(C) Common Dreams
This story was originally published by Common Dreams and is unaltered.
. . . . . . . . . .
Could This Rolling Rent Strike Make the Feds Protect Tenants? [1]
['Aaron Fernando', 'Aaron Fernando Is An Independent Journalist Covering Grassroots Movements', 'Solidarity Economy Projects', 'With A Focus On Land', 'Policy', 'Housing', 'Co-Operative Movements. He Is Also An Organizer With The Ithaca Tenants Union', 'Runs A Video-Focused Publication', 'Striking Distance Ithaca', 'Loves Speculative Fiction']
Date: 2024-10-04
On Oct. 1, tenants in two apartment complexes in Kansas City, Missouri, went on rent strike.
Their demand? That the federally backed loans their landlords depend on be conditioned upon protections for tenants living in the properties that receive this publicly supported financing.
These strikes are part of a campaign coordinated by the Tenant Union Federation (TUF), a new “union of unions” that was formed on Aug. 6 of this year. Still, the decision to strike came from the residents of these buildings themselves, who voted to authorize them on the evening of Thursday, Sept. 27.
Organized tenants in both Kansas City complexes, Quality Hill Towers and Independence Towers, are now withholding rent and demanding that their landlords and the Federal Housing Finance Agency (FHFA) take significant steps to protect tenants. FHFA regulates Fannie Mae and Freddie Mac, which, in their role as the major purchasers of mortgage loans, set standards for what loans they are willing to purchase.
According to organizers with TUF, these strikes kick off a much larger campaign: a coordinated rent strike, actively organized in cities around the U.S. where buildings of tenants can join the strike as they organize themselves and become strike-ready. TUF has indicated on social media that tenant unions in Michigan, Illinois, North Carolina, South Carolina, Montana, and Kentucky may soon join the action.
The coordinated rent strike is meant to address a crisis starting to reach a simmer: unsustainable debt in the multifamily rental market, which in turn leads to high rents and poor conditions for tenants. “There is a huge crisis of distress in the multifamily rental market that people are not talking about, really, beyond in the industry,” explains Ruthy Gourevitch, TUF policy team lead and housing policy director for the Climate and Community Institute.
As reported by The New York Times in July, almost a fifth of all multifamily loans are at risk of becoming delinquent, and the industry is watching the trend closely. The reasons are unclear, but the Times suggests the causes include inflation, overbuilding of luxury apartments in some Sun Belt cities, and an expectation that rents would keep rising everywhere faster than they have. That latter challenge frequently affects landlords who purchased a building with the expectation of moving out lower income tenants in favor of higher ones.
Gourevitch’s team found that in order to meet their debt obligations, landlords typically do one of two things: “Either they increase the rents . . . or they try and sell the property [to pay off outstanding debts],” she says. “We’re seeing this churn of properties changing landlord hands without any sort of improvement to tenant conditions.”
TUF’s Plan
Members of the Quality Hill Tenant Union launched a rent strike on Oct. 1. Photo by Jillian Guthrie
TUF organizers say that the coordinated strike aims to build leverage that forces the hand of the Federal Housing Finance Agency to do something—specifically, to codify tenant protections for all landlords that receive loans backstopped by the FHFA. The organizers demand that the FHFA introduce rent caps, in addition to demanding maintenance, structural repairs, and other concessions from the landlords. “What we’re trying to do is actually force the regulator to act as a proactive regulator of this market,” says Tara Raghuveer, director of the Tenant Union Federation and co-founder of KC Tenants, the 10,000-member union where these first strikes are taking hold.
FHFA regulates Fannie Mae and Freddie Mac, which are government-sponsored enterprises (GSEs), or for-profit corporations chartered by Congress to provide liquidity and risk management for the U.S. housing market. Mortgage lenders issue loans to multifamily properties, which the GSEs then purchase, bundle, and securitize. Because mortgage loans are so long-term, lenders need to be able to sell most of them to the GSEs to get the funds to make more loans. Therefore, lenders typically make sure their loans conform to GSE standards.
However, upon looking more closely at the loans for many of these distressed multifamily rental properties, Gourevitch says the TUF research team has found that “the loan terms are, for lack of a better word, wild. First of all, [the lenders are] backing properties that are clearly already in financial distress, and so they seem to be pretty loose in their requirements of what types of properties they back.” Gourevitch explained that by issuing loans to properties that are already financially distressed, lenders exacerbate the pressure to generate revenue, which gets passed on to tenants in the form of high rents and fees, and a lack of upkeep. “What we see on the balance sheets,” she says, “is [that] the amount of revenue that a landlord needs to be generating at the property level in order to be able to pay back the loan and abide by the loan terms is so significant that essentially the only way to achieve that goal would be to increase revenue generation at the property in a steep way.”
The way to counter this is with tenant power, says Gourevitch, and “tenants’ power is their rent. If tenants withhold their rent, it will set off this chain of events in which the landlord starts to enter financial distress, which triggers a whole process involving the [loan] servicer and the federal government.” If a landlord is unable to make their mortgage payments—as the striking unions aim to make happen—the GSEs securitizing the mortgage could take the landlord to court and get a court-appointed receiver to take over the property, explains Raghuveer.
In fact, that’s what was happening with Independence Towers, before the strike even began. “We were able to direct Fannie to initiate the process to get the Independence Towers into receivership,” says Nick Jacobs, senior communications specialist at FHFA. “Fannie did that, and then we were able to direct them and guide them to provide funding dedicated to fixing the situation.”
In other cases, “what they might do, frankly, is bail out the landlord,” Raghuveer says. Either way, “each of those interventions that the federal regulator or the GSEs might take to protect the landlord and protect their investment, becomes an opportunity for us to intervene and say, ‘Protect the tenants.’”
The TUF organizers have been looking to mobilize tenants in buildings that appear to be on the verge of financial insolvency, based on available data. There’s another reason to organize in those buildings: in a lot of cases tenants in financially strapped buildings are unhappy and living in poor conditions, and are therefore more ready to organize. “That’s where landlords are often cutting back on expenses and increasing fees on tenants,” explains Gourevitch, who has looked into the available data on the landlords’ financials. “And there, the theory is that just a handful of tenants withholding rents could tank that debt service coverage ratio and really hurt the landlord’s bottom line.”
We want to get it right in such a way that helps tenants and protects them, but also protects the safety and soundness of the mortgage markets.” Nick Jacobs, FHFA
According to the FHFA, a whopping 16 million people live in rental units with mortgages backed by Fannie and Freddie. “FHFA, we would assert, has untapped potential to regulate a large swath of the rental market,” says Raghuveer. “And that would then have a huge impact on the rest of the market.”
Jacobs, a spokesperson for the FHFA, says that the agency has been having “holistic conversations with stakeholders across the spectrum on the agency’s tenant protections policy and multifamily housing issues,” including the tenant unions, and that the agency plans to continue these conversations on the local level, in Kansas City, as well as continue taking feedback at a national level. Jacobs declined to comment on the FHFA’s position on the strike itself.
When asked if TUF’s biggest demand—the national rent cap—was a possibility, Jacobs responded, “We’ve taken specific actions in July and August designed to provide additional protections for tenants and are continuing to review feedback to determine next steps. . . We want to get it right in such a way that helps tenants and protects them, but also protects the safety and soundness of the mortgage markets.”
Campaign Background
Photo by Jillian Guthrie
TUF has its roots in a previous campaign, Homes Guarantee, which was launched in 2017 as an arm of the multi-issue organizing group People’s Action. That campaign set its sights on FHFA after it found that it had the ability to enshrine and enforce increased tenant protections, through its regulatory capacities. But ultimately, that campaign did not achieve its ambitious goals, which included increased protections for tenants at the federal level, a tenants bill of rights, and cancellation of rents during the pandemic. “Part of the reason for launching the Tenant Union Federation is that we became increasingly aware of how little power we had,” says Raghuveer. During that campaign, organizers found that there were structural issues with how multifamily rental units were financed, which was leading to an affordability crisis. “This is actually a systemic issue,” says Raghuveer, and so “what we’re trying to push for is a systemic solution.”
In May, U.S. Rep. Emanuel Cleaver hosted a meeting between FHFA director Sandra Thompson and tenant organizers in Kansas City. After that meeting, FHFA did codify three additional regulations to protect tenants, but they were minor, dealing with notification of rent increases, notification around the end of a lease, and a five-day grace period on paying rent.
The organizers did not find these changes adequate. “[FHFA director Thompson] failed to commit to taking the step that we need her to take,” recalls Raghuveer, “which is conditioning these federal loans on tenant protections, and specifically rent regulations. We left that meeting and immediately engaged in a summer-long process of assessing our readiness to take tenants on rent strike in a set of properties across the country with federally backed loans.”
The First Strike
TUF organizers began their work in June at Quality Hill Towers, one of the first two buildings that kicked off the coordinated strike on Oct. 1.
The organizing was fueled by increasing rents and poor conditions. “When I turn on my water, the water is brown,” says Lawrence Sims, a resident at Quality Hill, who says he started organizing shortly after he moved to the property because of how bad the conditions were. “There are people with holes in their ceiling. I have a neighbor who said that their faucet broke and then sewage—refuse—just came pouring out, everywhere, which is insane. People without working stoves. Last year during winter the heating went out for a week.” Tenants at Quality Hill have also said they experience harassment and intimidation from property management.
After three weeks doing a union card drive, they ended up with 148 members of the union, about 63 percent of the households in the building, says Grace White, lead organizer for the Tenant Union Federation. Then, “we had union members ratify their list of demands, and then the next week, we had them elect a bargaining team,” says White. After that, the union launched publicly and sent a list of demands to the landlord, Sentinel Real Estate. Demands included a five-year rent freeze; structural repairs to heating, plumbing, and wiring in the building; standardization of rents across similar units; and a commitment to timely responses to maintenance requests. The union is also demanding good cause protections for lease renewals, and an end to harassment from property managers. There was some back and forth with the landlord over email (the company has refused to meet in person), but the tenants won only small concessions like better pest control, according to White.
The Quality Hill Tenant Union launched a rent strike on Oct. 1. Photo by Jillian Guthrie
Sentinel provided a statement that says, “Management has been working with the union in good faith for more than a year and continues to respect and affirm tenants’ rights to organize. However, claims being made by the tenant union are false. The work being demanded either has already been completed or is underway—executing a rent strike will only impede the property’s ability to complete these necessary repairs. This outcome would negatively impact all residents—even those who choose not to participate in the rent strike.” The company’s statement goes on to say that the high rent hikes that organizers have noted some residents experienced have been a result of switching to month-to-month status, stating that since 2020, annual leases have increased an average of only 3 percent. (This is why standardized rents across all similar units is one of the union’s demands.)
The union disputes the idea that Sentinel is bargaining in good faith, writing in an email, “The Quality Hill Towers Tenant Union has repeatedly invited Sentinel Real Estate Corporation to the negotiating table. Since September, they have refused to meet and bargain with the union. If they have a plan to meet our demands, they have not shared that plan with us. Instead, tenants have received implicit threats.”
The crucial part of TUF’s plan, however, is that its members also have demands for entities other than the landlords. From Fannie Mae—and the receiver, if the complex goes into default—the union is demanding a “collectively bargained lease agreement for all residents through our union with any prospective buyer, before a sale can be approved.”
All the tenant unions on strike also have an ambitious shared demand that would affect all properties across the country with mortgages backed by FHFA-regulated entities: They are demanding that the FHFA condition its support for all existing and future federally backed lending for multifamily and mobile home parks on a 3 percent annual rent cap.
After the Quality Hill Tenant Union’s initial negotiation with the landlord, the organizing ratcheted up for a few weeks and eventually a strike authorization vote went to all the tenants in the building who were part of the union. The vote was successful, and as of Oct. 1 there are 54 units that signed strike cards—23 percent of all occupied units in the building, or 36 percent of unionized units. In Independence Towers, the proportions are higher, with 35 units of 63 total occupied units on strike at the time of publication, or over 55 percent of the building.
White, like the other organizers who spoke to Shelterforce, reiterates that the pain of the financial struggles of much of the rental market was being pushed onto renters, who couldn’t take it any longer. “In a world like that,” White says, “it feels like the only option is to try to fight back, even if there’s some risk associated with it.”
The landlord, Sentinel, would like the tenants to focus on the risk. “We believe the tenant union’s rent strike is misguided, short-sighted and has the potential to create negative consequences for the entire property,” the company wrote. “This rent strike is not a legally protected action in the state of Missouri and participation puts tenants at risk of violating their lease agreement. Accordingly, we encourage our residents to maintain their regular rent payments and consider all the facts.”
“If Sentinel charges late fees and starts filing evictions against the strikers,” said a
TUF spokesperson in a written statement, “they will demonstrate that they are acting in retaliation, in bad faith, and that they do not wish to find solutions.”
A rent strike is the difference between not paying rent from a place of desperation versus strategically and collectively withholding rent from a place of power.” Grace White, TUF organizer
The organizers take both the rent strike and its associated risks seriously. “In the last two years, landlords have aggressively hiked rents to the point that tenants don’t have affordable options,” says White. “People who live at Quality Hill oftentimes say ‘This is my only option. There’s nowhere else that I can go.’” Therefore, it’s extremely important to TUF that all of the strike organizing is bottom-up and led by building leaders.
“There’s a lot of deliberate steps that we are not skipping, and shortcuts that we are not taking,” adds Raghuveer. “A rent strike is the difference between not paying rent from a place of desperation versus strategically and collectively withholding rent from a place of power. And that requires really deep and serious organizing.”
Raghuveer says that the campaign found in its research that as few as 20 percent of tenants going on strike could push some landlords into financial crisis, but doesn’t feel that is the strongest organizing position for tenants. The campaign aims for supermajorities of tenants when possible—ideally 65 percent or more authorizing a strike. At any point, tenants who have gone on strike can vote to call their strike to a close, if they feel their demands have been met. They hold their unpaid rent aside for future negotiations.
Tenant organizers in dozens of buildings, largely in the South and Midwest, have been mobilizing to form tenant unions in coordination with TUF. “We have another set of buildings that may be strike-ready by Nov. 1,” says Raghuveer. Next they have “a bunch” of buildings where they will soon be announcing that a majority of the occupied units have joined a tenant union, and, she says, “we’ll see what the trajectory of those unions will be after they launch.”
TUF won’t say just how many buildings they expect to join the rent strike, in the near or longer term, but when asked what to expect in the next few months, Raghuveer had a one-word answer: “Escalation.”
[END]
---
[1] Url:
https://shelterforce.org/2024/10/04/could-this-rolling-rent-strike-make-the-feds-protect-tenants/
Published and (C) by Common Dreams
Content appears here under this condition or license: Creative Commons CC BY-NC-ND 3.0..
via Magical.Fish Gopher News Feeds:
gopher://magical.fish/1/feeds/news/commondreams/
