Landlords Squeezed Between Missed Rent and Overdue Mortgages

(Bloomberg) -- Chuck Sheldon, a landlord and property manager in Albuquerque, New Mexico, has owned apartments for more than half a century. These days, he can barely keep up with all the moving pieces.He’s talking with owners of roughly 1,700 units he manages, who are worried what’s going to happen if rent checks stop coming in. He’s talking with tenants, about half of whom he assumes will be delinquent this month because they lost jobs or choose not to pay. And he’s in discussions with banks, trying to figure out how he’ll make mortgage payments on the properties he owns during a rapidly worsening global health crisis.“That’s the $100,000 question,” said Sheldon, the president of T&C Management. “I’ve never seen something like this.”It’s rent day in America, with roughly $22 billion in monthly payments on apartments due, according to CoStar. But just how much of it gets paid in the coming days is anybody’s guess.Some large property owners have already rolled out payment plans and halted evictions as the coronavirus outbreak roils the economy. But many apartments in the U.S. are essentially small businesses that tend to have less financial flexibility and will need help in the coming months.Few ChoicesThere are few good choices for the millions of Americans who lost their jobs and have no clear prospects for when they’ll get them back. Eviction moratoriums, unemployment benefits and cash payments from the federal government could help many keep a roof over their heads.But nearly half of the nation’s 44 million renter households were already stretched financially. Over the next six months, they could need as much as $96 billion in relief, according to a recent analysis by the Urban Institute.Housing advocates have urged Congress to protect low-income renters and homeowners as deadlines loom. On a conference call Tuesday, the Center for Popular Democracy called for eviction freezes and rent and mortgage payment cancellations. The group stopped short of pushing for a rent strike, an idea other activists have floated.Sid Lakireddy, a landlord and the president of the California Rental Housing Association, said such efforts are “just plain wrong.” Property owners need to help tenants if they’re able, but renters should not take advantage of the situation, he added.Withholding PaymentOn a recent visit to an apartment building he co-owns in Berkeley, California, Lakireddy bumped into a tenant who threatened to withhold rent because of a new ban on evictions. He pointed out that the tenant hadn’t lost a job.“I said, ‘You’re not affected by this economy. You’re on Social Security,’” Lakireddy recalled. “‘Don’t screw with me, man.’”Not far away, in Oakland, Krista Gulbransen manages a duplex for a small property owner. She recently got a request from a tenant to lower the $3,495 monthly rent on his three-bedroom unit by roughly 40%. The renter makes about $172,000 a year at an established technology company, she said.“I just didn’t understand,” said Gulbransen. “He’s asking for a rent reduction of about $1,500, saying he doesn’t know where his job is going to be in the next few months.”Such anecdotes are probably rare, said Maya Brennan, a policy analyst at the Urban Institute.“There will be a very small sliver of economically privileged renters who will try to use this to get some extra advantage,” she said. “The vast majority of renters know that they need to figure out a way to keep a roof over their heads and are going to be trying to ask only for the level of relief that they truly need.”Not all the conversations between landlords and tenants are fraught. Hasan Leviathan, 20, lives by himself in a two-bedroom house in Frostburg, Maryland, where he is studying to become a physical therapist. In March, he lost his job at Kay Jewelers. Without that income, his $570 in rent is too burdensome, even with help from his mother, he said.Leviathan was prepared to move home, but his landlord agreed to stretch the April payment over the next six months, and also offered him a minimum wage construction job, which he plans to accept.“People need help more than ever,” Leviathan said.Trickling InChris Athineos, a Brooklyn landlord who owns nine buildings with about 150 apartments, half of which are rent-stabilized, said he’s sure some of his tenants have lost jobs and plans to work with them, perhaps offering the option of making partial payments.Some rent checks for April have trickled in, he added. And a handful of tenants who have relocated out of the city called about making payments electronically, he said. It won’t be until the middle of the month that he’ll get a full accounting of how much of the expected rent came in.Athineos said rent freezes don’t make sense, unless landlords get relief from property taxes. For now, he’s still paying a staff of five maintenance workers -- on top of his mortgage, taxes and water and sewer bills.“It’s kind of wait and see,” he said. “We’re holding our breath.”(Updates with quote from researcher in the 15th paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

Coronavirus: People who lose their sense of taste and smell should self-isolate, scientists urge

More than half of participants who tested positive for the coronavirus in a study lost their sense of smell and taste.

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'That was the master plan': Why Harry and Meghan were going to California — just maybe not so soon

In the end, it really isn't a surprise.Maybe the timing is unexpected, but Prince Harry and Meghan's reported move to California in recent days seems likely to have been the inevitable end goal for the couple who this week officially started their life outside the senior ranks of the Royal Family."They were always heading to L.A. That was the master plan," Katie Nicholl, Vanity Fair's royal correspondent, said via email.But as with so much else in the world right now, the coronavirus pandemic may have prompted a change in their plans, and moved up the timing of their departure from Vancouver Island, where they had been living with their young son, Archie, since November."I think with North America shutting down because of COVID, they decided to move to California sooner," said Nicholl."Meghan wants to be near her mum [who lives in Los Angeles], which is understandable at this time, and they clearly have projects in the pipeline and wanted to get to L.A. as quickly as possible."Still, it's a move that raised some eyebrows in the U.K., and leaves lingering questions about why they decamped so soon from Canada, which seemed to be in line as their temporary home at least for a little while as they seek to carve out a new life of financial independence."Their early announcements suggest that they might have hoped to undertake royal duties on a part-time basis, and a home in the Commonwealth might have been part of the plan if Prince Harry had retained his role as a Commonwealth youth ambassador," Toronto-based royal author and historian Carolyn Harris said via email.But things didn't work out that way, with Harry giving up that role as part of the agreement for him and Meghan stepping back from official duties."Instead, they are pursuing independent careers in addition to their philanthropy," said Harris, "and are following outside opportunities such as Meghan's recent project narrating the Disneynature documentary Elephant."That documentary is set to premiere on Disney+ on Friday, and has received mixed reviews in the U.K. media, with comments ranging from the Telegraph calling Meghan a "snug fit for this sweet nature doc" to the Guardian saying she adds "schmaltz" to the "Disney yarn." Thanks to CanadaHarris said the short duration of their stay in Canada is also "perhaps surprising" given the fact that their last public appearance as senior members of the Royal Family came at the Commonwealth Day service at Westminster Abbey earlier this month, and they visited Canada House in London in January to express their thanks for the hospitality they had received while in Canada over the holidays.WATCH | Prince Harry and Jon Bon Jovi meet at Abbey Road StudiosThe move to California, according to various media reports, may have taken place about 10 days ago. It also raised questions in some quarters in the British media about whether the couple should have considered going back to the U.K., given the serious circumstances surrounding the pandemic, and came at the same time as Harry's father, Prince Charles, tested positive for the coronavirus. (He has since come out of self-isolation, and a palace official has said he is in good health, the BBC reported.)Royal expert Richard Fitzwilliams told Express.co.uk that the timing of their Hollywood move might be perceived by some as selfish.While the timing was driven by the "imminent closing" of the border between the U.S. and Canada, Fitzwilliams said "the image this will create is that they are on a journey for themselves at a time when their undoubted global reach could give some succour to others."Could have 'won praise'Fitzwilliams also suggested the couple missed an opportunity by not returning to the U.K. "If they had temporarily returned to Britain, whatever their personal feelings, this would have been a selfless move and it would have won universal praise."But returning to the U.K. might not have been easy — or perhaps realistic right now."Frogmore Cottage, their house in Windsor, would have been a very safe place to self-isolate, and Harry must, of course, be anxious about his father and his grandparents [Queen Elizabeth and Prince Philip]," royal biographer Penny Junor, author of Prince Harry: Brother Soldier Son, said via email."But equally, Meghan's mother is in L.A. It must have been a tough choice, but having made their decision to step back, it would have been difficult to reverse that decision so quickly in order to show solidarity."Not right nowNicholl said she can't see Harry and Meghan moving back to the U.K. at the moment, given that they have just moved to L.A. "And with the royals in isolation, there isn't much they can do, although I suspect Harry will probably be feeling far from home right now," Nicholl said. "They won't want to take any risks by travelling, and their priority is to keep Archie settled and in a routine. I think they will come to the U.K. when it is safer to do so."There could also have been basic logistical challenges that kept them from crossing the Atlantic Ocean."A few weeks ago, a return to the United Kingdom certainly would have been a viable option for Harry and Meghan, but there are now fewer planes crossing the Atlantic because the United States has banned all but essential travel from the United Kingdom and Europe," said Harris.Such a trip could also have renewed focus on their travel, which was criticized last summer when they made four private jet flights within 11 days."If Harry and Meghan were to return to the United Kingdom at this time, they would likely attract criticism for travelling on a trans-Atlantic flight during a pandemic," said Harris.Other factors that could have played into the decision to go to California include questions of taxation and residency.Security considerations?"The decision to move to Los Angeles may also have been influenced by security considerations," said Harris. "During their time in Canada, Harry and Meghan received British and Canadian security, but they will engage private security services in the United States."President Donald Trump tweeted on the weekend that the U.S. wouldn't be paying for their security, and a spokesperson for the couple said they had no plans to ask for such support.As much as the move means Meghan, a former actor who grew up in Los Angeles, is back in familiar territory, questions also remain regarding Harry's feelings toward the move."I would be surprised if all of this has made Harry happy," said Junor.While he may be trying to make Meghan happy by taking her back to her home, her job and people she knows and loves, Harry is moving away from what is familiar to him, Junior suggested."But in so doing, he has left his home, his job and everyone he knows and loves. I fear there are going to be some very difficult times ahead for him."What's next for them isn't clear. In a social media post earlier this week, they told supporters "you've been great," and said they "look forward to reconnecting with you soon."

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The U.S. Postal Service has been in trouble for some time. Now, the coronavirus crisis has come along and made everything much worse.

Pension Funds Will Take a Big Coronavirus Hit

(Bloomberg Opinion) -- The coronavirus crisis is still unfolding, but it’s not too soon to think about lasting financial impact and how to limit the fallout. One major financial crisis that may hit later this year or early in 2021 is the ever-looming collapse in state and local employee pension funds. Although the problem has been growing for decades, the virus may have been the event that pushed it over the edge.Declines in the financial markets may have cost the funds as much as $1 trillion in assets, or about 25% of their total, according to Moody’s Investors Service. That would bring the aggregate funding ratio—value of assets divided by actuarial value of liabilities—from 52% based on the last report by the Census Bureau down to perhaps 37%. Markets may recover, of course, but they may not. The latest aggregate numbers we have are from 2017, and for most individual funds data is available only as of mid-2018. Asset returns are usually smoothed so it could be four or five years until the full effect of the virus is reported officially.But it’s not aggregate numbers or official reports that will trigger a crisis. It’s the big funds in the worst shape. My back-of-the-envelope calculations suggest Connecticut could be looking at a 28% funded percentage if the numbers were available now, Kentucky 25%, New Jersey 24% and Illinois 20%.Those figures rely on optimistic assumptions about healthcare cost increases and discount rates; the true numbers are probably worse. The important statistic is more objective: how many years’ benefits do the pension assets represent? That could be no more than about four years in Illinois if true numbers were public today, five in New Jersey and Kentucky, six in Connecticut.All benefits for active employees, plus all benefits for everyone in the near future, will have to come from employee or state contributions. But states will be strapped for cash, and looking to cut contributions, not raise them. Employees will be unwilling to contribute more since there’s little likelihood they’ll ever see that money again, especially as post-2008 reforms have denied many of them the gold-plated benefits that employees with more seniority enjoy. Taxpayers? The least willing of the bunch. Creditors? The states need to keep borrowing money, so they have to appease creditors. Some of the money will come via defaults or restructuring of state and local debts, but this is its own crisis, and it won’t fill the gap. The federal government? Maybe, but not for full payments. A more likely scenario would be absorbing retirees into Social Security and Medicare at sharply reduced benefit levels—and those programs face similar problems as state and local plans.It’s true that 48 states have constitutional or other legal protections for pension benefits. These will improve union bargaining power, but it won’t squeeze anywhere near the full amounts promised. Courts will both unwilling and unable to force governments to hand over money the governments don’t have and can’t get.Will deaths tied to the Covid-19 pandemic save the day? After all, deaths will likely be concentrated among retired employees getting benefits rather than active employees paying contributions. Moreover, active employees who succumb to the virus will be replaced. If we exclude Hollywood disaster scenarios, the highest projections are U.S. death rates doubling in 2020 and remaining 2.5% higher thereafter. Using the age distribution of coronavirus deaths for which information is available, that could cause liabilities to fall by about half the amount that assets fell. But in that scenario assets would probably fall much farther. It’s hard to come up with a scenario in which additional coronavirus deaths improve pension funded ratios.Will these events trigger Illinois or some other state to default? It’s plausible. Will that cause other states and municipalities to follow? That’s likely, mainly because creditors will stop lending to states with big unfunded pension liabilities. Will that provide the cover for every state except maybe Utah and Wisconsin from seizing the opportunity to renege on promises? I’d bet on that as well.What we do today is start treating pensions as an issue that must be addressed rather than a can to be kicked down the road. Admit that promises to employees will not be kept, and start figuring out how to direct the cuts to where they will do the least harm: younger workers with more time to prepare and richer workers with more ability to pay. Collecting the maximum contributions possible, but in realistic forms employees can count on rather than unreliable promises about future. Releasing timely and complete data on assets and cash flows.The basic terms of the fix are obvious. Pension payments will be capped, probably at something like the Social Security maximum of $3,011 per month for someone who retires at age 65. Tax the benefits, again probably like the rules for Social Security (50% of benefits for single filers with total income between $25,000 and $34,000, 85% of benefits for higher income individuals). Make healthcare plans more Medicare-like, with lower provider payments. Employee contributions to be directed either to Social Security/Medicare or individual retirement accounts rather than underwriting payments to retired workers.This will provoke fierce fights. First to accept the inevitable and second to set the precise terms. How will police officers be treated versus teachers versus Division of Motor Vehicle clerks? Will all state and local plans be put in one bucket, or will employees from more prudent states do better than employees from profligate ones? How will scarce funds be directed to pensions versus health benefits? How much will taxpayers and creditors kick in? These fights will take place in legislatures, courtrooms and union elections. It won’t be pretty or fun. But the sooner we admit the problem and start to solve it, the sooner it’s behind us.This column does not necessarily reflect the opinion of Bloomberg LP and its owners.Aaron Brown is a former managing director and head of financial market research at AQR Capital Management. He is the author of "The Poker Face of Wall Street." He may have a stake in the areas he writes about.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

A strange paradox: the better we manage to contain the coronavirus pandemic, the less we will learn from it

The pitfalls of self-defeating prophecies.