Black, Hispanic SFR Investors Face Disproportionate Financial Risk

Several reports have identified the needs of renters amid a nationwide pandemic. Now information is beginning to emerge  related to its impact on investors. In fact, a new Urban Institute report by Research Fellows Laurie Goodman and Jung Hyun Choi indicates that not only do Black and Hispanic rental investors face increasing economic struggles due to COVID-19, but also this minority group of landlords is more likely to assist their own tenants than are their White and higher-income counterparts.

"We found that Black and Hispanic landlords are struggling to pay their mortgages more than white landlords and are more apt to take mortgage forbearance," the researchers reported. "Despite the struggles, Black and Hispanic landlords are more likely to offer their tenants a rent payment plan, suggesting these landlords are dedicated to keeping their tenants."

The survey suggested that a third or more of surveyed landlords earned a majority of their income from rental properties, and that Black and Hispanic landlords reportedly "have lower incomes," "own fewer properties," and "are more likely to have a mortgage than own their building outright."

As a result, the researchers said, "Black and Hispanic landlords are more likely to struggle to make their mortgage payments."

"Owning fewer properties makes it harder to diversify risk and increases the financial volatility of rental income when a crisis hits," they said, pointing out a "10 percentage-point gap between the shares of White and Black landlords with incomes below $75,000 and a slightly smaller gap between White and Hispanic landlords."

And that, "Nearly half of Hispanic landlords own only one property and 40% of Black landlords own only one property (versus 32% of white landlords). White landlords have five or more properties more often as well."

The study revealed that 12% of all landlords with a mortgage are in forbearance. Those in forbearance are disproportionately Black and Hispanic, the researchers said, "reflecting their less stable financial situation compared with white landlords. About 20% of Black landlords, 14% of Hispanic landlords, and 9% of white landlords have at least one mortgage in forbearance."

Even with an "unsteady financial situation," Urban Institute reported, "more Black and Hispanic landlords offered rent payment plans to their tenants than white landlords. Overall, 38% of landlords offered rent payment plans to their tenants, with 61% of tenants accepting the offers.

The Urban Institute suggested that minority and struggling investors need more support from their government.

"[Tenants'] inability to pay rent will affect mom-and-pop landlords with fewer than 10 rental units, who own slightly more than half of all rental units. Without government support for rental payments, by direct payment to either the tenant or the landlord, these small operators may not be able to continue making their mortgage payments and keep their tenants housed," wrote Choi and Goodman. "The extension of eviction moratoriums will help tenants stay in their homes longer, but for many landlords who are struggling to make their mortgage payments and are disproportionately people of color, there needs to be additional policies to alleviate their financial burdens. "

Their full report is available at Urbanwire.com.