Pandemic policy led to unfair losses for local rental property owners
Thousands of Wisconsin renters caught a break when the Centers for Disease Control and Prevention imposed a moratorium on evictions in September 2020, ostensibly to prevent the spread of the COVID-19 virus.
The CDC was forced to lift moratorium in August 2021 when the United States Supreme Court ruled the agency had no authority to impose a moratorium.
But Wisconsin landlords like Mike Cerns had already paid the price.
Cerns estimates he lost between $60,000 and $80,000 in unpaid rental income and the cost of repairing property damage from bad tenants he could not evict. “The federal government essentially stole my property during the eviction moratorium and the courts were an accessory to the theft,” he says.
A financial hit
Cerns was hardly an outlier. The Badger Institute could find no federal or state studies showing how state landlords fared financially during the eviction moratorium. But a lawsuit filed by the National Apartment Association (NAA) in late July 2021 estimated landlords lost an estimated $26.6 billion, the amount of rent debt not covered by the roughly $47 billion in federal rent-assistance payments.
A federal judge dismissed the lawsuit in May 2022. The NAA is appealing the decision.
Nearly 140,000 Wisconsin residents lived in households that were behind on rent and mortgage payments in late August 2020 as the pandemic worsened, according to a U.S. Census Household Pulse Survey.
That number peaked in January 2021 at nearly 183,000, then dropped substantially month by month — presumably because of an influx of federal housing funds — until August, when the moratorium ended.
No help from courts
Cerns owns about 80 units that he rents primarily to lower-income tenants throughout Milwaukee, many of whom receive Section 8 government-rental assistance, based on a sliding scale according to income. He has been buying rental properties since 1993.
The CDC system required that tenants fill out declaration forms and submit them to the courts to avoid paying rent and protecting them from eviction. The courts, however, rarely verified the information on the forms.
But in the worst case he encountered, Cerns knew that a tenant who had received eviction protection didn’t apply for rental assistance because Cerns didn’t co-sign an application.
“No one checked to see if she was truthful,” he says. “She took me for $15,000, about half of it from lost rent and the rest for repairing damages to the unit. I didn’t get a penny and she absolutely destroyed my place — punched holes in walls, broke windows and doors, busted out tiles and tore up flooring and carpets. She lived like an animal.”
Cerns estimates that only 15% to 20% of his tenants gamed the system. “But unfortunately, my profitability depends on that 15 or 20% of tenants,” he says.
Given all of the businesses and special-interest groups that received government aid during the pandemic, landlords were unfairly singled out, Chris Mokler says. Mokler is director of legislative affairs for the Wisconsin Apartment Association, a non-profit business league in Oshkosh that supports those who own or manage residential properties in Wisconsin.
Industry observers have noted the government didn’t force gas stations to give away gas or grocery stores to hand out free food, with a promise that they’d get paid back later. Moreover, banks weren’t forced to declare a moratorium on mortgage payments.
“I understand why they felt an eviction moratorium was needed,” Mokler says. “But in many instances, it created situations where some tenants found reasons to not pay rent, even though they weren’t having financial problems.”
Members of the Milwaukee-based Apartment Association of Southeastern Wisconsin were particularly hurt the most by the extensive delays in receiving emergency rental-assistance payments from the government, spokesperson and attorney, Heiner Giese, says.
“I heard of payments delayed by three, six or nine months — or even longer,” Giese says. “During that time, taxes still had to be paid and utility bills and mortgage payments didn’t stop.
“And in some cases, tenants who couldn’t afford to pay rent, but refused to apply for rental assistance, moved out after the moratorium ended, leaving landlords holding the bag.”
The government shouldn’t be in the business of picking winners and losers during difficult economic times, says Mickey Ripp, a landlord who owns nearly 1,000 units in Milwaukee and surrounding communities.
“Landlords are landlords because they had jobs and saved money and took risks to invest in property,” Ripp says. “Why should the government deprive them of a return on their investments?”
Ripp says it might have been easy to single out landlords during a health crisis because landlords aren’t particularly sympathetic figures. “We’re the guys wearing top hats and twirling our handlebar mustaches,” he says. “To the media, we’re all greedy villains with deep pockets who evict people from their apartments.”
But it was the so-called “mom-and-pop” landlords who were harder hit by the eviction moratorium than the property barons of stereotype, who were better equipped financially to withstand revenue losses.
Cerns likes to say, “I’ve never evicted anyone in my life — tenants evict themselves when they do bad things. “If I have tenants who do the right thing, I want to keep them forever. Evictions are not fun — they’re expensive and time-consuming. People should blame the perpetrators, not the landlords.”
And as for the stereotype of landlords over-charging tenants and fattening their bank accounts, a 2021 National Apartment Association study found that landlords net only 9 cents out of every dollar paid in rent.
About 38 cents of each dollar goes toward mortgage payments, 11 cents funds capital expenditures, another 10 cents covers payroll expenses, 17 cents pays for operating expenses (utilities, property and liability insurance, maintenance, etc.) and 15 cents funds property-tax payments.
Property taxes, in turn, support communities by funding things like local education, emergency services and so forth, the study notes.
When electricity or water rates increase, or rampant inflation raise the cost of repairs, Mokler says, landlords must eat the additional costs until leases expire and they then can raise rents to cover the additional costs.
When the CDC imposed the moratorium, an entire chain of contractors — Ripp says he usually hires 80 to 85 contractors to work on his units in a typical summer. “Rent from tenants isn’t supporting just me, it’s supporting a small community of people,” he says.
Mokler says landlords generally acquitted themselves honorably during the moratorium. He knows of landlords who declined to accept rent from good tenants suffering from financial hardships or who worked out payment plans to keep good tenants in place.
“We encouraged landlords and tenants to talk to each other and get to know each others’ situations,” Mokler says. “I know landlords who went out and bought groceries for elderly tenants — went the extra mile to help out tenants.”
Ripp temporarily reduced rents for some good tenants. He also hired some tenants who’d lost their jobs because of COVID-19 to work in his apartment buildings to do maintenance and janitorial work.
“I hired a guy who lost his job at an industrial-painting firm,” he says. “He went on to form his own company and now paints apartment complexes.”
Landlords generally worked diligently with tenants, Andy Heidt, housing policy and program manager for the WISCAP Association, says. WISCAP served as the conduit for funneling federal emergency rental-assistance funds from the state to the community agencies that distributed the funds to landlords.
“The mom-and-pop landlords were all over this (helping residents with paperwork),” he says. “There were a lot of good actors out there . . . landlords really stepped up.”
Unintended, long-term consequences?
The eviction moratorium, which was designed to help tenants, may actually harm them in the long run because some struggling landlords now are selling their units to large rental companies that charge higher rents.
Moreover, some landlords now have raised rents, tightened screening requirements/background checks and charge two month’s rent for deposits instead of one to protect themselves from some future crisis.
And others, like Cerns, are getting out of the apartment-rental business altogether.
“I’m actually starting to sell some units,” he says. “This whole thing really took the wind out of my sails.”
Ken Wysocky is a Milwaukee-area freelance journalist and editor with more than 40 years of journalism experience.