New Jersey’s landlords say they are already seeing sharply lower rental income because of an executive order that prevents evictions and foreclosures during the coronavirus pandemic, and they fear more financial damage if a bill to extend those protections becomes law.
Representatives of large and small landlords attacked a bill, A-4034/S-2340, as a one-sided attempt to give renters and mortgage borrowers an extended time to pay without the threat of eviction if they have lost their jobs because of the public health crisis. They said the measure gives too little weight to the concerns of landlords, who are bearing many of the financial costs.
The bill’s sponsors say the measure is essential to prevent a wave of homelessness at a time when the state’s unemployment has surged to some 16% of the workforce, or about five times what it was before the pandemic shut down many businesses.
But landlords say they should not be required to wait up to 30 months for rent arrears to be paid, as specified in the latest version of the bill. They predicted that both the executive order and the bill, if signed into law, will reduce the supply of affordable housing and cut property-tax receipts for local governments, placing another burden on an already strained state budget.
Repayment plan for tenants
The legislation, which supporters call the “People’s Bill,” requires landlords to offer tenants who have missed rent payments during the pandemic an opportunity to agree to a repayment plan that would give them six months to repay each month owed in back rent, with all arrears payable in 30 months. Tenants would have to be making not more than 100% of median income for the area and would not have more than six months cash reserves in the bank.
For homeowners, mortgage lenders would be required to offer borrowers who had been unable to pay because of the COVID-19 crisis a forbearance to repay within a minimum of 90 days and a maximum of 180 days. Qualifying borrowers’ income would be no more than 150% of area median income.
The terms are unfair to landlords who would be forced to live with unpaid rent for up to 2 1/2 years, said Nicholas Kikis, vice president of legislative and regulatory affairs for the New Jersey Apartment Association, which represents large, professional landlords.
‘Erosion in rent collections’
“Once you’ve signaled that rent is no longer a priority, and it can be deferred interest-free, we will start to see a further erosion in rent collections,” he said. “That will trigger all the consequences we fear: Landlords who can’t pay their mortgage, property taxes that don’t get paid; declining valuations of the property for property-tax purposes.”
Kikis estimated that landlords have seen a decline in rent payments of about 15% so far in the pandemic, a figure that he said would have been greater without a $600-a-week federal jobless benefit that expired on July 31.
He accused Assemblywoman Britnee Timberlake (D-Essex), the bill’s lead sponsor in the Assembly, of taking a “combative” approach to drafting the bill.
“Instead of having a discussion on what goals do we collectively have and how can we get there without the impact, it was, ‘We’re going to make landlords give tenants free rent,’” he said. “It does really start to affect the viability of the industry.”
Timberlake rejected the group’s assertion that the bill hurts landlords more than other groups, and said it creates an opportunity for them to come to an agreement with tenants on unpaid rent.
“The Apartment Association has taken extreme measures to try to convince my colleagues to oppose this bill and to create division amongst landlords, renters and homeowners with false narratives about tax increases and harm to small landlords, all reminiscent of scapegoating,” she said in a statement. “I came to Trenton to represent the greater interest of the people and to be fair. If that makes me combative, then so be it.”
The bill moved closer to Gov. Phil Murphy’s desk on July 30 when it passed the full Assembly. It returns to the Senate, which approved an earlier version in April but must now take another look because of amendments in the lower house.
David Smith, policy coordinator for Sen. Troy Singleton (D-Burlington), the bill’s lead sponsor in the Senate, said changes to the bill were “significant” because the latest version allows loan forbearance by statute rather than by the governor’s executive order — which bans evictions and foreclosures until two months after the end of the public health emergency.
Senate likely to get onboard
But Smith predicted the Senate will concur with the Assembly version of the bill, as amended. Smith and other backers are hoping for a Senate vote before the end of August.
During its passage through the Assembly, the bill was amended to ensure that loan forbearance was only offered to people who could prove their finances had been hurt by the pandemic rather than to all tenants, Kikis said.
That eased some of the landlords’ concerns but didn’t go far enough to provide them with financial assistance like deferring property-tax payments or offering relief from utility bills, he said.
For small landlords like Jerry Cheslow, the governor’s executive order has already cut rent revenue at his 10 apartments in Middlesex and Monmouth counties by more than half, and he doesn’t know how much longer he will be able to survive the current situation.
Because of the order, he says he is unable to evict one tenant for nonpayment of rent, and the same applies to another for antisocial behavior that is aggravating other tenants. That has prevented him from renting one unit and led him to reduce the rent for another tenant to persuade that person to stay in the building despite the neighbor’s behavior.
The net result for that building is that costs are five times higher than the revenue he has been bringing in since the pandemic started. In his other five buildings, some tenants have stopped paying rent, but he is powerless to evict them. Overall, Cheslow estimated his rent revenue is down 55% to 60%.
In addition, some tenants, currently assured that they won’t be evicted, have stopped paying their utility bills, leading the municipality to impose a lien on Cheslow’s property until the bills are paid.
Retirement income from rental units
Cheslow, 71, acquired the units over the past 28 years to provide retirement income for himself and his wife, and he fears a long-term reduction in that income because of the current order and the bill that may replace it.
“Already, I am very hard-pressed by the moratorium that exists today,” Cheslow said, referring to the executive order. “It’s making my financial future unravel.”
He dismissed the idea of taking a forbearance of mortgage payments with his own lender because that would only last three months, and he is not confident that nonpaying tenants would resume payments during that time.
If the current rules persist, either under executive order or statute, Cheslow predicted severe damage to the affordable-housing sector because landlords won’t be able to afford to maintain their buildings. “You’re lucky if somehow you can scrape together what it takes to pay your mortgage and pay the utilities for those people who aren’t paying,” he said, in an interview with NJ Spotlight.
Derek Reed, an attorney who represents the Property Owners Association of New Jersey, a trade group for smaller landlords, said Cheslow’s case is representative of the current travails of small landlords. He predicted that would worsen if the Timberlake/Singleton bill becomes law.
“What essentially that bill is doing is asking all landlords, in particular small landlords, to give nonpaying tenants an interest-free loan,” he said. “They are asking landlords to shoulder the burden of carrying this debt for up to 30 months.”
Meanwhile, Singleton said he understands landlords’ concerns but predicted a crisis of homelessness unless the measures are adopted.
“Unprecedented jobless rates combined with expiring federal unemployment assistance mean that people simply will not be able to afford to keep their roof over their head for much longer,” he said in a statement.
“We have listened to the concerns shared with us by the New Jersey Apartment Association and have made some modifications to the proposal based on those concerns,” Singleton said. “However, ultimately it is our responsibility to do everything we can to prevent these families — our neighbors, our friends — from losing their homes to foreclosure and evictions.”
A spokeswoman for Murphy, asked whether he would sign the bill in its current form, declined to comment.