This is a message that it is safe to say, the majority of our rental owners have received in the last year. The common response from the owner is So what does that mean? Fair question. Other than the obvious (they might get some rent money) it means our hands are now tied at collection until we find out if the tenant will qualify.
It is beginning to appear that the Federal funds, that have twice funded rental assistance over the last almost two years, are not going to be totally distributed for some time. It also seems possible that these programs may be a popular government benefit program for some time to come.
Rental Assistance Is Plentiful and Many Qualify!
Rental assistance is available throughout Indiana. There are several different agencies involved in distributing these funds. The main parameters of eligibility have expanded over the last year. These programs have moved from income disruption to a multi-factor eligibility. The IndyRent program states:
Households at or below 80% of the Area Median Income (AMI) that have experienced a reduction in employment income (or self-employment business income) due to the COVID-19 pandemic and are at risk of housing instability. Priority will be given to households below 50% AMI or residents who have been unemployed for 90 days or longer at the time of application. (notice nothing about COVID in that priority).
There is a lot of information on the program at IndyRent.org.
Can We Just Refuse To Participate In Assistance?
One interesting situation that has occurred in the last few months. What happens if a landlord does not respond to a tenant’s application? Maybe you just want the tenant to move so you are refusing to participate.
Here is why rental assistance has become much more difficult to ignore for your delinquent tenants.
- Assistance programs will still process their application but the tenant will be responsible for providing what the landlord is refusing.
- If the tenant is approved the assistance funds will be sent to the tenant.
- If there is an eviction filing, almost every Judge is now asking if the tenant has applied for assistance. In Marion County IndyRent representatives are stationed in the eviction court rooms. It does not matter how delinquent your tenant is, the Judge will send them to go meet with IndyRent to see if they qualify before considering the case.
Pay Rent or Quit Leads To Applications
We estimate that over 75% of the Pay Rent or Quit notices we file the tenant then files for rental assistance. We receive notice of the application and if we cooperate by completing the paperwork we also agree to stop collection efforts for 45 days. IndyRent is very clear – approval can take 30-60 days. If the tenant is approved, another 30-60 days to receive the funds. Though we have not seen the cycle take more than 90 days.
Most Applications Seem To Lead To Approval, But…
This is all a very brief overview of a situation that has possibly contributed to delinquencies increasing (higher than when the pandemic began in 2020!). To the assistance programs benefit, they are handing out money pretty freely. So, if a tenant does apply, there is a good chance the investor is going to receive some funds. And this is a very important point to remember when you learn your tenant has applied.
The bad news for many tenants who receive assistance. By the time the funds are received, the tenant is further in delinquency than the funds will cover. The tenants often are not making payments waiting for the funds. In a significant portion of the cases, the funds are just kicking the problem down the road.
What the Rental Owner Needs To Know
In summary-our collection efforts are significantly more intensive now than during the pandemic due to rental assistance. Many of you have reaped the benefits. The main things to accept is:
- If a tenant applies there are better than 50% odds they will be accepted and funds issued.
- You really have little choice but to cooperate. In fact, in one court in particular the Judge is asking rental owners to provide an affidavit explaining why they are refusing to participate. We have only done one of these but it is not taken lightly.
- WILMOTH Group will handle all the paperwork for you.
So when you hear your tenant has applied for rental assistance, it likely will bring some much needed income to your portfolio. If not, an eviction filing with a tenant who was turned down for assistance is an extra point in the argument for the owner’s possession.