A new study from the American Bar Foundation, “The Impact of COVID-19 on Small Rental Property Management: Insights from a Chicago Case Study,” examines small-scale landlords’ business practices and how their approaches to property management changed during the pandemic. Through in-depth interviews, the study assessed whether COVID-19 potentially threatened the sustainability of small rental properties (SRP), which make up a large share of the country’s naturally occurring affordable housing. The researchers found that while most landlords continued using accommodating approaches to property management during the pandemic, nearly one-fifth of those interviewed indicated they would adopt fewer flexible approaches as a result of financial hardship during the COVID-19 pandemic. These approaches included raising rent, instituting fees, and adopting more formal tenant-screening criteria.
The researchers conducted 69 interviews with Chicago landlords owning six or fewer rental units. The interviews took place over three time periods: pre-COVID (2018/2019), early COVID (2020), and late COVID (2021). The study found that most landlords interviewed implemented at least one flexible management approach, such as not charging fees, raising rents, or conducting extensive tenant screening. Additionally, 65% of landlords’ units were rented below fair market rent.
Motivations for adopting a flexible management approach varied. Eighty-seven percent of landlords were owner-occupants and living in the same building as their tenants. This led landlords to form more personal relationships with tenants. Some landlords felt that it was more financially advantageous to keep their rent low and maintain a positive relationship with their tenant rather than risk frequent turnover. Several landlords experienced financial hardship themselves during the pandemic and expressed that they adopted flexibilities because they could not afford to evict a tenant, even if the tenant was not paying in full.
When asked how the pandemic affected their management style, eighty percent of landlords indicated that they planned to continue implementing flexible management approaches. The other 20%, however, indicated that they either already started implementing more rigid management approaches or intended to do so in the future. These practices included requesting first and last month’s rent at move-in, instituting move-in fees, and conducting more stringent tenant screening, such as requiring a specific income-to-rent ratio. Ninety percent of landlords who planned to modify management practices indicated they experienced income loss during the pandemic and that increased rigidity is intended to protect them from future shortfalls due to non-payment of rent.
To address income loss due to rent non-payment, five of the landlords interviewed applied for emergency rental assistance (ERA) and found the process to be relatively straightforward. Others who did not apply, however, were frustrated by the lack of transparency and consistent guidance, citing confusion around when programs would open and how much funding they could receive. The authors point to the need for permanent programs to assist small rental property landlords during times of economic hardship. For example, landlords who participated in the Housing Choice Voucher program were relatively unaffected financially during the pandemic, improving their perceptions of the program.
Read the report at: https://bit.ly/3rRaPJw