Metropolis

Red April

What happens on the first of the month when residents, restaurants, and retail stores don’t pay rent?

A man walks past a sign saying Stop the Rent on King Street in Newtown in Sydney, Monday, March 23, 2020. The state of NSW is shutting down all non-essential services to slow the rapidly spreading.
Rent day is coming. AAP Image/Joel Carrett

In a pandemic, the rent eats last.

That seems to be the desperate consensus as a growing number of residential tenants, small businesses, and national chains, in a game of chicken with nervous landlords, prepares to withhold rent for the month of April.

More than 3 million Americans filed for unemployment benefits last week, five times as many claims as the previous weekly record set in October 1982. Even so, that statistic understates how much money people aren’t making, because it doesn’t count undocumented workers, gig economy or freelance workers, or people who have been laid off but haven’t filed. Finally, all those numbers are from last week—before shelter-in-place orders had been issued in New York, California, and Illinois.

The astonishing job loss hints at the revenue crisis in restaurants, where data from Open Table shows restaurant reservations declining 100 percent in the United States since last year, and in retail, where many stores have been forced to close indefinitely. According to a 2016 JPMorgan study, the median independent retailer has enough cash to last 19 days; the median independent restaurant has enough for 16 days.

Residents alone owe $40 billion for the month. Retail and restaurants owe something on the same scale. April 1 will bring contract chaos when thousands of leaseholders decide not to pay, pushing a tide of unpaid debts from lessees to owners to banks—and sometime soon, a flood of litigation back from banks to owners to lessees.

Weirdly enough, the April rent strike is being led by Bolshevik institutions like Mattress Firm, Subway, and the Cheesecake Factory. On March 18, Cheesecake Factory CEO David Overton asked landlords for patience and help—and announced the restaurant would not be paying rent in April. Mattress Firm has told its landlords the same. And Subway declared the pandemic a force majeure, a legal term for an unforeseen event that voids contract obligations.

Commercial landlords perceive chains as credit-worthy and dependable partners, to the extent that a lease with Citibank or CVS can boost a building’s sale price vs. a mom-and-pop toy store paying the same amount. Pandemic surprise: When it comes to contract-breaking and collective action, chains are lawyered up and ready for Red April.

On the residential side, things are a little less predictable. “We are very concerned about what’s going to happen on April 1,” says Andrea Shapiro at the Metropolitan Council on Housing, a New York–area nonprofit that works with tenants. “On our hotline in the past two weeks, all we hear about is people who can’t pay rent.”

Is the Met Council advising tenants not to pay rent? The question is a little besides the point, she says. “The amount of people who cannot pay rent, it’s not really a choice. It’s unbelievable.”

The data backs this up: Between 10 and 15 percent of Americans say they could not handle an emergency $400 expense, according to the Federal Reserve. A survey from the University of Chicago reported that a third of adults couldn’t cover necessities after missing one paycheck. One in 4 tenant families pays more than half its income in rent, and the rate is higher in high-rent, high-wage cities like New York and San Francisco, where service-sector jobs have vanished overnight.

In Chicago, a Tenants United organizer told me that the city will see widespread nonpayment of rent, in part through organized actions begun by tenants themselves. “We expect to see rent strikes, not just on the South Side where we can expect more people in distressed housing situations, but also people on the North Side in more affluent neighborhoods who make up the service worker economy in those neighborhoods. That’s thousands of people, and we have hundreds of people organizing.” The push is happening on digital platforms like Facebook and occasionally on the back staircases of three-flats. (Face-to-face interactions, in rent striking as in all things, are not advised.)

Politicians have rushed to put protections in place: Congress’ economic aid bill includes a 120-day moratorium on evictions for many tenants, including Section 8 renters and anyone who lives in a house or apartment with federally backed loans. The checks being sent to most Americans will help—but don’t equal lost wages, may take up to four months to arrive, and won’t help the nation’s 12 million undocumented immigrants. Several states have halted evictions, including New York and Pennsylvania, and even organizations representing landlords are urging members to be lenient. The National Multifamily Housing Council, for example, recommends firms stop evictions and rent increases, and offer payment plans for residents who can’t pay rent.

Many tenant advocates say payment plans are useless—strapped residents will never be able to make up the rent later. In New York, a group of Democrats in the state Senate have proposed a three-month rent jubilee. Residential or commercial tenants who lose income from coronavirus-related shutdowns “shall never be required to pay any rent waived during such time period,” according to the bill. San Francisco supervisors have proposed a similar resolution.

Rent strikes are relatively rare in the U.S. and are mostly reserved for slumlords who don’t provide services like heat or extermination. But they have an important history: A wave of rent strikes in New York beginning after the First World War led to the nation’s first rent control law. That those strikes were a political and practical success, the historian Robert Fogelson observed in The Great Rent Wars, was thanks to strong support from the then-powerful Socialist Party, as well as the role of women whose domestic social life was perfect for daytime organizing.

Circumstances today are different. In Philadelphia, Tenants Union president Barry Thompson said he was discouraging tenants from withholding rent. “If you have it, pay it,” he counseled. “I suggest tenants be very, very careful—we’re encouraging people to communicate with their landlords, pay something, and get it in writing.” Paying even a little, he reasons, may help tenants when eviction courts, in which landlords very rarely lose, are bombarded after the crisis.

Generally, COVID-19 emergency laws up to and including this week’s federal aid bill have been more generous to homeowners and landlords than to renters, with more comprehensive guidelines for mortgage deferments than for rents. But not everyone thinks landlords are in such a strong position here, especially those, like malls, that depend on vanishing income from retail and restaurants. Bars and shops figure landlords would rather take a haircut now than lose their tenants on the eve of a recession. Columbia University, which manages 600,000 square feet of retail space in Upper Manhattan, is offering tenants two months free.

Euripides Pelekanos, the CEO of the midsized chain Bareburger, told me he has been negotiating with every landlord for deferments and reductions—after laying off more than 500 people this week. He’s conscious that he and his peers may just be passing the problem upstream: “I hate to say this, but they’re pretty fucked with the rest of us. I don’t see what they’re going to do at the end of the day.” Landlords can claw back lease guarantees, including security deposits, but if they succeed in evicting tenants, they may be sitting on vacant storefronts for a long time. “There’s going to be no one rushing to open up a restaurant after this, that’s for sure.”

And if residents are reluctant to challenge landlords, restaurants and bars may feel they have less to lose, even with the passage of a coronavirus aid package that offers grants to keep workers on payroll. “My plan is to not pay the rent,” says Anthony Ramirez, who runs the Bronx Beer Hall. Ramirez had to lay off his staff this week but is betting his landlord won’t want to evict. “Rent ends up being the lowest thing on the list,” he said. “Everything before rent.”

For more on the impact of the coronavirus, listen to The Gist.