For months, Jamie Steward thought the recession just meant fewer customers for the small auto repair business she ran out of her garage.
But three weeks ago, Steward heard a knock at her door. A Ramsey County sheriff was outside. He explained that Steward’s landlord had stopped paying his mortgage and the St. Paul bungalow was now in foreclosure.
“I couldn’t believe it,” Steward said. The 35-year-old single mother and her two youngest children moved into the house in 2007. Now she is scouring the classifieds looking for a new home.
Steward is just one of thousands of Twin Cities’ renters hit hard by the economic downturn. While middle-class homeowners have been the primary focus of relief efforts, evidence continues to mount that some renters may be in even worse shape. A comprehensive study of foreclosed rental units in the Twin Cities does not exist. However, a new study conducted by U of M Professor Ryan Allen estimates that about 60 percent of all foreclosures in Minneapolis between July 2006 and June 2008 were rental properties.
As renters living in foreclosed properties scramble to find new housing, they face competition from foreclosed homeowners looking for a place to stay. At the same time, area homeless shelters are overflowing, with at least 10 percent of shelter beds occupied by people who lost their housing due to foreclosure, most of them renters.
Last year, the state legislature approved a series of changes in landlord and tenant law strengthening renter’s rights in foreclosure situations. Mortgage holders are now required to provide a two-month written notice to tenants to vacate a rental property. The changes also allow tenants to use their security deposit to cover last month’s rent, and permit renters to pay their own utilities when the landlord skips out on the bills.
“Since the laws have changed, tenants have been given a lot more power and a lot more rights,” Melina Chohan, attorney for Legal Aid’s Tenants in Foreclosure program, said.
Still, Chohan said, many landlords knowingly violate these regulations, often taking advantage of tenants’ unfamiliarity with their legal rights. Non-English speaking immigrant households are particularly vulnerable. “Landlords are renting to them, saying, ‘Oh, here’s your year lease. Pay me a few months in advance,’” Chohan said. “A week later the building is foreclosed upon.”
Although these actions are illegal, tenants often face lengthy legal battles to resolve such matters. Since its inception in April, Legal Aid’s foreclosure program has worked with more than 100 clients on problems ranging from a landlord’s failure to return a security deposit to a landlord’s refusal to fix a boiler once the property has gone into foreclosure.
Meanwhile, even renters lucky enough to avoid foreclosure face an increasingly tough time.
Governor Tim Pawlenty recently proposed cutting the state renter’s property tax credit by 27 percent as part of his plan to balance the budget. The Minnesota Coalition for the Homeless argues that reducing the rebate would penalize low-income renters, many of whom depend on the rebate for basic needs like dental care, school supplies, and prescription drugs.
Local advocates say that the lack of affordable housing remains the biggest challenge for low-income families. In 2008, average rent in the Twin Cities increased to $906 a month, up from $899 in 2007, according to a report by GVA Marquette Advisors.
Most housing experts say that housing becomes unaffordable when a household pays more than 30 percent of their income toward rent. Using these standards, a renter would need to earn about $17.50 an hour working full-time to have affordable housing. In Ramsey County, the estimated average wage for a renter is $13.94 an hour. In Minneapolis, the average is slightly higher at $15.80.
Steward spent most of her income on rent until 2002, when she received a Section 8 voucher. “I thought I had finally won big,” she said. Steward pays $86 a month for her three-bedroom home, where she lives with her 15-year-old daughter Kayla and 9-year-old son Seven.
Steward graduated from St. Paul College in 2007 with a degree in automotive repair. Unable to find employment, she started repairing cars out of her garage. “On a good month, I make $600,” she said. “On a bad month, it’s more like $200.”
Steward also receives $297 in monthly child support benefits, $147 in cash assistance, and $415 in food support. Raising a family of three on less than $1500 a month is tough, Steward said, but for a while her situation seemed stable.
Her two children enrolled in local public schools and made friends in the neighborhood. Steward started collecting auto repair tools and storing them in her living room next to framed photos of her children. She had hopes that her business would grow.
“And then I learned about the foreclosure,” Steward said. “You know how sometimes you just get that home feeling when you’re all settled in? That’s gone now. There’s just uncertainty. I’ve got kids. I don’t like uncertainty.”
A sheriff’s sale is scheduled for March 25, but rental laws allow the family to remain in the house for an additional six months. Steward said she also talked to a worker at the St. Paul Public Housing Agency, who confirmed that she must vacate the property by the end of August.
Still, Steward worries that she won’t be able to find a safe, decent apartment with a landlord who will accept her Section 8 voucher. She said she stays up late at night wondering how she’ll be able to afford application fees on a new apartment and whether her children will be able to remain in their current schools.
More than anything, she said, she’s frustrated by her lack of control over the situation. “I’m a good tenant,” she said. “I pay my bills. Why is it my fault if my landlord doesn’t?”
Madeleine Baran is a freelance journalist, specializing in labor and poverty issues. Her articles have appeared in The New York Daily News, Dollars & Sense, Clamor, The New Standard, and other publications.