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We could be looking at $34B in unpaid rent by the time we get to January: NAA President & CEO

Bob Pinnegar, National Apartment Association President & CEO joins the On the Move panel to discuss the impact of the pandemic on the housing crisis.

Video Transcript

JULIE HYMAN: Well more than six million households failed to make their rent or mortgage payments in the month of September. That's according to the Mortgage Bankers Association's Research Institute for Housing America. We know that a lot of Americans have indeed been struggling with paying their rent or their mortgages. This just puts a more specific number on it.

To talk more about the effect, not just on those individuals, but on the housing industry, we're joined now by Bob Pinnegar. He is the National Apartment Association president and CEO. Bob, thank you for joining us.

So obviously this creates hardship not only for those individuals, but in some cases for the folks who own those apartment buildings that are depending on that rent. So what are you hearing from your members at this time when we're seeing those numbers of people who are not paying their rent?

BOB PINNEGAR: Well, I mean, this has been going on for seven months, and so we have a lot of members who are really struggling because they have gone through their reserves. They're trying to work with their residents and make ends meet.

Look at this industry. It's very diverse. And approximately 21 million of-- 21 million units that are sitting in the true independent-rental-owner category, those are the ones I worry are most at risk. If you look at the industry overall, you about 41 million rental housing units across the country. 21 million of those are with individuals who own one to four units.

ADAM SHAPIRO: What do you hear potentially coming from Washington or at the state level to protect landlords because we all know people who in the great financial collapse made a killing by buying up foreclosed properties that they turned around to start renting? And they have big, deep pockets. But these landlords who might have one or two, three, four apartments-- not the same.

BOB PINNEGAR: No, that's the challenge is they don't have the deep pockets. I mean, this is the person that instead of investing in stock market for their 401(k) put money into real estate. And this is their retirement, or maybe they're already retired. This is their actual income at this point in time. So it is a huge challenge.

And, you know, Washington has failed to act, and with the election looming ahead of us, I don't anticipate we're going to see anything coming out of Washington until the election is over. And depending upon the outcome of the election, it may be sometime in 2021.

BRIAN CHEUNG: Hey, Bob. Brian Cheung here. What role do local governments have with this? I know here in New York City there have been some calls from landlords for the city, for example, to suspend or at least postpone some of the tax collection payments so that at least they can have some liquidity for a little longer. Now the problem, of course, is that state and local governments are also strapped because they don't have tax revenues coming in, and they need to balance the budget as well. Have you seen a lot of negotiating between landlords and state and local governments to try to maybe find some middle ground there?

BOB PINNEGAR: It's really-- it's really you know, a whack-a-mole sort of type of situation across the country. There is no consistent thing happening. In some parts of the country people had-- or different entities had used dollars they received either through the CARES Act or through some of these funds that the administration says are available, and they've created assistance programs. But it's not consistent, and that's the challenge. And I don't think there's enough money available right now to really help the renters across the country, absent a stimulus piece of legislation that would have a significant funding.

JULIA LA ROCHE: Bob, it's Julia La Roche. And I hear you saying that there's not enough money to help the renters across the country. You also just, as you were mentioning earlier, have the pulse of the landlords who are also struggling. Are we about to see a wave of bankruptcies here? And what could be some of the knock-on and ripple effects from the landlord side?

BOB PINNEGAR: Well, you know, there's a study that was put out by a group out there that said that we could be looking at $34 billion in unpaid rent by the time we get to January, and that is not a sustainable model. And so we do have the real possibility of foreclosures. If you look at the part of the industry that is in buildings of five units or larger, that's about 10% of the total mortgage debt for this country. If you look at the 20-- the 21 million that are in that one-to-four category, which includes single family homes which arguably have a higher value, that could be in excess of another 10%. So, you know, conservatively speaking, we could be looking at 20% of the total mortgages in this country, you know, on the line.

JULIE HYMAN: But, Bob, on the flip side, what about the market for folks to then sell their rental properties, right? I mean, as we have talked about frequently on the show, for good and for ill we are seeing a lot of income inequality in this country. And the folks who are investing in the market, for example, have more capital to put to work. Interest rates are very low. Are a lot of your members just saying, OK, I'm just going to sell my property, and if so, are they seeing demand?

BOB PINNEGAR: Well, the challenge is, with the CDC order, who wants to buy a property that they can't move into? Because really the market that you're going to see a transition would be in that single-family, home-owner market, we're seeing across the country where people are moving out of cities, and they want to go into more suburban areas. But you have a product that is very difficult to market, and so I'm concerned that that could adjust to a foreclosure situation before the end of the year.