Affordable Housers Face Deepening Rental Arrears and Ballooning Expenses

This article excerpt is republished from Shelterforce Magazine.

Emily Taylor started as the associate director of resident services for Champlain Housing Trust in Vermont four years ago, shortly after the pandemic began. With 2,500 affordable apartment units across the nonprofit housing agency’s portfolio, Taylor helps manage a team of resident service coordinators who provide direct services to tenants who are falling behind on rent. This includes connecting tenants with local support services, social service programs, and/or federal programs that could provide some financial relief.

Since Taylor began, the need for support has become so high that she and her director are now going out themselves, meeting directly with residents who are forced to choose between rent and other pressing expenses.

“Last year alone we provided services to 850 residents,” she says. “We’re nearing a point where we’re providing one-on-one direct services to almost half of all residents who rent from us.”

In four years, the amount of unpaid rent at Champlain Housing Trust properties has tripled—from $250,000 in rental arrears pre-COVID to $750,000 today, according to Michael Monte, the organization’s chief executive officer.

This is a dilemma familiar to nonprofit affordable housing organizations across the United States. Four years after COVID-19 first wrought havoc on the American economy, nonprofit housers are dealing with a tremendous amount of rental arrears.

Meanwhile, many federal and state assistance programs that provided a vital lifeline to these housing organizations and their tenants during the pandemic have dried up. That loss, coupled with inflation and ballooning operational expenses—including skyrocketing property and liability insurance premiums—has caused many organizations to feel hamstrung in their ability to provide services and maintain their properties.

Altogether, it has created a difficult operational reality for nonprofit housers.

“It has the potential to become overwhelming,” says Andrea Ponsor, CEO and president of Stewards of Affordable Housing for the Future, a collaborative of nonprofits that operate affordable housing developments in 49 states. “It’s a very simple equation to maintain a stable property in some ways—it’s revenue minus expenses. And that’s not what’s happening right now.”

A recent survey by the collaborative, with data from nine of its member operators representing 100,000 units, showed a $44 million increase in unpaid-rent receivables over a five-year period—a 336 percent increase, Ponsor says. At the same time, operating costs in their combined portfolio have gone up 36 percent.

In Los Angeles, Abode Communities has $4.4 million of unpaid rent on the books; Community Roots Housing in Seattle has $3.3 million. And that’s not taking into account the millions in federal and state aid they received in the years following the pandemic to offset rent arrears. Factoring out relief funds, Holly Benson, the CEO and president of Abode Communities, says the true figure is $8 million. And Chris Persons, Community Roots Housing’s CEO, says total rent arrears since the pandemic are closer to $9 million.

“What we’re seeing is that the rate of nonpayment is not as bad as it was in 2020 and 2021,” says Persons. “But it seems to be stuck at a certain level.”

The trend is very concerning, not only for ownership and property management, but also at the macro level—community, residents, investors, and lenders.”
Carlos Gonzalez, The NHP Foundation

Carlos Gonzalez, senior vice president of asset management at The NHP Foundation, a nonprofit multifamily housing provider in Washington, D.C., says his company is experiencing rental arrearages at dollar amounts they’ve never seen before. “Our balances are simply off the charts,” Gonzalez says.

“We haven’t seen any improvement on collections since the pandemic hit, regardless of rent assistance programs and our collective efforts to keep our residents in their homes,” Gonzales says. “The trend is very concerning, not only for ownership and property management, but also at the macro level—community, residents, investors, and lenders.”

Beacon Communities—a real estate firm that manages 19,000 affordable and market-rate units, the bulk of which are in Massachusetts—is in a similar situation. In an emailed response, Beacon wrote that “in many cases, residents have been very responsive, and we have succeeded in implementing internal repayment plans. However, coming out of the pandemic, delinquency rates increased across the portfolio industry-wide, and it has been challenging to convince a significant number of residents that they need to pay a portion of their rent consistently.”

Faced with this reality, agencies are being forced to balance their community-driven mission with operational and financial realities to keep their properties up and running. It often means deferring maintenance, decreasing resident services, or having a little less on-site staff to help people have a quality place to live, Ponsor says.

“When you have a healthy portfolio, you can elevate your social mission and make sure that people are housed,” says Robin Hughes, the president and CEO with the Housing Partnership Network, a collaborative of more than 100 housing and community development organizations across the U.S. “But when half of your portfolio is in trouble, it’s more difficult to implement the sorts of social policies that you’d like to.”

Community Roots Housing owns and maintain dozens of apartment buildings in and around Seattle, which provide affordable housing to more than 2,000 residents. It’s one of many affordable housing providers across the country that are dealing with large amounts of unpaid rent. Community Roots’ CEO says the organization has about $3.3 million in rental arrears. Above, The 12th Avenue Arts building, comprised of 88 affordable apartments, retail space, arts space, and Community Roots Housing’s main office. Photo by William Wright

‘It does feel truly unprecedented’

Rent arrears in all sectors remain at “crisis levels,” according to data from the National Equity Atlas. Nearly 5 million households are behind on rent, according to the organization, which estimates there is more than $9 billion in total rent debt.

But data specific to nonprofit affordable housing is hard to find.

Hughes says members have data about their individual properties, but the network has yet to create a centralized data source, “to really understand the magnitude that rent arrears is happening, the rate at which it’s happening, and then the impact that it’s having on portfolios.”

“We hope to get there,” she says. “Where we need to collect data is where this is happening, what parts of the country and what submarkets it’s happening [in].”

And, Hughes adds, which “local state policies have either prolonged the eviction moratorium or have in place policies that make it more challenging to address these issues.”

[RELATED ARTICLE: During the Pandemic, Community Development Organizations Prioritize Relief and Assistance Work]

Rent arrears exploded after the pandemic began, when thousands were left without work and without income. Federal stimulus programs helped some nonprofit agencies keep their books balanced and tenants’ rent caught up.

But federal stimulus money often wasn’t enough, and eviction moratoriums ensured that tenants who couldn’t pay their rent could keep their housing.

At the Housing Partnership Network, Hughes says, they are finding that higher rent arrears often correspond to what the eviction process looks like in a given state or locality, and how long the courts take to process evictions.

“So, in places like Washington, D.C., for example, it could be a whole year before an eviction is processed,” she says. “That takes a higher rate of rent arrears in that space. We’ve seen that in Michigan as well.”

In areas with strong tenant protection policies, rent arrears are higher, Hughes says. While these policies are important to protect low-income residents from slipping into homelessness, Hughes says it’s critical that such policies be coupled with support for the operation.

“Having 20 percent, 30 percent of your tenants not paying has a significant impact on you being able to keep up with day-to-day maintenance and keep the property afloat,” she says.

Hughes noted these patterns are only anecdotal, and “without real data, it’s really hard to reach a conclusion.”

The pandemic hurt a lot of industries really badly, but I would make the case that it impacted the affordable housing industry more than most.”
Chris Persons, CEO of Community Roots Housing

Persons of Community Roots Housing says, “The pandemic hurt a lot of industries really badly, but I would make the case that it impacted the affordable housing industry more than most.”

Nonprofit housing agencies say they try to avoid evicting tenants. Monte with the Champlain Housing Trust says his organization does not evict for no cause, and makes sure its resident services team has exhausted every federal, state, or local program available to them to keep tenants in their housing. The cause for eviction, he says, “has to be pretty dramatic.”

“People don’t get evicted because they don’t pay rent. They usually get evicted because they don’t respond or talk to us or work with us or figure something out,” he says.

The organization has in some cases been forced to evict tenants—usually after bad behavior coupled with growing arrears that, he says, leaves them no choice.

“Every eviction is bad. . . . It’s a struggle, and it’s not good for the property, it’s not good for the tenant, and it’s not good for the community,” he says. “We try to do everything we can to avoid it.”