There doesn’t seem to be a single facet of life right now that does not seem to have been touched by the threat of the coronavirus. Professional and collegiate sporting events have been canceled, students have been sent home from major universities, and the toilet paper has become the hottest collectible since Beanie Babies.
It would stand to reason then that real estate investment properties will be touched by this pandemic in some way as well. The question is, “How?”
Early signs out of Hong Kong point to Airbnb issuing a moratorium on reservations and landlords being asked by the government to waive or defer rent payments on commercial spaces.
Looking toward the horizon in the U.S., one only needs to look to California to spot signs of what may be coming for multifamily landlords nationwide.
Forty-nine percent of all Americans live paycheck to paycheck according to a survey by the First National Bank of Omaha.
If a business is canceled in order to contain the spread of coronavirus, or a tenant misses work because of illness, the snowball of falling behind financially can grow quickly.
To help mitigate the threat of a rapid increase in the homeless population, last week California cities began taking action. The city council in the city of San Jose voted 10-0 in favor of a temporary ban on evictions due to the epidemic, with Los Angeles and San Francisco discussing similar measures.
The freeze requires that tenants who can’t pay inform their landlords know they can’t pay in advance of the day rent is due. To qualify for rent deferment, residents must provide pay stubs and a note from their employer to prove the impact the coronavirus has had on their income.
Residents will still have to pay the rent at a later date, though whether they will be responsible for it, there will be public funding available or some other mechanism to resolve it has yet to be determined.
Further to the south, the city council in Los Angeles has begun considering a similar measure, with others calling for a statewide moratorium on evictions. While Los Angeles is exploring similar measures to San Jose for compensating landlords and providing financial assistance to residents, they have not yet settled on a remedy.
Additional measures being explored for providing financial relief include temporarily halting utility shutoffs and asking lenders to defer mortgage payments.
While the Los Angeles city council has yet to vote on the measure (they intend to on March 19), the mayor of San Francisco plans to implement an eviction moratorium for those who’ve had to miss work to care for children who are home due to school closures, who have the virus, or have lost income as a result of it.
To date, the number of cases of coronavirus in the state of Minnesota pales in comparison to those in California. However, the west coast usually sets trends. It would probably be wise whether you’re a multi-family property owner, have a single-family rental, or own a large retail rental to set money aside in case even the best tenants can’t pay rent due to the natural disaster of the coronavirus.