Eviction moratoriums are expiring across the country just as federal coronavirus aid runs out, and that means America is on the cusp of a housing crisis. To get a closer look at what’s happening, I talked to Emily, an undocumented immigrant who’s four months behind on her rent, and Peter Hepburn, a research fellow at Princeton University’s Eviction Lab, on Friday’s episode of What Next: TBD. But I also wanted to hear from the landlord’s side, from the industry built around people paying their rent. So I called Kass Management, which manages more than 10,000 apartments in Chicagoland, across the income scale. They’re not a mom-and-pop landlord, but they do manage properties for landlords, and they only get paid when the rent comes in.
Mark Durakovic, a principal at Kass Management, told me that the company’s typical on-time collection rate has dropped by about 5 to 7 percent, which adds up to about 1,500 households that aren’t paying. Some tenants are a month behind or paying reduced rent. Others are in eviction territory. But with overlapping moratoriums at the city, state, and federal level, they can’t be evicted. In this excerpt of our conversation, condensed and edited for clarity, I talked to Durakovic about what that means for his bottom line and what will happen to his tenants when the moratoriums are lifted.
Mark Durakovic: The only thing that the eviction moratorium has really caused a negative impact on is all of the individuals that were in the eviction procedure prior to now have basically been put in a position where you just added several months to what already is, unfortunately, in Chicago, a process that can take six to 10 months. … If you have a renter that is sitting in a unit for six to 10 months, and now you add another six months to that process, it becomes a very challenging situation.
Henry Grabar: Right. When you say “individuals,” though, you mean the managers. Presumably, for the tenants it’s a great situation.
Well, look, it’s not a great situation. I’m sure they’re experiencing challenging times and such, but the property is now experiencing a gap in income for a prolonged period of time. Those types of evictions that take six months before [the pandemic], or 10 months before—if those are now taking 12, 14, 16 months, those become situations that I think will also lend themselves to alternative strategies that are bad for everybody.
You mean that if a landlord feels like they can’t file and get an eviction through the court system, they’ll just say, “All right, well, we are not going to fix your window,” or something like that, and it becomes this escalating extrajudicial battle over the space?
Well, those are the types of things we as a professional management company will refuse to do. Even if a property owner were to advise us that that’s what they would wish to do. Because it’s illegal, No. 1, and morally we’re obligated to provide those services.
Let’s talk about a deferment plan. If that’s not available, let’s talk about vacating, and ultimately more or less forgiving the balance and allowing people to vacate without experiencing an eviction on their record, without being afraid of waking up one day and finding a collection on their credit report with regards to unpaid rent.
So you’ve come up with deferment plans. And then, in a case where people are truly behind on their rent, you’re trying to say to them, “Let’s come up with an agreement where you can find someplace you can afford, and we won’t have to initiate an official eviction proceeding.”
But if I were a tenant, I would be skeptical of that offer because you can’t evict them anyway. So what incentive do they have to accept your proposal that they take a hike and find a new place?
Well, we all know that there is an end to the eviction moratorium. So waiting out that entire period is going to allow someone to obviously, yes, take that situation and wait for three months, four months. But once that moratorium is lifted, the eviction procedures will begin, and at that point, those types of offers may not be as readily available. How many times are you going to be able to walk away from several thousands of dollars that you will owe?
Mark sees himself, and property owners at large, as instrumental to a thriving city. He thinks that between the inducements, vacancies, and unpaid rent, his rent rolls are going to drop 15 to 20 percent this year.
Think about what impact that has. How does the building pay for cleaning staff, for repair staff, for the utilities? Even us as a management company—if we don’t collect rent, we don’t get paid. If we don’t get paid, we can’t pay the property manager, the receptionist, the accounting people, the operations management people, and so forth. And what happens then, right? Not only are people losing jobs, the building, the neighbors, the community are all being impacted, because now you have a property that probably isn’t getting serviced and will probably lose professional management and will be left in the hands of a property owner who is not fit and able to manage those situations. At the end of the day, it becomes, at least in my opinion, a very, very, very scary situation.
I hear what you’re saying, Mark, although I suspect that the public’s sympathy, given the severity of the economic crisis, will be on the side of the renter who can’t make ends meet, and is worried about potentially being homeless, more than the property manager who is struggling to make ends meet.
I’ll ask you this question, though, if you don’t mind me doing that: When someone looks at it from the perspective of—housing is absolutely a necessity, but is it a human right? Do you walk into a restaurant and order food, and walk out without paying? Do you walk into a pharmacy or a grocery store and pick up things off the shelves, and walk out without paying? I think the answer to all those things is no, and these are individuals that own these buildings, and a lot of them are reliant on that income to pay their bills.