MIAMI – Susana Lay worked from dawn to dusk alongside her grandfather while he sold and repaired Singer sewing machines in New York City. She was his “todera,” or jack of all trades, helping with anything from bill collecting to mopping down the shop’s floors. Soon,Lay was able to use her savings to buy her first home in her 20s.
One property turned into six, purchased together with her parents and siblings over the course of three decades.
But with COVID-19, her tenants lost their jobs and couldn’t make rent. Lay, too, fell behind on her mortgage payments and entered forbearance.
“Day by day, COVID is reducing everything that I have built,” said Lay, now 54, who emigrated from Venezuela with her Chinese parents to the U.S. after high school.
Across the country, mom-and-pop landlords are hurting. They oversee the majority of the nation’s 48-million-unit rental stock. Black and Latino landlords are being hit the hardest, turning to forbearance at higher rates during a pandemic that has disproportionately affected their communities as their residents are unable or have refused to pay rent under eviction moratoriums.
A report by the Urban Institute found approximately 12% of landlords with a mortgage are in forbearance. Of these, 20% are Black and 14% are Latino, compared with 9% who are white.
By January, the combined rent owed to landlords nationwide could reach $24 billion, according to a study by Global Investment Bank and advisory firm Stout.
“I’m at a point where I should be preparing for retirement, walking into my golden years,” Lay said. “If I worked this hard, I shouldn’t be worried because all this real estate was supposed to give me something.”
Black and Latino landlords struggle to pay their mortgages
Black and Latino landlords tend to have lower incomes, own fewer properties, still have a mortgage and are more likely to struggle compared with white landlords, said Laurie Goodman, who runs the Housing Finance Policy Center at the Urban Institute.
Individual owners who own single-family and duplex homes or less than 20 units overall are known as “mom and pop” landlords, according to the 2015 American Housing Survey released by the U.S. Census Bureau.
People of color are more likely to be mom-and-pop landlords compared with white landlords, according to the 2018 American Community Survey
These landlords tend to purchase in less affluent areas and rent to tenants whose median household income is $35,500 in two-to-four unit buildings and $47,400 in single-family buildings.The national average median household income was $68,703 in 2019, according to the U.S. Census Bureau.
Lay said it has been scary because this is the first time she has defaulted on her loans. She had always paid on time, even during the 2008 financial crisis.
“Can you believe that I am negotiating with the banks over a loan I’ve had for 20 years?” said Lay, who forgave many of her tenants’ back rent and allowed them to get out of their lease early.
More than one-third of all landlords earn the majority of their income from rental properties. Most of them also expect to derive at least one-fourth of their retirement income from these properties, according to a survey by the National Association of Hispanic Real Estate Professionals and the University of California, Berkeley’s Terner Center for Housing Innovation.
Experts agree these prospects become more challenging when rental properties are the sole vehicle of wealth accumulation.
“Home equity is the single largest source of wealth for Black and Hispanics, and it’s a much larger portion of their net worth than it is for white families,” said Goodman, of the Urban Institute.
The median net worth of white families who are homeowners was $300,000, of which $130,000 was attributed to housing,according to the latest findings of the Survey of Consumer Finance released in September by the Board of Governors of the Federal Reserve.. For Black families who are homeowners, the median net worth was $113,000, of which $67,000 was derived from home equity. And for Latino families who own their homes, the median net worth was $165,000, of which $95,000 was tied to homeownership.
Lay’s story is one of thousands in a place like South Florida, where real estate has been a boon to the local economy, and in some cases the primary driver since the 1920s. Miami is the city in the U.S. where mom-and-pop landlords make the most money, behind Oklahoma City, according to the Zillow Rentals analysis in 2014.
Scott Sime, CEO of Sime Realty Corporation, a brokerage company in Miami, said individual buyers make up to 80% of all landlords who buy investment properties.
“Miami is made up of everyday people like you and me who are entrepreneurial,” Sime said.
But for many people of color, homeownership remains out of reach after decades of systemic redlining practices where banks and financial institutions limited loans, mortgages and insurance in specific geographic areas.
The National Association of Realtors found that the rate of homeownership for white Americans has been consistently above 71%. In the same period, homeownership has held steady at just above 41% for Black Americans, compared with 45% for Latino Americans and 53% for Asian Americans.
Comparatively, renters who are white have a median net worth of $8,900, versus Black and Latino renters at $1,830 and $5,800 respectively.
Latino and Black landlords want federal help, too
For Hector Alvarez, 62, real estate was always supposed to be safe.
After arriving in South Florida from Cuba, his family saw investing in rental properties as the only way they’d become financially independent and save up for retirement.
“They saw it in our neighbors that were 65, 75, just getting Social Security and a little pension and barely making it,” Alvarez said. “They needed to have their own businesses and real estate was the vehicle to create that independence.”
Now after decades of stability, he has no idea whether his tenants will ever be able to pay him back. Of his seven units in Miami, most of his tenants lost their income due to COVID-19. One of his tenants has cancer.
At least three of them have not been able to pay him since April. Others pay him whenever they come by some cash doing the odd job or if a family member chips in.
Alvarez calculated he’s lost about $72,000 on rent alone. For several of his tenants, he has also paid their water, electricity and cable, which can quickly add up to $500 a month each. He also owes $83,000 in property taxes and insurance for all of his properties.
Early in the pandemic, Alvarez depleted his small savings trying to cover mortgage payments. He has maxed out credit cards to pay utilities and expenses, including caring for his 91-year-old father, who requires round-the-clock care.
“We’ve been living on credit cards, paper clips and chewing gum,” said Alvarez, who opted into forbearance for six months and is now in the process of refinancing.
“It’s hard because, on the one hand, I am being understanding with them, but the banks aren’t being understanding with me.”
Alvarez is among the Latino and Black landlords who the Urban Institute said were more willing to accommodate tenants. Nearly 48% of Latino landlords and 42% of Black landlords offered payment plans and used security deposits toward rent since April, compared with 36% of white landlords.
Some landlords forgave tenants’ rent and allowed them to break the lease. According to the report, 61% of tenants accepted the offers.
Alvarez said he has never considered eviction, especially because he, too, knows what renters across the country are going through. Earlier this year, he was sued by the owner of his elderly father’s apartment unit after the rental agreement was canceled for failing to pay the rent increase. Alvarez had kept paying the original amount. The lawsuit is ongoing.
“I have tried to be compassionate every step of the way,” Alvarez said.
Meanwhile, after months of partisan deadlock, Lay and Alvarez are waiting for Congress‘ proposed pandemic-relief package to kick in.
The $900 bipartisan rescue package passed on Monday night by Congress included $25 billion in rental assistance to pay for past or future rental, or other housing-related expenses. Renters would need to apply for assistance with entitiesselected by state and local officials to administer the program. Once a renter qualifies for assistance, the administering entity would send the payment directly to the landlord.
While the legislation will also extend an eviction moratorium for some renters through January, renters may be eligible for a full 12 months of rental assistance to make them whole with their landlords.
The National Low Income Housing Coalition estimated that 9 to 17 million households could face eviction in 2021 as 9.8 million people remain unemployed and continue falling behind on rent.
Doug Rice, of The Center on Budget and Policy Priorities, a think tank that analyzes the impact of federal and state government budget policies, said rental assistance is particularly important for mom-and-pop landlords who have fewer financial reserves compared with white landlords to cover expenses when renters fall behind.
“Smaller landlords are a major source of rental housing for low-income people, so providing rental assistance to low-income households is well-targeted to help them,” he said.
Contributing: Nicholas Wu in Washington, D.C.