6. Protecting Renters and Stabilizing the Rental Supply

Data from the Mortgage Bankers Association show that 20 percent of national foreclosure actions in 2007 were associated with small multi-unit properties. According to the Woodstock Institute, nearly 35 percent of foreclosure filings in Chicago in 2007 occurred in two-to-six unit, multi-family properties. A study by the National Low Income Housing Coalition of foreclosures in Connecticut, Massachusetts, New Hampshire and Rhode Island shows that 32 percent of properties and 52 percent of units at the end of the foreclosure process were multi-unit property (January 2007-March 2008). As a result of the rapidly increasing displacement of renters by foreclosure, a number of strategies to protect them have been developed, expanded or enforced. 

Strategies include:

• Emergency rental assistance to support up to three months of rent and moving expenses for eligible tenants evicted after a landlord’s foreclosure (e.g., Chicago).
• Pro-bono legal services provided to evicted tenants.
• Renter counseling and advocacy by nonprofit groups.
• State laws or notification systems that guarantee renters a minimum notice (as much as six months) before being evicted from foreclosed buildings (e.g., the Cleveland Tenants Organization partnered with seven local organizations to notify 5,000 renters living in foreclosed properties in order to inform them of the situation and offer support and information regarding their rights and available resources).
• Reserving tenant-based housing vouchers for renters who lose their homes to foreclosure (e.g., Connecticut).
• Television ads informing tenants of their rights. (e.g., When Baltimore passed a law giving renters in foreclosed properties more time before eviction, the district launched television ads to inform tenants of their rights.)

Federal protections for tenants living in foreclosed properties were signed into law by President Obama in 2009.

The renter protection provisions took effect immediately and expire at the end of 2012.S. 896 contains these key renter protections:

• 90-day pre-eviction notice to tenants whose homes have gone into foreclosure.
• The rights of tenants to remain in their homes for the terms of their leases. (However, if the new owner will live in the home, leases can be terminated subject to the 90 day notice.)
• Tenants with Section 8 vouchers able to remain with both their lease and rental assistance payments intact, subject to the rights of the purchaser at foreclosure who wants to occupy the home after 90 days notice.
• Currently, in most states, renters get little or no notice to vacate their homes upon their landlords' foreclosures.  The new federal law will not preempt state laws that provide a greater level of renter protections at foreclosure.

Meanwhile, outreach and intervention with landlords at risk of foreclosure may be an important element of stabilizing neighborhoods with significant rental stock.

Strategies include:

• Similar outreach and counseling services to those offered to owner-occupants.
• Policies that encourage loan modifications and refinancing for landlords.
• Emergency repair loans for landlords.
• Organized recruitment and financing of responsible landlords to purchase multifamily foreclosed properties.
• Acquisition of foreclosed multifamily property by a nonprofit housing provider.