Starting April first, we will enter into a new phase of the economic crisis brought on by the Coronavirus outbreak: rent and mortgage payments will come due. The mortgage industry is already moving on a mortgages suspension program for homeowners and in New York Governor Cuomo has announced that banks are waiving mortgage payments for 90 days. But it’s more than just homeowners who are going to struggle at the end of the month. We need to address the months of economic uncertainty that renters and small businesses will also now face.
The hardest hit areas – New York, Seattle, and the San Francisco Bay Area – all have more renters than homeowners and economies with a large and devastated retail sector. In New York City, there are approximately 180,000 businesses which employ less than 20 people. Thousands of these small businesses will not be able to make rent, and many more of their employees who have been laid off or seen their hours cut will not be able to either. This in turn means thousands of small building owners will struggle to make their mortgage payments – or worse make them, but only by laying off workers or forgoing building service and maintenance. What we do about this will matter far beyond next month, and far beyond when this crisis is over.
Banks and other mortgage holders need to do their part by providing mortgage deferment agreements for multifamily and mixed-use landlords who suspend rent for residential and small business tenants, the same as is being discussed for single-family homeowners. For instance, instead of requiring an April mortgage payment, the payment (and interest) would be suspended and the mortgage simply extended a month if the owner also commits to the same for at least part of the tenant’s lease. The federal government has made this much easier for financial institutions by providing zero-interest borrowing, giving banks a way to cover the gap in these payments without accumulating interest. Just as the federal government has stepped up for banks, it’s time for the banks to step up for people. And if they don’t, the government should be prepared to step in.
Small businesses and tenants are in this together, especially in New York City because of our mixed-use neighborhoods. Retail rents are often a huge part of a building’s income. Think of a typical avenue in the outer boroughs, one where there are two or three floors of apartments above a ground-level storefront. Oftentimes, that storefront provides more than half the building’s rent. Without it, a building can quickly start to fall short of the money needed to operate. This will have huge impacts – layoffs for workers, less regular cleaning in our current health crisis, utility outages that go unrepaired just when they are needed most. Large landlords may have enough cash to cover this crisis, but smaller ones will be in dire straits.
Typically, a small business or worker would use some of their income to pay rent, which a building owner would then use to service their mortgage. But right now any income – or government relief – has to be prioritized for immediate needs, such as keeping people employed and operating basic services. Collecting debt should be the last priority. Debt payments are the least crucial thing to the everyday operations of a building or business, and suspending them would cause little harm to the economy in the short term and provide for a faster recovery later.
Deferring these mortgage payments needs to be part of a larger financial assistance package that looks to provide short term support and help businesses and their employees make it through the crisis as best they can and rebound quickly. Think about freelance and gig workers who might not have access to other benefits. Think about our food delivery workers who are extremely underpaid and overworked in good times and are now at the forefront of keeping people fed. We need to make sure they are supported. The New York Employment and Training Coalition has a list of policy recommendations aimed at supporting small businesses and workers, including expanding sick leave benefits, providing protective gear, mitigating childcare costs and expanding no-interest loans and cash infusions, which should be acted on immediately. We also need a grant program in place that commits to helping small businesses start up again at the end of this crisis, showing them that there is a light at the end of the tunnel.
We do have some advantages if we act now. We have two weeks to set up relief programs before the rent comes due. We are in a time when winter heating season is over and peak electricity use is still months away, reducing costs and making buildings easier to manage. And while we do not know when the crisis will end, we know that it will end. And New Yorkers know how to deal with adversity. We overcame 9/11, the financial crisis of 2008 and Hurricane Sandy. This will be as much of a test, if not more, than all of them, but we will overcome this too. While we do not know when the Coronavirus outbreak will be over, we do know it will pass. The key is to weather the storm as best we can until we get there and then come back strong. We know that small businesses and their employees can do this – but we need banks to do their part as well.