Money

'Why Not Help the People?': These Are the Landlords Who Aren't Collecting Rent

Amid an unprecedented economic collapse, a few landlords are deciding that doing the right thing means giving people a break.
April 7, 2020, 6:52pm
A small apartment building.
An apartment building in Queens, New York. Photo by John Nacion/NurPhoto via Getty

The way Dennis Beaver tells it, waiving April rents for his tenants was an easy call for him and his wife. "We were having dinner and we looked at each other, and we both instantly had this notion," the Bakersfield, California, landlord and attorney said. "Let's forgive rent for the month of April. Let's do something to help our tenants. And there was no major thought process. It just struck us at that time as being the right thing to do, the morally and ethically correct thing to do."

All over the country, the effects of the coronavirus shutdown are rippling through the economy, and relations between landlords and tenants are straining as a result. Millions of workers have been laid off and are unable to pay rent, and some tenants are demanding their landlords give them relief and are refusing to pay rent during the crisis. Even businesses like the Cheesecake Factory have announced that they can't pay rent in April. A few activists have called for a nationwide moratorium on rent and mortgage payments as a way of making sure that people aren't kicked out into the streets in the middle of a pandemic.

Whether the states or the federal government take that kind of unprecedented action, individual landlords are facing the immediate challenge of having a bunch of tenants who suddenly can't pay rent. And a few, like Beaver, have decided that it's best for everyone involved—and maybe their bottom lines in the long term—if they agree not to collect rent this month.

"This is a real crisis and we have to have some compassion here," said Eric Sussman, an adjunct professor of real estate and accounting at University of California, Los Angeles, who is also a managing partner at a real estate firm. "But I think it's in everyone's financial interest to work together."

The analogy Sussman uses is that everyone—renters, landlords, the lenders many landlords have to make mortgage payments to, utility companies, tax authorities—is on the same Olympic rowing team. They all need to move in harmony to steer the boat out of dangerous waters, meaning those who can afford to still pay, and those who can extend relief do so. But if commercial or residential tenants who can afford rent decide not to, he said, it could have a cascading effect: landlords won't be able pay their bills, they might have to lay off staff, properties may eventually be foreclosed upon, real estate values will plummet, and the economic catastrophe will be deepened.

"My biggest fear is that individuals and businesses take advantage of a situation and by so doing, create a much worse situation than we would otherwise be in if people did the right thing based on their individual circumstances," Sussman said.

For Mario Salerno, as for Beaver, doing the right thing was obvious. The lifelong Williamsburg, Brooklyn, resident has become a minor celebrity for telling the tenants of his 80 apartments they didn't owe him anything in April; he's been featured in the New York Times and on local TV news. Some of his tenants, he says, have called him offering to pay him back by working at the gas station he owns or helping maintain his buildings.

"I did this from the kindness of my heart," he said. "This is an unfortunate situation not only for here, not only for the city, not only for the state, but the whole world. Everyone's losing these jobs."

Cea Weaver, a campaign coordinator at the New York tenants' rights organization Housing Justice for All, was happy for Salerno's tenants, and praised the move, but said that individual acts like his weren't going to be sufficient to the scale of the crisis. "Most landlords don't give concessions without demands," she said. "We need to stabilize everybody, and we can't rely on a couple landlords' charity to get through this moment."

Most landlords either aren't willing or don't have the resources to waive an entire month's rent, let alone multiple months. Many are constrained by the mortgage payments they have to make (Beaver said he owns his buildings outright so that's not a concern). They may be concerned about their tenants, but they are also worried about the damage to their businesses that would result from widespread refusals to pay rent. A sample letter provided by the California Apartment Association to landlords with tenants expressing interest in a "rent strike" emphasizes that nonpayment of rent is illegal and "will make a bad problem worse," though it also expresses a willingness to work with tenants who are genuinely broke.

So far, it seems most tenants are continuing to pay. Crain's reported that on a conference call of over 100 New York City landlords, they said that just 10 percent of their tenants had reached out about not being able to afford rent. Small businesses may have more trouble than residential tenants, with one survey finding that half of 1,000 businesses with fewer than 50 employees weren't able to make full rent or mortgage payments in April.

The damage this shutdown is doing to small businesses was what motivated John McNellis, a developer in northern California, to launch what he calls a "retail Marshall plan," referencing the aid provided by the U.S. to Europe after World War II. He's waiving April rent for all his independent commercial tenants, granting more limited breaks to franchises, and charging the full amount to large corporate tenants. He wants more landlords to make that sort of decision, to be charitable in their business dealings rather than trying to maximize profits.

"It's always annoyed me that there are these major corporate raider types, private equity guys, who go in and disembowel a company, fire all the employees, raid the retirement accounts and basically put 10,000 people on the street. They make a billion and then they give $100 million dollars to their favorite charity in New York. And everyone says, 'Oh, what a great philanthropist.' Now that's bullshit," he said. "Why not help the people, or employees, or in our case our little tenants?"

Beaver had a similar thought. If there are landlords like him out there who aren't cash-strapped and don't require rent payments but are demanding them anyway, he said, "shame on them."

This sort of charity has limits. McNellis figured that his tenants would be able to open in early April and get back on their feet to make rent on May 1. That hasn't happened, and none of the landlords VICE spoke to for this article were sure what they would do about May rent. "We could be in for a major depression," McNellis said.

As landlords and tenants continue to figure out what to do as the economy hits bottom and (hopefully) bounces back, at least a few of them are thinking about how to use this as an opportunity to deepen what is normally a nakedly transactional relationship, which could be good business sense in the long term.

"Unless you're dealing with a real jerk of a tenant," Beaver said, "when you do something like this, and the tenant realizes you do care, it's not just like a ca-chink on a cash register, but you care about that person's welfare, you'll have the best tenant ever. The first check that person writes every month will be sent to you."

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