Updated:Mortgage Relief for Some Multifamily Housing Providers
The Federal Housing Finance Agency (FHFA) ordered Fannie Mae and Freddie Mac not to foreclose on borrowers if they suspend evictions for 60 days. Here’s the text of the order (here’s a link to the FHFA site):
To keep renters in multifamily properties in their home and to support multifamily property owners during the coronavirus national emergency, the Federal Housing Finance Agency (FHFA) is announcing that Fannie Mae and Freddie Mac (the Enterprises) will offer multifamily property owners mortgage forbearance with the condition that they suspend all evictions for renters unable to pay rent due to the impact of coronavirus. The eviction suspensions are in place for the entire duration of time that a property owner remains in forbearance. The forbearance is available to all multifamily properties with an Enterprise-backed performing multifamily mortgage negatively affected by the coronavirus national emergency.
Federal Housing Finance Agency
There is no direction on exactly how this will be implemented but it is welcome news at least for some providers. While some will be helped by this, we still haven’t seen banks and other lenders investors make the same move. However, it is the right direction. No housing provider wants anyone to lose their home, but they also can’t provide that home if they go out of business.
A Rent Strike is Like Looting
This is what happens when people try to bargain with people who have bad faith. The eviction ban was always about grabbing power. It has now encouraged people to actively not pay rent to make a point. You can check out a new website encouraging people to not pay rent but you can also read two sample letters below. Please, if you get letters like this please let me know immediately (roger@seattleforgrowth.org). We’re asking local elected officials to repudiate this effort. This doesn’t help anyone and is like looting. It should be stopped. And if you support our work, please make a contribution now (follow this link). We’re working to stop this from getting worse. Thank you.
Does New “Stay at Home” Order Impact Housing?
I posted about Boston’s Mayor shutting down construction projects as non-essential during it’s lockdown. Washington Governor Jay Inslee’s proclamation issued Monday evening is a long list of jobs considered essential and thus allowed to continue working. It looks like housing construction and other related functions for operations are considered essential.
Construction workers who support the construction, operation, inspection, and maintenance ofconstruction sites and construction projects (including housing construction) for all essential facilities, services and projects included in this document, and for residential construction related to emergency repairs and projects that ensure structural integrity.
Workers such as plumbers, electricians, exterminators, and other service providers who provide services that are necessary to maintaining the safety, sanitation, and essential operation of construction sites and construction projects (including those that support such projects to ensure the availability of needed facilities, transportation, energy and communications; and support to ensure the effective removal, storage, and disposal of solid waste and hazardous waste)
Governor’s Proclamation
It’s not clear if this would be strictly limited to “construction sites” and exclude rental properties or units of housing. The best thing to do would be to contact providers of those services to see how they’re operating under the order.
More details as we get them.
Details on Council Legislation Extending Eviction Ban
The details of Councilmember Lorena Gonzalez’ efforts to extend and expand the COVID-19 eviction ban have emerged. She’s proposed two pieces of legislation. Here’s a description of the first proposal extending the ban (full text here).
Her legislation adds a defense to evictions if the tenant cannot pay rent because of the COVID-19 crisis, including a tenant’s illness; loss or reduction of income; loss of employment; reduction in compensated hours of work; business or office closure; a need to miss work to care for an immediate family member or child, where that care is uncompensated; or other similar loss of income due to the civil emergency proclaimed by the Mayor on March 3, 2020. The defense is applicable for unpaid or late rent for a period up to six months after Mayor Durkan declares the conclusion of the civil emergency.
City Council Website
Nobody knows when the civil emergency declared by the Mayor will end. But if it continues to say the end of April, COVID-19 related issues can serve as a defense until November and perhaps beyond.
And what about the second proposal mandating payment plans (full text here)?
The second bill, Council Bill 119762, allows tenants who cannot pay rent during the COVID-19 emergency to pay late rent on a payment schedule during the crisis. The payment plan must be made in a written agreement with their landlord, and gives the tenant a year to become current on full rent payments after the date Mayor Durkan declares the civil emergency to have ended.
City Council Website
Gonzalez claims that this somehow helps housing providers by creating more certainty. It doesn’t. On the contrary it creates an interest free loan; it’s making housing providers a non-profit bank. Shouldn’t the City be doing this financing? Why are housing providers supposed to make these loans without any interest? Couldn’t the City partner with a bank or the federal government to pay the rent and have the resident pay the bank back — or not if this is going to be a grant.
The problem with the City of Seattle, including Gonzalez and Mayor is that they don’t see housing providers as small businesses, but as large pools of cash. As we already pointed out in our letter, it doesn’t take much for a project to get into financial trouble. All this legislation does is create a big balance that a hard hit and hurting resident doesn’t have much rational self-interest in paying. It doesn’t solve anyone’s problem but it makes it worse.
Our Response to Proposed Extension of COVID-19 Eviction Ban
Unfortunately a ban on evictions does nothing to help people who have lost income, and it is especially not helpful in the next 30 days when rent is coming due. What would help most is rent assistance. Longer term if people are encouraged not to pay rent, and a balance builds, they will have an incentive to abandon their lease. What incentive is bad credit going to be in these uncertain times? Almost none. What people need is the certainty of some cash to make it to the other side and a helping hand from other people.
Here’s what I’ve heard from a housing provider from his outreach to his residents.
“In the first 48 hours after reaching out to residents, we heard back from slightly under 5% who were both recently unemployed and interested in working on our properties for a rent credit. Roughly half of these respondents have filled out the paperwork to get started. From these, five residents of our properties showed up for work, on time, this morning to start their Day 1 of this new world we live in.We have several more lined up to start on Monday”
Here are some of the comments from residents:
- Thank you so much for having such a comprehensive plan and being so considerate of our individual needs in this strange time.
- Thank you all for thinking about us during these difficult times.
- Anything will help. I’m open to any type of work available
- I’M WILLING TO DO WHAT NEEDS TO BE DONE TO KEEP MY APARTMENT
- I can do manual labor, maintenance and general upkeep as needed.
At this point, partnering with government is important to help residents recover. Capitulation to government in order to be seen as “helpful” or “good corporate citizens” is a one way ticket to eventual government control of housing when the crisis is done. If something is not done to support housing providers at this time from their debt, and foreclosure happens, the only entity with the power and money to buy them back will be government.
I can’t help but think of an iconic scene from It’s a Wonderful Life, usually called the “Bank Run Scene.” It’s the beginning of the depression and people are trying to get their money out of the bank and George Bailey’s Building and Loan. The villainous Mr. Potter is buying up everything in town because he has cash. Bailey implores people to hang on.
“If Potter gets ahold of this building and loan they’ll never be another decent house built in this town, he’s already got charge of the bank, he’s got the bus line, he got the department stores, and now he’s after us . . . Can’t you understand what’s happening here? Don’t you see what’s happening? Potter isn’t selling Potter’s buying! And why? Because we’re panicky and he’s not, that’s why. He’s picking up some bargains. Now we can get through this thing alright. We’ve got to stick together though. We’ve got to have faith in each other!”
The words were true then, and they are true now.
Let the City Council and Mayor know your thoughts by sending them an e-mail.
Here’s our letter to the City Council:
