Cascading effects of COVID-19 in Michigan’s residential rental market
Measures to slow the spread of coronavirus have caused many businesses to grind to a halt. Employees at these businesses have been told to stay home or have even been laid off. Waiters, hair stylists, nail techs, and so many others aren’t sure when they’ll see their next full paycheck. And as the first of the month approaches, many are wondering how they’ll pay rent.
If those workers can’t make rent, their landlords take a hit. If landlords can’t pay mortgages on rental properties, lenders could lose money. We spoke to three people about the domino effect the coronavirus outbreak is having on Michigan’s residential rental market.
Kristal Michal-Brasseur is a student at Wayne State studying to be an English teacher. She’s also a server at the Monarch Club, a high-end bar in the Jewelers Building in the Brush Park area of Detroit. The Monarch Club shut down on March 15 after Governor Gretchen Whitmer ordered bars and restaurants to move to take-out and delivery service only. That means Michal-Brasseur is out of work right now.
She applied for unemployment, which will pay out $200 per week. It doesn’t take into account the tips she would earn, which bring her closer to $500 per week in earnings. She rents a studio apartment in the city for $500 a month.
“For myself I feel like I’m going to be able to keep [my place] for the next month, but I don’t know about after that,” Michal-Basseur said. “When this all calms down, will I get a grace period from my landlord to pay my rent back? Is the grace period going to be enough time for me to pay my rent back?”
Tim Vanneste is a landlord in Warren, Michigan. He owns 35 small rental houses and also works as the maintenance man for the properties. Many of his tenants are food service workers or work in other sectors that have been deeply impacted by the shutdowns.
He said the current situation reminds him of the 2008 housing crisis, when many tenants weren’t able to pay rent. That impacted his ability to pay his mortgages and property taxes. Since 2009, Vanneste said he has paid off his mortgages, but he is worried that people who are new to owning rental properties will struggle to make those payments.
Ten of his tenants have already reached out to him about not being able to pay rent. Vanneste said that he is working with them to figure out how to get rent paid in these financially uncertain times.
“I’m basically hoping they pay the heat and the electricity. I’ve worked with many of them for years, they’ve been with me for a long time, I’m not just going to process a bunch of eviction notices even if I could,” Vanneste said. “They get a bill every month, they know their balance is climbing, we’ll work it out
Owen Lee is the co-owner and CEO of Success Mortgage Partners in Plymouth, Michigan. He said that his business is doing pretty well, despite all the chaos elsewhere. While it’s not “business as usual,” the mortgage industry has received a lot of support from the federal government in the past few days in an effort to stabilize the home mortgage industry.
Lee said the lessons learned during the 2008 financial crisis have been helpful in dealing with the uncertainty of the current moment.
“Some of the lessons we learned about what worked then provided tremendous blueprints for the situation we’re looking at today.”
He said that his business is fielding a lot of questions from people wondering what this crisis will mean for them and their mortgages. Communication is key for people like rental property owners who are wondering what to do if their tenants can’t pay rent, Lee said. He said property owners should reach out to their banks for help and guidance in a rapidly changing situation.
This article was written by Stateside production assistant Olive Scott