Landlords In Crisis

Landlords facing increasing loan default risk.

Because of the pandemic, many single-family rental landlords have become financially at-risk of defaulting on their rental home loans. RealtyTrac reports that during the past year, 48% of US counties have single-family rental property owners at increasing likelihood of defaulting on their loans.

As of the beginning of February 2021, 9.6 million renters were behind on paying their rent. Increased unemployment last year led to missed and partial rent payments, making it more challenging for landlords to pay their rental property mortgages. Federal and state rent programs aimed at easing the impact of the COVID crisis primarily benefitted renters, not landlords, and further stymied landlords by disallowing evictions for non-paying renters.

The latest data suggest that nearly ninety percent single-family rental property owners are small, often family run operations, with ten or fewer units. Most of the mortgage relief programs, such as those offered in the CARES Act, weren’t available to them because their investment properties are non-owner-occupied units. Some CARES Act assistance has been available for qualifying landlords, and, in many cases still is, however, many landlords haven’t sought help or are unaware of their eligibility.

Florida has the greatest number of at-risk counties of the 100 largest in the country, with seven. New York, California, Ohio, Texas, and Illinois each have multiple counties on this list. County data were aggregated and assigned a weighted-risk score based on three criteria: the proportion of residences rented versus owned, the county’s unemployment rate and the average single-family rental home loan to value ratio. While this doesn’t take into account specific landlord loan status, it indicates areas where multiple factors could point to increased financial difficulties for landlords.

This all adds up to potential financial distress, and, failing adequate supportive measures, defaults. While overall default rates are currently low, defaults and evictions could spike in the coming months as renters exit the protective provisions and past-due amounts suddenly become payable.

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