As U.S. foreclosures soar, renters — especially in small apartment buildings and single-family homes — are paying a high price for their landlords’ financial troubles. Across the U.S., thousands of people are being evicted.
Renters are particularly vulnerable now for a couple of reasons. As lending standards were relaxed in recent years, more people snapped up properties that they rented out, or partly rented out. When they couldn’t make their mortgage payments — sometimes because their adjustable-rate mortgages reset to higher rates — the properties ended up in foreclosure. In most places in the U.S., that voids tenants’ leases.
Unlike larger apartment buildings owned by commercial enterprises, homes and small multifamily properties typically aren’t run by management companies. Banks, which aren’t equipped to handle utility and water bills, maintenance and insurance requirements, want to sell foreclosed property as soon as possible, and often that means getting rid of the tenants.
Renters’ protections vary, depending on state and locality. In many cases, tenants get just 30 days’ notice. Now, some tenants’ advocates and lawmakers are pushing for beefed-up protections. New legislation in Illinois, which takes effect in January, will require that tenants get 120 days’ notice. And the U.S. House of Representatives recently passed legislation that would require new owners to honor leases of tenants for as long as six months after foreclosure.
This one spoke to me on many levels.
I own a two-family house. For years, we rented out half of it. (We now live in the whole thing; part of it serves as my office.) When we were negotiating to buy this place originally, the part we wanted to live in was occupied by an older woman who didn’t want to leave. I could empathize with her plight, however by the time it was clear that she was going to drag her heels about moving, we were effectively ‘homeless’, having given notice on the place we’d been renting across town.
We had two small kids at the time. We moved in with my generous in-laws for an indefinite interim. It was an arrangement that worked remarkably well for the few weeks we needed it–drawing us closer in ways that have persisted. It could have become far more difficult had the timeframe stretched to months. That’s often the case here in Massachusetts, where law and precedent favor tenants to a degree unmatched outside Europe or San Francisco.
To make a long story short, we agreed to close on the property with the tenant still living in it after the seller offered us a discount to rid himself of the headache. We were gambling that the tenant would move out sooner rather than later. Six weeks later, she did, with no additional prodding from us. That period could easily have stretched to six months or more–and gotten ugly and expensive. I don’t know precisely what happened to her; word was that she landed on her feet. Her previous ties to the place had been more emotional than due to any financial hardship. That’s not the case for everyone.
Part of the reason I could empathize with her plight (in the midst of my own) was that four years earlier–and only a week after the birth of our oldest daughter (now a college freshman)–we had gotten a phone call from our then-landlord. She wanted to move back into her condo, she told us, the words not quite sinking in as I heard them, our infant daughter asleep in the next room. We needed to leave. Soon. Still reeling from the new responsibilities that parenthood had brought, it was–to say the least–a difficult and stressful time. But we were young. We had money (though not a lot). We had options. The whole thing fell into the category of hassle, not hardship.
All of which is pretext to the news story I quoted above–and to my reactions to it. At the moment, I’m
flush blessed with work. It may not last. My primary client is a major bank and that industry is reeling like a centipede with dozens of other shoes still to drop. Part of me (the libertarian strategy consultant) screams for the most economically and fiscally rational solution to the mortgage banking ‘crisis’. (It’s a term I put in quotes because, were it not for the intractable foolishness and greed of the human heart, there would be no ‘crisis’ at all).
I know well the ripple effects that could ensue if banks fail to foreclose and extract the last penny of value from their imploding holdings. From my own experience, I also appreciate that a tenant-occupied dwelling is less financially attractive than an empty one. That’s not a big deal under most circumstances. Musical chairs is an orderly game when only one chair is taken away each round and the players are corporations, able to absorb losses and move on. When several chairs are taken away all at once and the ‘players’ are less sophisticated low-income renters however, things can ugly in a hurry.
To revert from the metaphor, the current banking crisis is especially perverse when one considers a hypothetical pair of individuals with identical incomes and prospects:
One knows that the risk of taking on a too-good-to-be-true mortgage (e.g., floating rate, balloon payments, no money down, etc.) is huge and so he wisely avoids doing so, continuing to rent (a rational choice in many cities today given the upward divergence of property ‘values’ from rents).
The other sees his friends and neighbors getting lucky–and maybe rich–and he goes for it, figuring he has little to lose. And he’s right. Like similar ‘crises’ before this one (e.g., the 1980s S&L crisis) an over-arching feature is the shifting of risk–I take it, you bear it and the greater fool theory prevails. I’ll stop there lest I swim into rip-tides of economic analysis I’m ill-trained to fight that might carry me far from the shore of my main point.
And here it is…
Recently, at my church, we’ve begun to explore the full notion of stewardship as revealed in scripture. Until two weeks ago, my understanding of that word was conventional and slightly cynical: a fig leaf for the annual church shake-down. Way too narrow, I’ve learned. God’s idea is a whole lot grander.
You think all this stuff is yours?, he asks… Think again. Or if you’d rather not think–and too many of my people don’t–then just wait. I’ve got time. I’m God. Wait a hundred years. Wait fifty. Hey, you may not even have to wait that long. That breath you just took? That’s mine too. You’re welcome.
That car in the driveway. That roof over your head. That stock portfolio you just clicked on before you came over to read Art’s blog? I know what you’re thinking: deep in your heart, you want to imagine you can “take them with you”. But trust me. No really, I mean that literally: trust me. I’ve got better things in store for you than you can possibly imagine.
That stuff about leaving a legacy, abolishing the ‘death tax’ and all that. I get it. You love your spouse and your kids. You want the best for them. You know the government isn’t going to look out for them like you can. But put me in the picture for a moment. I love them too.
But if you want to try and preserve that stuff, I won’t stop you. You go right ahead. Deck chairs on the Titanic, I say. Or if you prefer, go read Shelley. I liked his stuff. Well, some of it anyway. But I digress.
It’s all the same to me. I’ve got eternity. You’ve got… dust. You’re my tenant. Whether you know it or not, you signed a tenant-at-will agreement at birth. I don’t sell. I only grant leases occasionally.
Are we understanding each other here? I’m a benevolent landlord. Really. Ask my people. They know. But they also know that there’s one thing that really tries my patience and that’s you thinking you own this place and pretending to be me and trying to run it as if I didn’t exist. You don’t, you aren’t, you can’t and I Am.
OK, forgive me if that’s overstepping a bit. I don’t speak for God. Here’s my jumping-off place, from Leviticus 25:23:
…the land is mine and you are but aliens and my tenants.
The other one that seems highly relevant is the parable of the Good Samaritan (Luke 10:25-37), particularly this bit:
…Jesus said: “A man was going down from Jerusalem to Jericho, when he fell into the hands of robbers. They stripped him of his clothes, beat him and went away, leaving him half dead… The next day [the Samaritan who'd picked him up] took out two silver coins and gave them to the innkeeper [aka, landlord]. ‘Look after him,’ he said, ‘and when I return, I will reimburse you for any extra expense you may have.’”
In other words, when we lose faith that we’re going to get reimbursed outside of earthly economic calculus, we all tend to behave badly.