By Almot Maqolo.
HARARE, Zimbabwe – (News of The South) -As the coronavirus pandemic prompts unprecedented job losses across the country, one of the first problems for many households will be how to pay this month’s rent or mortgage.
The poorest 80% of Zimbabwe’s households including many workers in low-wage industries such as retail and food service were already spending more than half their income on housing costs even during the economic boom. These families have little or no savings that can help them weather the sudden loss of income stemming from the pandemic.
To protect renters from losing their homes, the President of Zimbabwe E. D Mnangagwa used his presidential powers and signed Statutory Instrument 96 of 2020 on deferral of rent and mortgage payments during national lockdown.
This has now put a temporary halt on evictions, meaning that landlords cannot evict tenants who fall behind on their rent. While this may buy renters more time, a pause on evictions could cause ripple effects that further hurt local economies. There is a more effective way to help renters by giving them cash that replaces lost income, while also supporting small businesses and local governments, but alas our government is too broke to do such a thing.
Rent has important multiplier effects in the local economy as rent payments do not just line the pockets of fat cat landlords but they also contribute to essential government services and other workers’ wages. If many households are simultaneously unable to pay rent, the economic impacts will be felt throughout the local economy.
The first entity that gets paid by a monthly rent check is not the landlord but it is the local government. Property taxes have a higher priority even than mortgages because if a landlord falls behind on both property taxes and mortgage payments, the local government’s claim supersedes the lenders.
Cities and towns rely on property taxes from all their citizens and that is the individual homeowners as well as owners of apartments, offices, and other non-residential properties in order to cover the cost of providing public services. Although local governments could defer property tax payments during the current crisis, the economy is already stressing local government budgets.
And just as individual homeowners worry about paying their mortgage if their income falls, if rent payments dry up then landlords will have trouble making their monthly payments. Landlords who own small apartment buildings are especially vulnerable as mortgage payments, property taxes, and insurance account for well over half of property income.
Landlords are also responsible for paying building utilities, including water and sewer fees, garbage collection and electricity for common areas. These are essential services that must remain functional even during the pandemic.
Additionally, many of the expenses incurred by landlords are actually the wages of other workers. Keeping the building functioning, safe, and clean requires the efforts of maintenance and housekeeping staff. Larger buildings typically employ on-site workers, but even small properties have ongoing needs which they may outsource to local contractors, like plumbers or electricians. As rent payments dwindle, small landlords will defer some maintenance needs, which means poorer quality housing for all tenants in the building and loss of employment for maintenance workers.
For most landlords, partial rent is better than no rent, as during a widespread economic crisis, landlords have strong financial incentives to keep existing tenants in place instead of pushing them out. Prospective tenants cannot easily view apartments or submit applications while enforcing social distancing. Vacant units bring in no rental income. Preparing apartments for new tenants thus cleaning, painting, and marketing them also costs money.
The most logical thing the SI should have done was to rather encourage landlords and tenants to negotiate reduced rent levels or accept partial payments rather than the landlord to incur the costs of the building.
Making partial rent payments instead of deferring evictions is also better for tenants, who may otherwise rack up even larger obligations that have to be repaid in the future.
Halting evictions may sound good on paper, but it risks exacerbating the pandemic’s local economic impacts in unforeseen ways. Instead, the government must step into its role as the lender of last resort through loans, grants, and direct cash payments. People, businesses, and communities across Zimbabwe need help now.
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