In her two decades as a landlord, Lanette Hayashi has been lucky. She has two rental houses, and has had the same renters for the last 19 years — that is, until her Pearl City renters left in December. That’s when she decided to renovate the place, gutting the bathroom and putting in new flooring and lanai.

But by the time Hayashi finished the repairs, the coronavirus pandemic hit and Gov. David Ige had imposed an eviction moratorium. Now Hayashi is hesitant to get a new renter. What if they trash the newly renovated place and she’s not able to kick them out? She no longer has a mortgage on the house and can afford to leave it empty. So that’s what she’s doing — allowing it to stay vacant as the pandemic continues, with no end in sight.

“I’m so afraid,” she said. “It’s a confusing situation, actually.”

Honolulu landlords are struggling to make their mortgages as their tenants pay less rent. Anthony Quintano/Civil Beat

Hayashi is one of many landlords in Hawaii who are grappling with the continuing eviction moratorium — an unprecedented rule that prevents private landlords from evicting people who don’t pay rent. Last week, Ige extended the moratorium through the end of November — good news for tenants who have lost their jobs, but bad news for some landlords who are increasingly frustrated by their inability to collect rent.

Philip Garboden, a professor in affordable housing at the University of Hawaii, says Honolulu has more single-family homes as part of its housing stock than average, and by extension more mom-and-pop landlords who may not have the resources to withstand long bouts of missing rent.

He conducted a recent survey that found more than 38% of Hawaii landlords surveyed are struggling to stay profitable and the residential vacancy rate has more than doubled, up to 9.2% compared with 3.9% prior to the pandemic.

Some like Hayashi are afraid of renting their properties while not making any money in return. Ten percent of landlords in the survey have contemplated selling since the pandemic, which could shrink Hawaii’s limited rental housing stock and drive up prices over the long term, Garboden said.

Not all landlords are abiding by the moratorium, according to Dan O’Meara, an attorney at the Legal Aid Society of Hawaii, who has been helping to protect tenants from illegal evictions. O’Meara says he still speaks to landlords who are unaware of the moratorium and said some landlords are trying to circumvent it by taking tenants to court for breach of contract. Others aren’t participating in the state’s rental assistance programs in part because they weren’t paying taxes on their rentals to begin with, O’Meara said.

But even landlords who are following all the rules are having a hard time, and even securing state rental assistance for their tenants hasn’t been easy. The state stopped accepting applications for rental or mortgage assistance on Friday after receiving nearly 20,000 applications. So far, fewer than 1,000 households have been helped, according to the state, which is bringing on extra staff to process the backlog in applications.

Challenges Paying Bills

Landlords with federally backed mortgages can participate in forbearance programs, putting their payments on hold for six months to a year due to the federal coronavirus legislation. But not everyone is eligible — and some are even wary of participating.

That includes Margaret Murchie, a real estate agent and landlord who has mortgages on two two-bedroom apartments in addition to her personal home. One rental unit is vacant. She had tenants from the mainland lined up earlier this year, but they pushed back their moving date due to the pandemic and ultimately decided not to move.

Her second unit is rented to a woman who recently lost her roommate and has struggled to pay the rent.

“I can’t kick her out and I don’t want to kick her out,” Murchie said. But that forces Murchie to make up the difference. “I count on that income.”

Murchie said she hasn’t wanted to apply for mortgage forbearance because she is worried it could affect her credit. Forbearance isn’t supposed to hurt your credit, but banks do have different rules about when and how homeowners must pay the money back.

JoDee Hunt said she learned the hard way about how forbearance works during a recent lava disaster on Hawaii island. For six months she benefited from lower payments on a hotel property she and her husband own. But then their mortgage payment doubled, which she hadn’t expected.

She and her husband have mortgages on 18 units in Wahiawa, 30 in Chinatown and 30 in central Oahu — a mix of commercial and residential units across multiple buildings. She’s not eligible for forbearance but says even if she were, she wouldn’t do so again.

Ernie and JoDee Hunt have been accepting partial payment from some renters and say they’re better able to withstand the pandemic than smaller landlords. Courtesy: JoDee Hunt

Hunt says 13 of her units were rented to businesses, and five of them have closed since March. The remaining tenants have been able to quickly secure government assistance to help cover their rent.

A couple of her tenants have been waiting for unemployment assistance since March.

“It’s just defeating for them because they’re on the phone night and day,” she said. “One tenant was waiting, waiting, waiting for unemployment and finally she got a back payment and paid me $5,000, but then she has not been able to pay since then.”

Another tenant, who is a business owner, has had to choose between paying her rent at her business or at her home. Hunt said she told her renter to prioritize her business, because she won’t be able to pay either if it goes underwater, meaning that her tenant’s money has been going to another landlord and not Hunt.

Hunt considers herself fortunate — she’s been able to float the mortgages through savings. Smaller landlords that own two to four units and don’t have extra resources may not have that luxury, she said.

Her Chinatown rental complex costs her more than $5,500 a month for utilities, regardless of whether her tenants can pay. She understands why the moratorium is necessary but says some government assistance with fixed costs would go a long way.

Choosing To Sell

As the pandemic continues, some landlords are considering selling their properties. Maria Tanega owns properties in Manoa and near Iolani School and has one tenant who hasn’t paid rent since August. Tanega said her tenant is still waiting for money from the state’s rental assistance program.

“Tell the governor, stop the moratorium. I cannot subsidize the freeloaders. I want to get rid of them,” she said.

Like Hunt, Tanega wishes the city would subsidize water and sewer for the landlords. She previously didn’t want to sell her property due to potential taxes and its prime location near Iolani School, but is considering it now.

“For now with this COVID thing I’d rather get my capital back and a little profit and share it with IRS than being overtaken by tenants who want to freeride on water and sewer,” she said. “They don’t even pay half of the rent.”

Michael Shower did decide to sell, four years after purchasing two legal vacation rentals in Waikiki that, at first, seemed like a great investment.

Philip Garboden is a professor at the University of Hawaii specializing in housing. 

But when COVID-19 hit, the pandemic shutdowns meant Shower wasn’t able to rent out the apartments anymore to tourists. He thought about renting them to longtime residents but decided against it due to the eviction moratorium — what if they rented the place and refused to pay rent?

He talked to his banker about going into forbearance on his mortgages but felt there wasn’t enough clarity about when he was going to have to pay back the mortgage or if he could tack it onto the end of his loans.

Last month, he decided to sell both properties.

The Kaimuki resident and realtor said it’s a relief to get rid of the mortgages and the accompanying financial anxiety. But Shower wishes that the government had a clear plan to deal with the pandemic and he wasn’t forced into this situation.

Landlords for long-term rentals who choose to sell could have big implications for Hawaii’s long-term rental market, says Garboden from the University of Hawaii.

Honolulu’s rental housing market is made up of more single-family homes than many other cities, he said. Single-family rental houses tend to be owned by small landlords, who may have less capital to rely upon during the pandemic.

“I don’t really see here any way that we get that stock back as rentals,” he said. Even losing 5% of the rental housing stock would be significant, he said. “To me, the rental stock in Hawaii is a fairly precious resource.”

Less rental housing supply could ultimately lead to higher rents down the line. Garboden said the eviction moratorium is “necessary but not at all sufficient.”

“In 2021, there’s a huge need for some form of longer term rent assistance,” he said.

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