Those landlords also need bailing out. They need to pay their loans, as well.
Every city in the US has a similar issue including the one near where I grew up and it's the weirdest most broken thing. I remember many times walking down streets flanked by empty buildings with homeless people sleeping outside.
And people who do this are always people with perfectly good couches in their living rooms but would never let a homeless person sleep there, but want others to give up a entire building.
Let me explain it to you simply: The landlords made a bad investment, bailing them out forces everyone else to pay for it. In the "it's my property" sense it's identical to forcing someone to house homeless people (although the comparison still isn't the same because the landlords generally don't live in the buildings they're renting out.)
Simultaneously buildings would be converting into condos because they were unable to fill vacant commercial space. As an example, two buildings where I worked had this happen: 70 Pine Street (AIG) and 75 Wall Street(JPMorgan.)
Doesnt the market meet somewhere in the middle?
tl;dr: 2 years free rent with the condition that the tenant doesn't ask for a lower price. due to language in the contract the rent can not go beyond a specific (low) value. the loan isn't held by the bank but immediately restructured and sold as a CMBS (https://en.wikipedia.org/wiki/Commercial_mortgage-backed_sec...)
here is the reddit post that he recaps: https://www.reddit.com/r/nyc/comments/innhah/nearly_twothird...
Some of those properties are profitable to rent out. Some are not. You rent out the profitable ones. You don't rent out the ones that are not profitable, you just wait until they're worth significantly more than what you paid for them. When they are, you sell them, and you buy more property. Each property leverages the subsequent properties, in terms of both the mortgage credit you have access to, and actual money gained accumulated from rent and sales.
If my money is going to be going to making missiles and weapons for overseas, some of it can come back and pay for rough times instead.
It's not exactly fair to landlords who own the properties outright, but, I can live with that.
What do we do about the people that presently have no money? Do we also give them a stipend to pay for food, etc? Or force them onto credit cards?
Well of course you're OK with that, you're obviously not a property investor who worked to get free and clear. What if instead we levied a special premium salary fee on technology workers who make more than the median salary? Not really fair but us worker bees are OK with it...
Imagine if they were honest instead and said "We pay these bailouts now and increase taxes from 30% to 50% for the next 10 years to make up for it", how many would be happy?
If the tenants didn't want to pay rent, they should not have signed leases.
Why is it that tenants can get a break on their obligations but landlords can't? Why are tenants more deserving of help? Most landlords are not rich. They are providing a service to their tenants, who cannot afford to purchase buildings and would have no hope of opening a business if there were not landlords around willing to rent things out.
The value of the building, whether it drops or increases, is the investment component of being a landlord. That is not in dispute here. If a building drops in value the landlord just has to deal with it. But until now, if someone promised to pay rent and did not do it, a landlord could sue them, or evict them, because the landlord would be the victim of a breach of contract that has nothing to do with investment value.
What is in dispute here is that people who promised to pay rent are being allowed to stop paying, but landlords who promised to pay their mortgages are not allowed to stop paying. That's not fair.
It's not good for the economy either, because most businesses can't afford to buy property and need to rent from landlords, and we are now making it very unattractive to be a landlord.
Why not provide them an extension during this time, as well?
Owning land is lucrative in NYC and that’s unlikely to change anytime soon.
If we stopped relief to everyone, tenants would stop paying, rents would crater, and landlord would be ruined much moreso than tenants, it's just the nature of investment.
Rent is revenue. Investment is based on the value of the underlying asset. They are not the same thing.
Our society has always assumed that the investment has a risk element but the rent is ensured by law and there are remedies if it is not paid -- remedies which are now being suspended for tenants paying landlords, but not for landlords paying their mortgages.
If you have a tenant, they can’t pay, then they leave and you can’t find another renter for a year, you’ve made a bad investment even though your property value hasn’t changed.
At first these rent forgiveness measures were supposed to last a few months. Now we are nearly in the 10th month of the pandemic and these measures are being renewed. There are tenants who have not paid rent since March. Most landlords would rather have no tenants at all, than have tenants who do not pay rent for almost a year yet force their landlords to continue to provide for them by paying for maintenance, and insurance, and property tax, and the mortgages.
It seems more like “well nobody is going to be able to rent it anyways, so we might as well keep the businesses alive so that recovery can happen”. If those 90% of businesses all went under, then there would be nobody left to pay any rent even after a recovery starts to happen. Creating a law that advantages the renters prevents the landlords from screwing each other, and the entire market, by putting the companies out of business. Those companies need to survive so that the market can bounce back more quickly. And the landlords would get screwed either way.
I do also think that mortgages should be paused, but that’s secondary in importance, in my opinion. Sorry you got downvoted, I think your opinion is also valid, and this does really suck for landlords too.
In certain cases, the financing for commercial real estate, for instance, will literally substitute the credit rating of tenants for those of the landlords - because ultimately that's where the money is coming from.
If a landlord is rendered insolvent, they aren't even rendered destitute; they sell or refinance the property to generate liquidity. If many landlords do the same thing, the volume of real estate on the market increases, the price of real estate drops, and the market is now on it's way to pricing in the effects of the shock which caused the crunch.
The fact that we've been spewing money at asset holders for over a decade is why real-estate metrics are so out of line from historical cycles.
No, the reason is restrictions on building which have constrained supply.
The world exists outside the particular clusterfuck that is the SF bay real estate market.
'Property management' is a real thing and businesses don't want to necessarily own property.
Managing property is a service like any other - and rates for their goods are market based - just like any other market.
"If a landlord is rendered insolvent, they aren't even rendered destitute;" - ? why do you assume that? Property owners are often leveraged like many other businesses. If x% of their portfolio goes bust - they go bust.
There might be opportunities to make things a little bit more fair one way or another, but it's not rational to single out one form of business as being 'better or worse' than another.
What could be reformed is the fact that economic rent is not really valuable for society at large. 'Trading playing cards' benefits nobody, we should be investing in value creating operations.
They do when they have the capital.
>"If a landlord is rendered insolvent, they aren't even rendered destitute;" - ? why do you assume that?
Because I've been through the books of multiple major banks, REITs, investment funds, commercial owners, commercial tenants, private individuals with residential real estate portfolios, etc.
You have to be incredibly negligent to lose money in an industry where your assets have been skyrocketing in value for over a decade.
But it is. If a business decreases social welfare (like cartels enabling coordination to jack up prices) the government should regulate it away. Most of what landlords do is cause friction in the real estate market (and hurting everyone else in the process) in hopes to gain some more mpney from it.
They provide a service just like any other business.
They should use the force majeure clause to terminate their contracts and the landlords could sue if they don't like that. A pandemic is not unlike a flood or earthquake. This is exactly why such a clause exists in contracts.
My boss negotiates a lower rent during a crisis. It’s fair enough. Would the landlord prefer a smaller amount to none at all?
If they terminate their contracts they need to move out. That's not what is happening here. Tenants are trying to stop paying, but also stay in the property for free, indefinitely.
As was explained a week or so ago by somebody in that business on Reddit: for commercial real estate, many landlords would prefer none at all over a smaller amount, because the loan is written with the assumption of a certain rent per unit, and if the average rent goes down, it breaches the loan conditions and the loan is revoked (or something like that.)
Tenants are either members of the community who want a home, or are trying to provide a service to the community.
One group is trying to speculate on the value others will provide and get a cut, and they're able to do this because as they've ensured scarcity of affordable space. It's extraction
If there were no landlords, it would be impossible to start a business in NYC without buying a building. Most businesses would never be able to afford that. Thank goodness there are landlords who are willing to rent out their buildings!
Private ownership and rent contracts is only one way of many to solve the problem of granting access to space without outright purchase.
Also, providing a service and extracting value from others work aren't mutually exclusive. Consider this: a foreign organization extracts natural resources, refines them, sells the new product back to the localsy (and other outside communities) for large profits that are mostly redirected outside of the native community.
I would clearly call that extraction, the fact that they also provide a service to the community doesn't negate that.
Why does one class of investor get a bailout but not others?
(Why bailout any investor? Risk is part of investment.)
> Why bailout any investor? Risk is part of investment.
The damage caused by this pandemic is so rare it is less than a 1-in-100-years event (1918 pandemic killed millions, but businesses were typically shuttered only for weeks at most, not 6 months).
Certainly bailouts for natural disasters are quite common in other respects. And if the government were to seize your property via eminent domain, they owe you money. Why shouldn’t they also in justice pay out if they order your business shuttered for a half a year?
When you bail out something like Ford you keep it running and collect tax revenue. If you don't, factories stop and the business essentially disappears.
When a landlord goes bust nothing happens, other the financial loss for the landlord.
It's like the old saying "when you own the $10,000, that's your problem", "when you own the bank $1B, that's the banks problem".
When 1/3 of NYC commercial real estate gets foreclosed, that's not just the landlord's problem, that's everyone's problem.