David Brogan, executive director of the New Jersey Apartment Association, at the organization’s headquarters in Monroe — Photo by Mary Iuvone for Real Estate NJ
By Joshua Burd
State lawmakers on Monday are slated to consider a rental assistance bill that could help soften the blow to apartment owners during the COVID-19 crisis, but industry leaders say they need help from the federal government to weather the storm over the long haul.
The bill, titled the 2020 New Jersey Emergency Rental Assistance Program, would appropriate $100 million to help many of the state’s low- and moderate-income tenants. The program would make direct payments to landlords for certain tenants who are at least 30 days past due on a rent payment, are unable to pay rent without assistance and have suffered a demonstrable loss in income due to the coronavirus pandemic.
Yet David Brogan, executive director of the New Jersey Apartment Association, still sees longer-term concerns for the state’s multifamily industry. Economic hardship for renters could still worsen before it gets better, he said, which will only add to the strain that landlords have felt in recent weeks since Murphy ordered residents to stay at home to slow the spread of the virus.
Here is the latest from Brogan, with the rental assistance bill under consideration and as New Jersey enters another week of social distancing:
Real Estate NJ: The state Senate is slated to consider the rental assistance bill on Monday as part of a broader relief package. How far does the bill go in addressing the concerns you and the industry have had for the past several weeks?
David Brogan: It is, without a doubt, the best short-term solution possible, but we need federal funds to make it work. It is a very well-crafted piece of legislation. It utilizes the existing infrastructure of the Homelessness Prevention Program to facilitate the program, and they did two things that were absolutely necessary: They raised the income thresholds and they eliminated the need for an eviction action to be filed in order to get assistance. Regarding the former, this change will not only allow low- and moderate-income people to get help, but also middle-income people as well. These are average New Jerseyans who live in workforce housing who would not otherwise qualify for such assistance. Regarding the latter, the elimination of the need for an eviction action to be filed was critical to get people assistance before they get in that situation. This change was the right thing to do with or without an eviction moratorium.
Having said that, the scope of the program will be severely hampered if we don’t get federal assistance. NJAA, the National Apartment Association (NAA) and the National Multifamily Housing Council (NMHC) have been actively lobbying for federal rental assistance. It is clear that the Legislature and the governor understand the need for this program. My only hope is that Congress sees that need as well.
RENJ: It has been about a month since the COVID crisis hit New Jersey. Gov. Murphy’s stay-at-home order was issued three weeks ago. How has the industry managed since then?
DB: I think like everyone else — we were shocked at how serious COVID-19 was in both New York and New Jersey. At the same time, the professionally managed property owners did what they needed to do in an effort to protect tenants. We established protocols for cleaning, maintenance and repairs. We have honed those protocols as the crisis grew, focusing on new ways of being responsive to tenant requests and/or emergencies: how to properly enter and leave an apartment when performing maintenance; how to decontaminate common areas; and how to protect tenants and staff to the best of our ability.
The stay-at-home order also placed new stresses on the systems within those buildings. Added usage of heat, electricity and plumbing have occurred. And as we have mentioned in the past, the ability to find toilet paper has prompted people to use alternatives that were not meant to be flushed. This is causing problems for our owners, as well as municipalities. Hopefully the supply and availability of toilet paper increases soon.
And in the middle of all of this, our owners had to brace for the unknown after the eviction moratorium was issued. The goal of the moratorium was to help those who were truly economically impacted or lost their jobs due to the crisis and give them a little time to get financial assistance or find work. But like so many industries facing the unknown in COVID, we had no idea how many tenants would continue to pay rent and how many might simply not pay for several months at a time. Based on preliminary data, April rent collections were between 69 percent and 89 percent. When preliminarily asked what we expected to collect, we honestly didn’t know. However, we do believe that May will be worse, and if the crisis lasts longer, we frankly don’t know what percentage of rent we will be able to collect. Beyond May is anybody’s guess.
But, from a financial perspective, the fact remains that operation of these properties costs money. You have to pay your staff, your vendors, your utilities, your taxes, your insurance and your mortgage. While there are some opportunities for mortgage forbearance, people have to understand a few things: First, loan forbearance does not mean loan forgiveness. That financial obligation still exists. Second, while forbearance can delay the payment of a portion of the mortgage for 90 days, in some cases, that three-month obligation could be due on the 91st day, while others will have to make up those payments over the following 12 months. It really depends on the bank and financial quality of the applicant. Third, elected officials must understand that a 90-day forbearance is just that: 90 days. In many cases, on July 1, those payments need to be made. As such, without rent revenue, we are in real trouble.
Also, our members have been working with their tenants as the governor and others have requested. While some people would consider that an easy task, it’s not. Working with tenants based on their individual circumstances is not that difficult when you have six tenants, but what happens when you have 600 tenants or 6,000 tenants? I wish the elected officials in this state understood the herculean task this is. Even so, we are doing it. But the only way we can continue to do this is if we get rent revenue. Tenants that have the means to pay their rent and do so, are actually helping their neighbors in need. Their rent revenue allows a landlord to work with other tenants who are less fortunate.
RENJ: There have been discussions about rent strikes or rent suspensions across the country. What are your thoughts?
DB: A rent strike would be devastating, and tenants would need to understand that if something like that happened, inevitably those properties will fail. It is a very shortsighted view of the world.
As for legislative- or executive-issued rent suspensions or reductions, my question to those who support that is, ‘If those things occur, how are landlords supposed to operate those buildings, maintain staff, be responsive to tenants, pay taxes and pay their mortgages?’ Simply put, properties cannot operate without rent revenue. Such actions unfairly target a single industry, strip its revenue stream and expect it to operate normally. That simply isn’t possible and it amounts to a backdoor taking. Those owners will lose those properties. Anyone who proposes such a measure should also provide financial assistance to those affected property owners.
Finally, for those who propose rent strikes, suspensions or reductions, they need to put themselves in the position that we are in. Just as the state and municipalities would not want, for example, all landlords to implement statewide property tax strike or a statewide property tax payment suspension or reduction, we do not want to see such actions from tenants or the government.
RENJ: If there was one thing you would say to elected officials, what would it be?
DB: I would ask them to end the stigma as it pertains to landlords. In a general sense, New Jersey is more progressive than many states in the country. We are more open to diversity and we frown upon stereotypes of any kind, whether that is based on race, gender, sexual orientation, etc. I believe that is absolutely appropriate. Yet the stigma about landlords still exists. Some groups thrive on the narrative that landlords have unlimited financial means and that they want to evict tenants. Neither is true. Would a person who takes a second mortgage on their house to buy a six-unit building be considered to have unlimited financial means? Absolutely not. And as the property size increases, so do the costs and the risks. In short, virtually no owner has unlimited means and their financial stability or viability can vary greatly.
As it pertains to tenants, they are our customers. Just as Walmart, Target or any other retailer would not want to force their customers or potential customers out of their stores, neither do we. And just as those aforementioned stores cannot survive without people purchasing their products, without rent revenue from tenants, our industry is in peril. However, the main difference in my example is that when a Walmart closes, people can almost immediately find another place to shop. When a property owner loses their property, tenants’ lives can be significantly disrupted and in a worst-case scenario, they could be thrust from their homes. This helps no one and the last thing we need over the next year is more people without homes.
Once the stigma is removed we can have an honest discussion about what is needed to keep rental properties in operation, keep tenants in their homes and allow all the other good things that come from professionally managed properties to continue, including a sense of community, jobs and tax revenue for the state and municipalities.
If we are truly all in this together, then the solutions to the problems we face cannot include initiatives that hurt one segment of society to help another. The solutions need to be balanced and provide assistance without negatively impacting or destroying an industry or industries. Elected officials look at the multifamily industry as essential in providing homes to people who are now forced to stay at home. If we are providing those homes and meeting the needs of society, we shouldn’t be targeted by legislation or executive action in a way that punishes the industry for doing the right thing.