Many landlords felt a sense of relief on Aug. 26, when the U.S. Supreme Court vacated an extension of the federal moratorium on evictions for nonpayment of rent. But landlords and tenants may be dealing with fallout from the 17-month moratorium for a long time.
“It has definitely led to a lot of uncertainty for people,” says Patrick Noonan, manager of Colorado Housing Connects, an organization that helps landlords, tenants and homeowners find resources and is one of four nonprofits that administer federal rental assistance funds in partnership with the Colorado Division of Housing.
Just keeping up with all of the rules and regulations, plus disseminating information about resources available to landlords, “has been a full-time job since COVID hit,” says Laura Nelson, executive director of the Apartment Association of Southern Colorado.
Federal rental assistance programs require landlords and tenants to work together, and landlords have been confronted with a barrage of data to gather and forms to fill out.
“A lot of property managers and assistant managers and office staffs had to take on the duty of trying to find rent money for these folks,” says Nelson. “A smaller landlord and a private investor with a few homes doesn’t have the staff to keep up on that sort of thing.”
Dana Lowry, owner of Grand West Properties, agrees.
Lowry owns and manages four properties on the near east side of Colorado Springs with a total of 74 units, plus a 144-unit community in Pueblo.
Lowry says he has worked with half a dozen tenants who were unable to keep current with their rent. But his business has also been impacted when he’s had to evict a tenant for a reason other than rent. Those evictions were still allowed under the moratorium, but new regulations have lengthened the eviction time frame and curbed the late fees a landlord is able to collect.
Eviction wasn’t an easy process even before COVID, but now it’s even more of a hassle, says Lowry.
“The last thing I want to do is to go through the time and expense of an eviction,” he says. In the coming months, “there may be somewhat of an uptick because it has not been business as usual, but I don’t think we’re going to see a huge wave of evictions” in El Paso County.
The U.S. Census Bureau, however, foresees an increase in evictions throughout the state.
A Census Bureau survey found that 31.6 percent of adults in Colorado were living in households that were not current on their rent or mortgage payments in July, compared with 25.5 percent in June. The bureau estimated that 42,655 Coloradans were likely to be subject to eviction or foreclosure in the next two months.
The U.S. Centers for Disease Control and Prevention issued its initial order halting residential evictions on Sept. 4, 2020. The order was set to expire on Dec. 31, 2020, but was extended until Jan. 31, 2021, after then-President Trump signed the Consolidated Appropriations Act on Dec. 27.
The CDC extended the order on Jan. 29, March 29 and June 24, with modifications each time.
According to the CDC’s website, the June 24 order, which extended the moratorium until July 31, was intended to be the final extension unless there were changes in the trajectory of the virus.
In light of the rapid spread of the Delta variant, the CDC issued a temporary order Aug. 3 extending the moratorium to Oct. 3. The order applied to counties where COVID-19 cases were increasing; as written, it applied to up to 90 percent of renters.
Landlords who violated the order were subject to a fine of up to $100,000 or a year in jail, or even more if the landlord’s action resulted in a death.
The CDC claimed it had the authority to issue and modify the order under the U.S. Public Health Act, which contains a provision that permitted the CDC director to take measures to prevent the spread of communicable disease.
But the high court ruled that the CDC did not have the statutory authority to extend the moratorium in the absence of clear direction from Congress.
The original moratorium was imposed to help tenants remain in their homes and prevent the spread of COVID-19.
The moratorium applied only to failure to pay rent. Tenants could still be evicted for violations including lease expiration, criminal activity on rental premises, property damage, threatening the health or safety of other residents, or violating other health and safety regulations or contractual obligations.
Colorado’s own eviction moratorium ended in January 2021, but on July 30, Gov. Jared Polis extended a state order requiring that landlords give tenants 30 days’ notice of intent to file for eviction, instead of the previously required 10 days. The order applied to tenants who applied for emergency rental assistance from federal and state sources before Aug. 1. The order is set to expire Sept. 4.
Landlords in Colorado also were prohibited under a state order from collecting late fees from struggling tenants between April 20 and June 12, 2020. The order was reinstated Oct. 15, 2020.
Colorado’s emergency rental assistance program was set up in February 2021 to help struggling tenants with rent payments. Colorado received $690 million in federal funds through relief acts for the program, but because of overwhelming demand, tenants have been waiting for weeks and even months to receive the funds.
According to research done by The Colorado Sun, only 7.4 percent of the federal funds had been distributed to tenants as of Aug. 26.
In the beginning, landlords were eager to work with tenants and implemented measures such as using security deposits to cover a month or two of rent and working out delayed payment plans, says Brian Carberry, managing editor of Apartment Guide, an Atlanta-based service that matches prospective tenants with rentals.
“They understood this was a scenario that was unlike anything we’ve really ever seen before,” he says. “But as it dragged on, landlords were getting a little more frustrated with their inability to collect rent payments from their tenants.”
Landlords not only had to pay their mortgages but cover a host of expenses, from insurance and property taxes to utilities and maintenance.
Carberry says he believes much of the frustration was caused by media coverage that focused on how renters were struggling and ignored landlords’ issues.
“I think a lot of people thought of landlords as these big conglomerates — greedy, deep pocket-type people that are just out for themselves, and didn’t truly understand the implications that it had on the other people working there, like the maintenance staff, the lawn-care people,” he says. “And then they weren’t really thinking about the mom-and-pop landlords who are just renting a home because they need it for extra income or retirement.”
Although data is lacking at this point, Carberry says he thinks it’s a fair assumption that smaller landlords have been hurt the most and will have the toughest time recovering.
Initially, tenants had to fill out a declaration stating that they were financially burdened, “and that was kind of it,” says Carberry. “Landlords really had no way to challenge that, to ask for proof.”
That changed with the most recent iteration of the CDC moratorium, but it had little effect because, two weeks later, it was overturned.
While it’s still too early to know what the impact on rents will be, it’s likely that landlords who have been forced to forgo rent will raise the prices of their units, Carberry says.
“There are reports that there’s a disproportionate number of lower-income and minority renters who are at most risk of eviction,” he says. “That just kind of illustrates the larger affordable housing issue that’s been out there for a while.
“There really aren’t good long-term solutions out there,” says Carberry. “I don’t think anyone has figured out what the overall impact is going to be, other than to say that it’s going to be a very challenging situation for a lot of people — both tenants and landlords — unless something more is done to help them out right now.”
Landlords have encountered a host of issues when trying to get funding to cover rent, which they had to apply for jointly with their tenants, says Nelson.
For example, she has heard reports of renters moving out and allowing a friend to move in. In that case, she says, landlords can’t apply for funding or evict because the occupant isn’t on the lease.
Another landlord had a tenant who not only wasn’t paying rent but also caused a lot of damage to the property.
“He was stuck with all the costs of renovation” as well as being shorted on the rent, she says.
The good news, Nelson says, is that the majority of renters have paid the rent.
“Here in Colorado Springs, we have it even better because a lot of our renters are military” and receive housing allowances, says Nelson.
According to a recent county-by-county survey by data firm Surgo, 12 percent of renting households in El Paso County were in arrears between June 23, 2021, and July 5, 2021, owing an average of $3,926 per household. While that might seem like a lot, the figures are much higher elsewhere, with the percentages of arrears topping 30 percent in some Southern states.
Lowry says he much prefers working with tenants to obtain state and federal rental aid to eviction, but he thinks the procedure for getting funds has become more burdensome.
A state program that ended in February “worked fairly easily and made payments on a fairly timely basis,” he says. “Then they switched over to a federal system because of federal money. That process is terrible — unbelievably inefficient and error-prone to be able to get funds and understand where you were in the process. I just don’t have time to do and redo and investigate and put in calls to do something that should have been done right the first time.”
The late fee law, which goes into effect Oct. 1, “is troublesome to me because it takes away a lot of the leverage I have as a small business to get my clients to pay. The only other leverage I have is eviction.”
Noonan says the emergency rental assistant program is experiencing a very high volume of applicants.
The program requires both landlords and tenants to participate, but “it can cover a tenant’s back rent and in some circumstances, forward rent for a couple of months,” he says.
Although the process may be cumbersome, it’s important for landlords and tenants to apply as soon as they can, he says.
“One of the best things you can do is to work with a renter and apply for rental assistance,” he says. “If the landlord proceeds and evicts the tenant, they are no longer eligible for the rental assistance programs, and they would have to go through a civil process to try and recoup any financial losses from the tenant.” That is difficult because the tenant also bears the cost of eviction.
Landlords with mortgages have the opportunity of talking with their loan servicer.
“They might be eligible for forbearance or another resolution coming from the servicer to provide some more breathing room,” says Noonan.
“I think the tough decision for landlords, now that the eviction moratorium has lifted, is: Do they try to move forward and sever ties with the existing tenant and cut their losses, or do they wait it out and try to get compensated for any of the rent that they were owed previously?” he says. “It’s a business decision for each landlord.”