What Happens When You Stop Paying Rent

It’s Not Okay to Steal From Your Landlord

What if I walk into Costco, fill my cart and walk out without paying. “Food Strike! Covid-19. Life’s not fair. I’m not responsible” I’ll yell as I walk out. How long do you think it will take for my arrest?

“Thou shalt not steal. “ Not, “thou shalt not steal unless the government orders you to stay at home.”

Don’t leave. Hear me out. I don’t like this horrible situation either. I have compassion for those who have had their lives turned upside. People work hard in their jobs. They help others. They did not cause this pandemic but suffer because of it. Landlords included.

Federal Relief is Both a Solution And a Problem

The government ordered stay at home edicts and people are complying. So, the government should be addressing the housing situation in a reasonable, responsible manner. The good news is they have initiated some helpful steps.

For example, the CARES Act was enacted on March 27. One part of the Act blocks foreclosure proceedings for at least 60 days if you have a federally-backed home loan, like Freddie Mac or Fannie Mae. The next thing it allows is up to 180 days of forbearance.

You don’t get to forget about making those payments. You pay them later, but there’s an option to extend for another 180 days. FHA, HUD, Dept. of Ag Loans and VA Loans also fall under the CARES Act. Comforting for some.

But how many renters live in federally-backed homes? Not a lot. Most federal programs are designed to help an individual purchase a home to live in. Some allow for buildings that have up to four residences. Not large apartment complexes. So the act is great for most homeowners. Not renters.

What About Private Banks?

Private banks aren’t part of the Act. There are some states and banks that have created ways to ease the burden. California and Connecticut, for example, made a deal with some banks to allow for a 90-day grace period of all mortgage payments and to suspend foreclosures. New York Gov. Cuomo said they will do the same. Call your private bank to find out what they are doing to help. Again, great help for those paying a mortgage in the home they live in.

Encouraged to not pay rent in Portland, Oregon.

So it’s okay to not pay for your housing?

It is according to a Facebook community group of over 697 members in Portland, Oregon. The group’s purpose is “to coordinate actions in regard to the upcoming rent strike”. That strike was scheduled for April 1.

Their demands are no work, no rent, house all the homeless, free healthcare, and release prisoners. Huh? Release prisoners?

On their website, pdxrentsrike.info, they urge everyone, regardless of ability to pay, to stop paying their rent. I guess it makes sense that those who want to set prisoners free are okay with stealing.

Will this hurt the economy?

In a big way! Let’s go through a scenario. Our renters have March-May of rent-free living. According to RENTCafe.com, the median rent in the U.S. for January 2020 was $1463. Newly enacted government orders give them six months to begin to pay back that missed rent. It will be the end of November before they start. Our renters decide not to pay at all.

Eviction proceedings can’t begin until July 1. In Oregon, those proceedings take no less than 30 days. That was when courts weren’t backed up by an additional three months. So now, September is the earliest the landlord can prepare the property to rent. That likely equates to having a renter in October. Eight months of no rent collected.

The Big Impact

The Facebook group ‘Rent Strike 2020’ has 11,545 members as of April 5, 2020. Using the scenario from earlier, if the renters were paying $1463/month, the landlord will lose $11,704. That’s on top of any wages they lose. Using those numbers, if all members of that one group choose not to pay, it would create a loss of over $135.1M.

A loss of this magnitude could cause many people to shy away from being landlords. Properties will become scarce. Rents would increase significantly as shortages become the norm.

The cost of being a landlord

The cost of being a landlord goes beyond collecting rent to pay your own mortgage. Laws require landlords to take care of certain issues. Property maintenance, adhering to building codes, making sure that vital services function and more add up. According to the Insurance Information Institute, a landlord’s premium is around 25 percent greater than with typical homeowners’ insurance. If you want to hire a property manager, that typically costs around 10% of the rent charged.

Many landlords who rent single-family houses or duplexes don’t make much of a profit, if at all. Many are hoping to supplement their income and to provide opportunities in the future.

Loss to Pension Funds
 But it’s not just the landlords who are hurt. Investors are tied into many mortgages, often buying bonds. Carol Galante, UC Berkeley’s faculty director for Terner Center for Housing Innovation, states “So you say, well, who cares about the investors?’ ‘But the fact is that many of those investors are things like pension funds.” Those pension funds are for you, the firefighters, teach­ers, first responders, and others.

What’s the Solution?

This is a new frontier that is very complicated. But I am clear about these two things:

1) Our governments must continue to seek out and quickly implement solutions.

2) The answer is not to steal from landlords or others.

We can continue to work together to ease the impact of this unprecedented time. There are instances of landlords and banks reaching out to help in very big ways. I’d like to hear more of those stories and t­­­o know your opinion.

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