This letter from a housing provider organization summarizes challenges faced by both tenants and landlords due to job and income losses caused by the COVID-19 pandemic. It argues that a proposed city council plan to defer rent payments and waive late fees will not solve the underlying problem of lost income for tenants or ensure landlords can make required mortgage payments. The letter urges the city to consider a more comprehensive solution that helps tenants pay rent and requires lenders to offer mortgage relief and lower coverage requirements for properties housing many tenants facing income issues.

1. March 21, 2020
Greetings Mayor and Councilmembers,
Housing providers all over the city of Seattle are coming to grips with the still
emerging impacts of the COVID-19 epidemic. Like other businesses in Seattle,
housing providers are worried about their employees but also about the well being
of their customers, their residents and commercial tenants. These small and
medium sized businesses are doing what they can to work with people to solve
issues related to job loss and illness.
According to the Seattle Times Councilmember Gonzalez is going to "introduce
legislation that would set guidelines for tenant-landlord payment plans in the year
after Seattle's emergency ends.” According to the article, “the legislation would cap
the installments at one-third the monthly rent, unless agreed to by a tenant. It also
would prohibit late fees and interest for six months after the emergency.”
While well intended, this proposal does not solve the deeper problem faced by
tenants: lack of income. Worse, it ignores the fragile balance of financing for smaller
multifamily providers. Lenders not only expect debt to paid back, they also expect to
see healthy income from rent payments, enough to cover debt payments and more,
as much as 30 percent more.
When renters can’t pay rent, and income from a building falls below that
requirement, banks and lenders may require more cash be placed into reserves, and
they will charge fees and interest for late payments. Worse, in some cases, if rent
revenue falls enough, a project won’t be able to pay its mortgage sending the
building into foreclosure. Taken together with vacancies, even a small number of
rent defaults can push a project into lenders calling for more cash or foreclosure.
The response to COVID-19 has caused massive losses in income; when people lose
jobs, they can’t pay rent, and when rent doesn’t get paid, housing providers can’t
cover their bills and financing requirements. Mandating a deferral of rent does not

2. mean that lenders will stop asking for additional cash, charge for late payments, and
foreclose.
Most importantly, with bans on eviction and other limits on collecting rent, hard hit
people and families will rationally pay other obligations rather than rent, deferring
that expense until it reaches a point where they can’t make payment in the future.
This will result in eviction, abandonment of the lease, and damage to the resident’s
credit. The proposal being considered won’t help residents who need income and
housing providers who need to make payments and cover operating costs.
We urge you to consider a comprehensive solution that helps residents make rent
payments and to require that lenders lower or eliminate coverage requirements and
offer mortgage relief for projects with many residents facing issues with income.
This approach is compassionate, and does not defer the pain and problem farther
into an already uncertain future.
Sincerely,
Roger Valdez
Director