Ever since it made its presence known in the U.S., the novel coronavirus (COVID-19) pandemic has disrupted life as we know it. Due to the outbreak, several industries have ground to a halt, while others are barely hanging on by a thread.
One of the segments hit the hardest by the pandemic is rental property owners, who are currently grappling with a sudden loss in income. Whether you own a housing unit or a short-term rental, you might have also had firsthand experience with this phenomenon by now.
Why Rental Property Owners?
It may not be surprising, but due to the set of events triggered by COVID-19, long-term or vacation rental operations are against some unprecedented set of challenges.
It’s because of a variety of reasons. With the U.S. facing its highest unemployment rate of 14.7 percent in April, an overall reluctance in spending, and massive restrictions on travel, rental properties don’t have much of a “market” right now.
And this is only looking at the rental property owners, how their renters have been impacted add additional difficulties. While some are reducing rent, others cannot afford to; and many renters’ business sectors may have been adversely impacted by the pandemic, making it difficult to pay rent.
Meanwhile, even people seeking a vacation are self-quarantined. While states have reopened and the unemployment rate has started to go down, the current rise in COVID-19 cases doesn’t paint a promising picture for the future.
This has a direct impact on your rental housing unit, Airbnb, or Vrbo, where renters are either struggling to make payments or don’t have the same level of comfort to stay at vacation homes as they did before the pandemic.
As a result, while owners of housing units are currently facing the tough choice between rent relief and evictions, Airbnb owners are making contingency plans on what to do with a property that people don’t want to share with others on a frequent basis. If you fall in either of those categories, you may also be able to identify with the struggles they are going through.
Government is Passing Extensions on Foreclosure and Evictions
If you own mortgaged properties and rent them on a long-term or short-term basis, foreclosure adds yet another level of difficulty to the mix. After all, if you aren’t able to generate regular income through your renters, how else are you supposed to pull funds together for the mortgage payment?
Fortunately, the federal moratorium on foreclosures and evictions has been extended for another two months, with the new expiration date set for August 31, 2020. But since it provides limited coverage against a certain set of properties, government officials are working on additional measures to extend this protection.
On June 29, the U.S. House of Representatives passed a relief bill that would extend foreclosure and eviction moratorium for a year. To cover properties that aren’t protected under the moratorium, the bill also includes $75 billion for homeowners and $100 billion for renters to fulfill their housing and utility costs.
In addition to that, certain states such as Florida are also individually extending foreclosure and eviction moratorium. This gives some homeowners relief from their mortgage payments for the time being, but it still doesn’t solve the larger problem of covering for the loss of income.
For homeowners who depend on rent payments to generate regular revenue, this also creates problems in meeting essential expenses such as utility costs and property taxes. Failure to meet these costs directly affects local governments, and that could have a larger impact on a federal level.
While another stimulus bill seems to be in the works, it remains unclear what its current timeline might be or exactly what it may contain for those who depend on rental income to survive themselves. For now, all eyes are on the government to pass legislation that doesn’t only stop foreclosures, but also covers for loss of income for homeowners to help them through this time of need.