Despite fears, most renters in Minnesota have been paying on time

With yet another rent payment due Monday, the third since the coronavirus pandemic shut down a big chunk of the state economy, Minnesota still lacks an intervention that both political parties seem to agree on: a state fund to pay rents and mortgages of people who can’t afford to make those payments.

So-called rental assistance will be on the agenda when state lawmakers return for a special session of the Legislature in mid-June, but the fund obviously will not be available in time to help on June 1. Despite some agreement on size of the fund ($100 million) and source of the money (federal CARES Act support) the Republican Senate and DFL House failed to find a deal before adjournment of the Legislature’s regular session on May 18.

An executive order by Gov. Tim Walz has stopped evictions due to non-payment of rents, and he has asked mortgage holders not to push foreclosures during his peacetime state of emergency. Yet both of those will expire when the emergency declaration ends, and affordable housing advocates and landlord groups both fear that once that happens many low-income tenants will not have the money to make good on past rent. 

Rental assistance payments that go directly to landlords and utility providers could lessen what could be a crush of evictions, and it might be all that will come in next steps for hard-pressed residents. A $1,200 per family payment under the CARES Act was a one-time payment, and $600 a week in extra unemployment compensation, which was also part of the CARES Act, is set to expire the week of July 31, with no consensus in Congress on whether it should be extended. A large federal rental assistance program was contained in a new CARES Act passed by the U.S. House but that bill is unlikely to be accepted by the Senate.

Rents mostly paid

Reports from building owners — both private and nonprofit — have shown that late or non-payments so far are not as dramatic as feared. Dominium, the Minnesota-based developer of affordable housing projects, reported that it had collected 93 percent of total rent payments through May 18. That number is comparable to April and slightly above Nov of 2019, the last month with rent due on a Friday.

“We’ve been pleasantly surprised by April and May because we thought it would be really, really bad,” said Paula Prahl, the vice president of public affairs for Dominium, which has 35,000 units in the U.S. with most of those units subsidized. “The loss that we’ll have is still going to cancel any potential profit. We’re at a loss for the year, we know that. But it’s not nearly as bad as we thought it was going to be.”

Prahl cited three factors for that: working closely with residents to help them with unemployment insurance systems and to get their stimulus checks; the effectiveness of early financial help from the state and federal governments; and the importance to tenants of keeping secure housing.

“Home has really become very important to people and they’re prioritizing it in a way that maybe they haven’t always,” she said. “With stay home orders you’ve got to have a home.”

The Minnesota Multi Housing Association, which represents apartment owners and managers, reported earlier this month that collections for what is termed class A buildings were at 95 percent of what was owed, down only slightly from the 97 percent in 2019. Those are the buildings that are newer, in the best condition and charging the highest rents.

But even for class C units, which include what is often called naturally occurring affordable housing (NOAH), collections for May were at 88 percent of total, compared to 91 percent a year ago.

“The speed of implementation of unemployment benefits by the state along with the federal stimulus checks and the additional $600 per week provided Minnesotans the support that was needed following the sudden stop to the economy,” said Cecil Smith, the president and CEO of the Multi Housing Association. “Our members report that renters have been remarkably responsible in working through any issues related to their inability to pay rent.  Our members continue to counsel and work with any residents that need it.”

Jeff Horwich, the spokesperson for the Minneapolis Public Housing Authority, said the agency has not experienced an increase in non-payment, perhaps because many of its residents are on fixed incomes not impacted by the COVID recession. “During the crisis, we have not seen any drop in the actual rent received by the agency,” Horwich wrote. “In fact, our rental revenues for May rent (due May 1) are actually up 10 percent over the prior four months.”

Others with more affordable and subsidized units in their portfolios are seeing more non-payment, however. 

People for Pride in Living, the Minneapolis-based non-profit that owns or operates nearly 1,600 housing units with 3,300 residents, reports that its non-payment experience is serious but not as bad as first feared.

“We’re at about 15% loss as of early this week and feeling fortunate to be there, to be quite honest,” wrote PPL President Paul Williams last week. “We have been operating with a 20%-30% loss projection for the year.”

And a survey by the Greater Minnesota Housing Fund of operators of 30,000 units — 54 percent of them getting some rental assistance — found that collections are at 90.7 percent through May 15. That compares for collections through all of April of 94.2 percent. Collections for March, most of which happened before the economic impacts of the pandemic took hold, were at 95.7 percent.

“The May 2020 rent losses are actually less than we feared so far,” wrote Warren Hanson, president and CEO of the housing fund. 

Even so, the percentages hide the fact that 20 percent-plus of Minnesota households are without work, and without housing assistance in some form, many will be displaced without federal and state support.

“We know most of those jobs are lost permanently or long term, so household incomes are on a cliff, and the impending eviction crises will be the aftermath of the health crises,” Hanson said. “It’s a slow train wreck many will be forced to experience.” 

The Greater Minnesota Housing Fund is currently raising $1.2 million for emergency rent assistance, particularly for tenants who don’t have access to unemployment insurance or stimulus funds. So far, $450,000 has been raised toward the goal.

After the eviction ban

If the rent collection numbers suggest that non-payment problem is less than some affordable housing advocates feared, there is also no evidence of something landlords feared: that people who can afford to pay will withhold payments while the eviction moratorium exists.

Rep. Alice Hausman, a DFLer from St. Paul who is chair of the Housing Finance and Policy subcommittee, said she had never really expected that to happen. “It assumes people want to play the system and be a crook,” she said. “People are paying their rent.”

“That’s why we were a little afraid going into this,” Prahl said of the threat of non-payment by those who can afford to pay. “It hasn’t happened yet.” Only about 1,500 renters nationwide have not paid and not responded to attempts by building managers to contact them.

Still, building owners are nevertheless worried about extending eviction bans. “No landlord likes to evict people but it is the only tool we have to hold some level of our tenant population to pay their rent,” she said. “Rent’s a big deal for us. It’s the thing that keeps the property going.”

Williams of PPL also is leery of what happens next. “We still expect things to get worse, as stimulus dollars decline and loss of income sinks in,” he said. 

He said he thinks his tenants received their $1,200 federal stimulus check pretty quickly but said others have not, perhaps because they haven’t had to file income tax returns because of income status. And Williams said he is finding others who have struggled with the unemployment insurance system. “We’ve been working hard to help people through those systems, insofar as we can,” he said. 

Williams said he was puzzled by Dominium’s relatively small non-payment problem, but he also said PPL tends to help tenants who he calls worker bees: lower-income people who have regular jobs that were among the first to be lost due to stay at home orders, service, retail and hospitality.

“Job loss is hitting lots of folks, to be sure, but these workers are being heavily impacted,” he said.

Dominium is in favor of either continuing the enhanced unemployment insurance beyond July or a rental assistance program. Or both. “We feel it’s really an important job for us to keep people in homes right now and we need to find some level of compensation to do that and we’re advocating for both of those programs,” Prahl said.