David Brogan, executive director of the New Jersey Apartment Association, speaks at the organization’s headquarters in Monroe. — Photo by Mary Iuvone for Real Estate NJ
By David Brogan
When COVID-19 hit the United States, most Americans never imagined the impact it would have on daily life. As the virus spread, states like New Jersey started to implement policies to promote social distancing and to help those impacted by the economic fallout of the crisis, including policies such as an eviction moratorium. While such a policy addresses one specific immediate-term problem, it does not address the systemic need for rent revenue that supports an entire multifamily ecosystem, which is a critical component of New Jersey’s economy and significantly supports the state and municipalities through taxes. Without rental assistance and an understanding that rent is still due, multifamily jobs will be lost, private-sector financial obligations may not be met, utilities will not be paid and municipalities might see shortfalls due to the inability to pay property taxes. That is why we need a rental assistance program immediately.
Multifamily on the front lines
The multifamily industry is literally on the front lines of this crisis. Millions of people are staying home in an effort to flatten the curve. While this is good for New Jersey, as well as the rest of the country, it does place added stress on the systems within multifamily buildings. Things like heating and air conditioning, as well as plumbing, are all being used much more now than ever before. Furthermore, with people flushing things other than toilet paper, blockages and clogs are on the rise. Even so, professional multifamily owners are doing what they need to do to have employees in place to respond to serious maintenance and emergency calls by tenants. If there ever was a question as to whether multifamily employees are “essential,” that answer is a resounding “yes” because without them, those properties would go downhill fast. Having said that, professional multifamily owners take that responsibility seriously and willingly.
Rent revenue is essential for the survival of the multifamily ecosystem
The multifamily ecosystem includes the tenants who live in rental properties, landlords and companies that own and manage residential rental properties, and every person or entity those owners pay to keep their properties running. In New Jersey, that includes over 50,000 jobs, banks, insurance companies, vendors and utility companies, as well as the state and municipalities, which are all paid through the rent revenue received by tenants. Without rent revenue, there will be a negative domino effect that will not only impact landlords, but every other component of society touched by the multifamily industry, including tenants.
The idea that landlords simply pocket the rent money without having to pay anyone else is categorically false. Conversely, the belief that we can stop the domino effect referenced above without rent revenue or rental assistance is simply sticking our collective heads in the sand.
What elected officials and decision makers need to realize is that without rent revenue, the multifamily ecosystem breaks down. Without rent revenue, tens of thousands of employees will lose their jobs, vendors who provide goods and services will no longer be contracted, state and municipal tax obligations might not be met, and the ability to maintain those properties will be impeded if not prevented over time. At the end of the day, this helps no one.
The need for a balanced approach
While we recognize the reasoning behind a temporary eviction moratorium, decision makers need to understand the ramifications of rent revenue disappearing. Many small landlords will go under in a matter of months. This is true even with loan forbearance, because anyone who rents residential property has financial obligations well beyond simply paying the mortgage. And while these small landlords might not have employees who will lose their jobs, these owners could see their life savings literally evaporate overnight.
As it pertains to the larger companies, they may or may not be able to survive longer. It will depend on their specific financial situation. But the longer this crisis lasts, the higher the probability that these companies will have to lay off employees, cut vendors and decide which financial obligations need to be paid now versus later. That includes both state and municipal tax obligations.
A balanced approach would include a rental assistance program that assists low, moderate and middle income New Jerseyans who are negatively impacted by the crisis, coupled with loan forbearance which has already been proposed. A balanced approach would also include an understanding that loan forbearance does not mean loan forgiveness. The banks provided those loans with the understanding that rent revenue would support those operations. So, just as owners will still be responsible for those financial obligations, tenants should understand their financial obligations as well. Furthermore, decision makers need to understand that just as someone cannot go into a grocery store and walk out with a basket full of food without paying for it, neither can they simply forget or dismiss their financial obligations to pay for housing.
Alternatively, if we are truly all in this together and there is no rental assistance or rent revenue, then just as the multifamily industry is being required to operate without revenue, so too should municipalities. If we are all part of one team, then the burden needs to be spread evenly, not selectively. Under those circumstances, municipalities should either delay those property tax payments they are placing on property owners, or if rent revenue is somehow no longer required, then they too should forgive those obligations. Moreover, so should the state.
In short, the ability to pay rent doesn’t just impact tenants, it impacts a significant component of New Jersey’s economy, as well as the state and our municipalities. It also impacts tens of thousands of employees who rely on the multifamily ecosystem to function properly, as well as all of the private sector businesses and institutions that feed off that system. Again, rent revenue is absolutely necessary to not only keep apartment communities running, but to also allow owners to meet both private-sector and public-sector financial obligations. We hope the Governor and the Legislature recognize this, among the other issues raised in this article. We ask them to not only understand the role this industry plays in housing over 1 million New Jerseyans in apartments, but also, the need to implement a rental assistance program so the multifamily ecosystem can survive. If not, the negative domino effect will surely exacerbate the problems created during this crisis, and both tenants and landlords alike will be left holding the bag.
David Brogan is the executive director of the New Jersey Apartment Association.