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March 21 letter

Roger Valdez
Roger Valdez

This letter from a housing provider organization summarizes challenges faced by both tenants and landlords due to job and income losses caused by the COVID-19 pandemic. It argues that a proposed city council plan to defer rent payments and waive late fees will not solve the underlying problem of lost income for tenants or ensure landlords can make required mortgage payments. The letter urges the city to consider a more comprehensive solution that helps tenants pay rent and requires lenders to offer mortgage relief and lower coverage requirements for properties housing many tenants facing income issues.

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March 21, 2020 Greetings Mayor and Councilmembers, Housing providers all over the city of Seattle are coming to grips with the still emerging impacts of the COVID-19 epidemic. Like other businesses in Seattle, housing providers are worried about their employees but also about the well being of their customers, their residents and commercial tenants. These small and medium sized businesses are doing what they can to work with people to solve issues related to job loss and illness. According to the Seattle Times Councilmember Gonzalez is going to "introduce legislation that would set guidelines for tenant-landlord payment plans in the year after Seattle's emergency ends. According to the article, the legislation would cap the installments at one-third the monthly rent, unless agreed to by a tenant. It also would prohibit late fees and interest for six months after the emergency. While well intended, this proposal does not solve the deeper problem faced by tenants: lack of income. Worse, it ignores the fragile balance of financing for smaller multifamily providers. Lenders not only expect debt to paid back, they also expect to see healthy income from rent payments, enough to cover debt payments and more, as much as 30 percent more. When renters cant pay rent, and income from a building falls below that requirement, banks and lenders may require more cash be placed into reserves, and they will charge fees and interest for late payments. Worse, in some cases, if rent revenue falls enough, a project wont be able to pay its mortgage sending the building into foreclosure. Taken together with vacancies, even a small number of rent defaults can push a project into lenders calling for more cash or foreclosure. The response to COVID-19 has caused massive losses in income; when people lose jobs, they cant pay rent, and when rent doesnt get paid, housing providers cant cover their bills and financing requirements. Mandating a deferral of rent does not
mean that lenders will stop asking for additional cash, charge for late payments, and foreclose. Most importantly, with bans on eviction and other limits on collecting rent, hard hit people and families will rationally pay other obligations rather than rent, deferring that expense until it reaches a point where they cant make payment in the future. This will result in eviction, abandonment of the lease, and damage to the residents credit. The proposal being considered wont help residents who need income and housing providers who need to make payments and cover operating costs. We urge you to consider a comprehensive solution that helps residents make rent payments and to require that lenders lower or eliminate coverage requirements and offer mortgage relief for projects with many residents facing issues with income. This approach is compassionate, and does not defer the pain and problem farther into an already uncertain future. Sincerely, Roger Valdez Director

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March 21 letter