landlords, said Laurie Goodman, who heads the Housing Finance Policy Center at the Urban Institute.
Individual owners who own single-family and maisonette houses, or less than 20 units in total, are referred to as "mom and pop" landlords according to the 2015 American Housing Survey published by the US Census Bureau in 2015.
A maintenance man breaks the lock on a house when Maricopa County officer Darlene Martinez issues an evacuation warrant on October 1, 2020 in Phoenix, Arizona. The federal rent support is expected to pass in Congress on Monday as part of a $ 900 billion pandemic relief package. (Photo by John Moore / Getty Images)
According to the American Community survey from 2018, people of color are more likely to be mom and pop landlords compared to white landlords
These landlords typically buy and rent to tenants in less affluent areas whose median household income is $ 35,500 in two- to four-unit buildings and $ 47,400 in single-family homes. The national median household median income in 2019 was $ 68,703, according to the U.S. Census Bureau.
Lay said it was scary because it was the first time she defaulted on her loans. Even during the 2008 financial crisis, she always paid on time.
"Can you believe that I'm negotiating a loan with the banks that I've had for 20 years?" said Lay, who gave back rent to many of their tenants and allowed them to get out of their lease early.
More than a third of all landlords earn most of their income from rental properties. According to a survey by the National Association of Hispanic Real Estate Professionals and the University of California, Berkeley's Terner Center for Housing Innovation, most of them expect to get at least a quarter of their retirement income from these properties.
Experts agree that these prospects become more difficult when rental properties are the only means of building wealth.
"Home equity is the greatest source of wealth for blacks and Hispanics, and it makes up a much larger proportion of their net worth than white families," said Goodman of the Urban Institute.
The median net worth of white homeowner families was $ 300,000, of which $ 130,000 was attributed to housing construction. These are the latest results of the Consumer Finance Survey published by the Federal Reserve Board of Governors in September for homeowners, the median net worth was $ 113,000, of which $ 67,000 was in home ownership. And for Latino families who own their homes, the median net worth was $ 165,000, of which $ 95,000 was home ownership.
A "For Sale" sign is seen outside a home on October 21, 2009 in Miami, Florida.
Lay's story is one of thousands in a place like South Florida where real estate has been a boon to the local economy and, in some cases, has been a major driver since the 1920s. Miami is the city in the US where mom and pop landlords make the most money behind Oklahoma City, according to an analysis by Zillow Rentals from 2014.
Scott Sime, CEO of Sime Realty Corporation, a Miami real estate company, said individual buyers make up as much as 80% of all landlords who buy investment properties.
"Miami is made up of everyday people like you and me who are entrepreneurs," said Sime.
For many people of color, however, home ownership remains inaccessible after decades of systematic redlining practices that saw banks and financial institutions restricting credit, mortgage and insurance in certain geographic areas.
The National Association of Realtors found that the home ownership rate for white Americans was consistently above 71%. Over the same period, home ownership for Black Americans was flat at just over 41%, compared with 45% for Latino Americans and 53% for Asian Americans.
By comparison, white renters have a median net worth of $ 8,900, while black and Latin American renters have $ 1,830 and $ 5,800, respectively.
Jamell Henderson (L) speaks against law enforcement agencies forcibly removing people from their homes in New York City on September 1, 2020 during a "No Evictions, No Police" national day of action. Activists and aid groups in the United States scramble to stave off a monumental wave of displacement across the country as the coronavirus crisis threatens tens of millions of people with homelessness.
Latino and Black landlords also want federal aid
For 62-year-old Hector Alvarez, real estate should always be safe.
After moving to South Florida from Cuba, his family saw investing in rental properties as the only way they could become financially independent and save for retirement.
"You saw it with our neighbors, who were 65 or 75 years old, only got social security and a small pension and barely made it," said Alvarez. "They had to have their own businesses and real estate was the means to create that independence."
Now, after decades of stability, he has no idea whether his tenants will ever be able to repay him. Of its seven units in Miami, most of its tenants lost their income due to COVID-19. One of his tenants has cancer.
At least three of them have not been able to pay him since April. Others pay him when they come with cash to do the casual job or when a family member steps in.
Alvarez reckoned he lost about $ 72,000 on the rent alone. He's also paid for water, electricity, and cables for some of his tenants, which can quickly add up to $ 500 a month each. He also owes $ 83,000 in property taxes and insurance on all of his properties.
At the start of the pandemic, Alvarez used up his small savings to cover mortgage payments. He has maxed out credit cards to pay for utilities and expenses, including looking after his 91-year-old father who needs 24/7 care.
"We live on credit cards, paper clips and chewing gum," said Alvarez, who has been indulgent for six months and is currently in refinancing.
"It's hard because on the one hand I get along with them, but the banks don't understand me."
Alvarez is one of the Latino and Black landlords who, according to the Urban Institute, were more willing to take on tenants. Nearly 48% of Latino landlords and 42% of Black landlords have offered payment plans and used security deposits on rent since April, compared to 36% of white landlords.
Some landlords have given tenants the rent and allowed them to terminate the lease. According to the report, 61% of tenants have accepted the offers.
Alvarez said he never considered eviction, largely because he, too, knows what renters across the country are going through. Earlier this year, he was sued by the owner of his elderly father's unit after the lease was terminated for failure to pay the rent increase. Alvarez continued to pay the original amount. The lawsuit is still ongoing.
"I tried to be compassionate with every step," said Alvarez.
Meanwhile, after months of partisan ceasefire, Lay and Alvarez are waiting for the pandemic relief package proposed by Congress to go into effect.
The $ 900 bipartisan bailout package passed by Congress on Monday night included $ 25 billion in rental support to cover past or future rents or other home-related expenses. Renters would need to apply for assistance from agencies selected by state and local officials to administer the program. Once a tenant is eligible for assistance, the administrator sends the payment directly to the landlord.
While the legislation also extends an eviction moratorium through January for some renters, renters may be eligible for a full 12 months of rental assistance to help them align with their landlords.
The National Low Income Housing Coalition estimated that 9-17 million households could be displaced in 2021 as 9.8 million people remain unemployed and continue to default.
Maricopa County Police Officer Darlene Martinez speaks to a tenant about an eviction warrant on October 1, 2020 in Phoenix, Arizona. The federal rent support is expected to pass in Congress on Monday as part of a $ 900 billion pandemic relief package.
Doug Rice of the Center on Budget and Policy Priorities, a think tank that analyzes the impact of federal and state budgetary policies, said rental support is especially important for mom and pop landlords, who have fewer financial reserves compared to white landlords to cover costs when tenants fall behind.
"Smaller landlords are an important source of rental housing for low-income people, so providing rental support to low-income households is targeted to help them," he said.
Contributor: Nicholas Wu in Washington, D.C.
This article originally appeared in the US TODAY: COVID Relief: Black Latin American Landlords, Renters Want Congressional Incentives
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