Source: Philadelphia Inquirer
Byline: Michaelle Bond
Date: 7/1/2020

Small landlords own nearly half of all licensed rental units in Philadelphia, and the city relies on them to provide much of the needed low-income housing. But they’ve been largely shut out of programs meant to help small businesses get through the coronavirus pandemic, and loans are hard to come by.

So the city is partnering with a community development financial institution based in Kensington to offer loans of up to $10,000 for small landlords in low-income areas.

The unsecured loans are meant to cover some of landlords’ costs while their tenants can’t pay rent because of the pandemic. Landlords with 15 or fewer residential rental units have until 5 p.m. July 7 to apply. Approvals are based on need.

“I don’t think it’s solving the problem, but it might help for a little bit,” said Paul Marcus, director of the Impact Loan Fund, which is running the program. “Hopefully, this will help keep another 100, 150 folks afloat.”

Any deferrals that landlords received for mortgage or other expenses will come due soon, and small landlords are already struggling, Marcus said, so the goal is to distribute loans as early as the end of July. He anticipates the average loan will be $5,000 to $6,000.

The idea is to replace one unit’s rent for six months to help small landlords get by until tenants return to work or receive backlogged unemployment or stimulus payments. Landlords must repay the loans, which have a 4% fixed interest rate, within 36 months, but no repayment is due for the first six months.

City officials and landlords acknowledge that the program is only a temporary solution.

“We wanted to make sure we were providing support to landlords who are providing affordable housing,” said Greg Heller, senior vice president of community investment at the Philadelphia Housing Development Corp. “We’re hoping these short-term loans can allow them to get through the crisis and keep their businesses operating so they can weather this storm.”

For landlords to qualify, they must not be charging rent in any of their units that exceeds certain guidelines derived from calculations around area median income. The maximum they can charge for a studio is $1,105; a one-bedroom unit is $1,160; a two-bedroom unit is $1,450; a three-bedroom unit is $1,681; and a four-bedroom unit is $1,914.

“We didn’t want to use our scarce public resources to subsidize luxury housing and landlords that were charging high rents,” Heller said.
Some small landlords use income from their units to supplement income from seasonal jobs or retirement benefits, and others rely exclusively on rent from their tenants to make a living.

Landlords aren’t eligible for the federal Paycheck Protection Program, which offers businesses loans that they don’t have to pay back under certain conditions. City and state rental assistance programs help landlords, too, but they come with strings attached, said Paul Cohen, general counsel for the landlord association HAPCO Philadelphia. The city’s program, for example, prohibits landlords from evicting tenants for six months after the city’s last payment.

“A lot of landlords didn’t want to take the money under that condition” because they would be out of rent for six months with no recourse, Cohen said.

Victor Pinckney Sr., a vice president at HAPCO Philadelphia, commended the city on the new loan program but said he wished that more landlords were eligible and that loans were larger “because we don’t know how long all this will last.”

One member told HAPCO that his handful of rental properties pay for his brother to live in a nursing home.

Pinckney said that if a landlord has 30 or 40 units and a few don’t pay rent, income from the others can help.

“When you’re talking about one, two, three, four, five units, and you don’t get money from one or two tenants, you now have an issue,” said Pinckney, citing ongoing expenses such as taxes, mortgages, and maintenance.

“Everybody thinks landlords are rich,” Pinckney said, but that’s not the case for everyone, especially smaller landlords who rely on rent payments to survive.

“Whatever resources you do have,” he said, nonpayment “is draining away from those.”