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How proptechs are dealing with the end of the eviction moratorium

Since evictions are starting again, concerns regarding rent collection are increasing steadily and there is a shift toward flexible payments, Circa CEO Leslie Hyman explained.

In the next two months, 3.8 million tenants may be evicted from their homes.

The U.S. Census Bureau estimates 8.5 million people were behind on their rent at the end of August. At the same time, rent costs soar by the day. In June 2022, the median rent in the U.S. became more than $2000 a month, which is the highest ever recorded rent.

Zillow research suggests rent has increased approximately 25% before the pandemic began, and by 12% in the past year. Low supply and rising interest rates have also caused a hike in rental prices, with median rental price in the top 50 U.S. metros topping $1,849 in May, according to Realtor.com.

Data also shows the median landlord ended 2020 with a decrease of 3.3% in total rental revenue and a 6.6% decrease in total expenses compared to 2019. 2021 began with low revenue for landlords, relative to 2019, but prices have continued to rise since the end of 2020.

This is in contrast to the biggest landlords, which amassed over $24.4 billion in wealth, according to a recent report by Bargaining for the Common Good, the Institute for Policy Studies and Americans for Financial Reform Education Fund. The report also says that 20 of these large corporate landlords decide the fate of two million families with rental housing, representing about 4% of the total units in the country.

These landlords comprise real estate tycoons, with a net worth of $190 billion and whose wealth increased to more than $21 billion since the pandemic began. According to the report, they are also responsible for 3,152 evictions across 29 counties in eight states.

While these companies are almost exclusively led and owned by white men, renter households of color are twice as likely to be at risk of eviction. Homeownership poses challenges for Hispanic and Latinx families across the country, despite the demographic slated to make up the largest percentage of household foundations between 2030 and 2040.

According to the UCLA Luskin School of Public Affairs, homeowners from these communities are the most disproportionately disadvantaged in today’s market. Data in the last decade shows these homeowners were 2.3 times “more likely to experience foreclosure than white homeowners.”

Some states do not want to spend money on housing assistance 

During the early months of the pandemic (March 2020), the U.S. Congress passed the CARES Act, which comprised a moratorium on evictions for rental properties that receive federal funding, or those which have government-backed mortgages. The issuance of this order by the Centers for Disease Control and Prevention (CDC), was intended to prevent the rampant spread of COVID-19 and provided temporary relief for housing insecure tenants.

The federal moratorium has now come to an end, with the decision-making power has shifted to state and local levels of governance. The Census Bureau noted that with many states now ending their moratoriums and rental relief payments, many renters are now vulnerable to evictions and loss of residence. 

In April 2022, news of red states refusing to spend federal housing assistance funds made the rounds. Governor Pete Ricketts of Nebraska, feared that such a measure might turn the state into “a welfare state.”

States like Georgia, Arizona, Wisconsin and Louisiana were also slow to spend their funds to date, and began shifting funding to the county and city levels, according to the New York Times. Vermont, Idaho and Delaware, on the other hand, have still yet to shift approximately $240 million in cash towards municipal governments.

Proptech for those in peril

As a result of this low supply and rising prices, proptech companies are now trying to find new ways to keep up with current housing trends, and protect at-risk homeowners and renters.

One example is Circa, a flexible payment platform based in Maine, which provides renters the option to break up rent payments into smaller amounts.

Leslie Hyman, co-founder and CEO of Circa, says the app deals with section 8 under HUD (Department of Housing and Urban Development) for each state, and provides payment breakdowns based on property information. It also gives landlords insights into a resident’s payment structure and the amount already covered by section 8.

Based on Hyman’s observations and data collected by Circa, the states with the highest number of users come from Texas and Georgia. “Those are two states where the laws are quite property friendly, and less resident friendly,” she said.

She also claims to receive messages from people asking for help with rent payments, sometimes only a few days before they are evicted. While most of them do not fall under properties that are Circa-backed, she says the organization launched Circa Direct to help those individual residents. “It is really extraordinary how state specific that is,” she added.

The company started before the pandemic and Hyman says people being unable to pay their rent “is not new”, but the eviction moratorium was. When the organization accesses its rent roll of a property, it can also see who has failed to pay rent and the duration of failed payment. Prior to the moratorium, most properties would evict the residents. Due to it, Circa used the opportunity to “put a shining light on the importance of arrears management”, and back rent collections following the halt in evictions. 

Through the app a tenant sees the amount they owe for rent, instead of the total amount, which includes partial section 8 payment coverage. Technologically, Circa collects data on what is covered by section eight via HUD, what is covered by the resident, and showcases the amount that is due to be covered by the resident.

The app, therefore, simply shows how much money a tenant owes their landlord. If their rent is $1,000, but they only need to pay $200, that is what they see on Circa. Hyman says clarity of the message and data management gives renters “peace of mind.”

The app accepts payments of all types. Residents have the flexibility to pay rent on the first of the month for free, or schedule a payment for the next month. They can also select a date or day of the week for the rent payment. Renters can ask for adjustment immediately before their payment as well, with the organization communicating with residents electronically and by phone.

“It is unbelievably flexible,” said Hyman. “She doesn’t feel shame, she does not need to go to her property manager and say, ‘I can’t pay right now.’ And that is just unbearable. And no resident should have to do that. We don’t, we don’t require any explanation, just go on the app and do it.”

Hyman worked at several life insurance companies like AIG and MetLife, before joining Circa. She says in previous roles she listened to grievances from housing-insecure customers in the past, and sympathizes with them, saying “they need a break every once in a while.”

Since evictions are starting again, concerns regarding rent collection are increasing steadily and there is a shift toward flexible payments, she explained.

What other proptechs are doing

Other proptechs are also working to help serve at-risk tenants who do not qualify for Section 8 rental assistance, such as Hello Landlord

SixFifty, a technology subsidiary of law firm Wilson Sonsini Goodrich & Rosati, launched the free tool Hello Landlord in June 2019 to help rent-insecure residents in certain areas write letters to their landlord about COVID-induced eviction moratorium protections. These areas include Oregon, Los Angeles County, Alameda County, San Francisco County, Marin County, El Cerrito and Richmond. Those who do not live in areas where eviction protections are active, can still write to their landlords to avoid being evicted with the help of this service.

The letters comprise the problems residents face with missed rental payments due to the COVID-19 Emergency and that the “new federal stimulus likely bars an eviction.”

The purpose of the letters was to convey to the landlord that evicting renters is not a viable option when the federal stimulus bill, the CARES Act, protected residents with an eviction moratorium. The moratorium extended to properties that have mortgages owned or secured by Fannie Mae and Freddie Mac, a significant number in the United States.

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