Cook Eviction Stats Part 9: The Cost of Doing Business
Evictions in Cook County are a multimillion dollar industry. With close to 40,000 cases happening each year, the amount of time and energy devoted to people who don’t pay their rent is mind-bogglingly vast. In fact, today I want to take some time to discuss what the eviction industry is costing Chicago in terms of lost time and money. And tenants, if you think this doesn’t pertain to you, it does. Remember that the resources that a landlord puts into evictions could otherwise be spent purchasing and rehabilitating the apartment buildings that are currently sitting empty and inaccessible.
Long time readers will know what this means. I’m going to do math for you. Again.
In order to get a clear idea of how many resources we devote to evictions in Chicago, I’m going to be looking at a scenario that’s technically impossible. I’m going to suppose that for one full year, every tenant paid their rent on time and nobody had to be evicted. I’m going to use the 2011 numbers that I obtained from the Cook County Clerk of Court, since they’re the last full year I’ve got available. Ready? Let’s get started.
Court and Administrative Costs
It costs $237 to file a Forcible Entry and Detainer case, and $432 to file a Joint Action case. Attorney representation will cost you anywhere from $500 on up, we can average that out to $750 per case. 53% of landlords and 5% of tenants had attorney representation. Based on the useful data provided by Rich Magnone in this excellent article about eviction costs, about 40% of landlords need to hire a special process server at $100 or so to chase down the tenant and serve them with notice of the eviction case. Figure about half of those will fail, requiring the Sheriff to post notice, at about $50. Then there’s the cost of the Sheriff actually enforcing the eviction – $60 each for the 62.7% of the cases that are successful. And let’s not forget about the cost in printing all the assorted paperwork – let’s ballpark that to 100 pages per case at 3 cents per page in paper and toner. (This is based on the current cost of high volume toner cartridges and cheap copy paper at Reliable Office Supply.)
Let’s make a table.
6948 Forcible Entry Cases in Chicago 2011
24857 Joint Action Cases in Chicago 2011
$750 per case on 58% of all 31805 cases
|Special Process Server
Average $100 on 40% of all 31805 cases
|Sheriff Posting Notice
Average $50 on 20% of all 31805 cases
|Sheriff Eviction of Tenants
$60 per eviction on 62.7% of cases
100 pages per case at 3 cents per page
|Total Court and Administrative Costs||$29,102,244.10|
Lost Rent and Fees
I don’t have the figures for the total amount of unpaid rent in all of the eviction cases, but we can make some estimates based on average rent rates. I did a little digging and discovered based on this RedEye article that the average rent in Chicago in 2010 was $1003. Based on a 3% annual rent increase to account for inflation and the fast market, we can suppose that in 2011 the average rent was $1033.09. If a tenant hasn’t paid their rent, they will also rack up late fees. The maximum allowable late fee according to the CRLTO on a $1033.09 apartment is $36.65 per month.
In Chicago, the time elapsed from the day a tenant stops paying rent to the day the sheriff throws them out in a best case scenario is between three and four months. Complicated cases could run half a year or more, so we’ll average that out at 4 months. The landlord is not allowed to collect rent the entire time.
However, about half of the Joint Action cases do result in money judgments, where the tenant is expected to pay their back rent. However, the landlord has to enforce that judgment in order to collect the money – this is normally done through garnishment or a collection agency. According to this brief article, the collection agency success rate in 2010 was a measly 17.1%.
So let’s do another table to see how much rent is lost in Chicago over the course of these eviction cases.
|Average 2011 rent in Chicago||$1033.09|
|Maximum Late fee||$36.65|
|Average time elapsed during eviction case||4 months|
|Money lost in a single eviction
(4 months rent + fees)
|Gross lost rent in a year
($4278.98 x 31805 evictions in Chicago 2011)
|… Minus the 8.55% of filed cases that will
successfully collect on the debt
|Net Lost Rent in a year||$124,456,952.74|
Time is Money
We shouldn’t forget that evictions take time. They take up landlord’s time, attorney’s time and tenant’s time. (I’m not even getting into the time spent by the court staff, postal carriers, clerks and sheriffs here, not to mention peer juries in the rare instances that they get involved. Those guys would still be on the payroll elsewhere in the justice system even if evictions weren’t happening.)
For the sake of argument let’s say that a tenant’s time is worth about $30 an hour. Landlords are usually a little more established, so they probably would earn about $50 and hour. And lawyers? Well they’re probably closer to $240 an hour, but they only serve on 58% of the eviction cases as I mentioned above. And let’s also suppose that everyone involved in an eviction spends an average of 4 hours working on the matter that could be spent doing other more important (and profitable) things.
I realize that counting the time an attorney spends on an eviction as “lost time” is somewhat debatable. However, most attorneys would be able to redirect their efforts into other areas of case work that could be more profitable.
So let’s see what our participants could earn doing other stuff if their time weren’t taken up with eviction proceedings.
|Tenant Lost Time
(4 hrs at $30/hr, times 31805 cases)
|Landlord Lost Time
(4 hrs at $50/hr, times 31805 cases)
|Attorney Lost Time
(4 hrs at $240/hr, times 58% of 31805 cases)
|Total Value of Lost Time||$27,886,624|
The Net Result
So, given the court costs, lost rent and lost time devoted to evictions that I’ve explored above, how much would Chicago save if every tenant decided to pay their rent on time and all eviction activity stopped for a year?
|Court Costs & Administration||$29,102,244.10|
|Uncollectible Rent & Late Fees||$124,456,952.74|
|Lost Productive Time for Involved Parties||$27,886,624.00|
|Estimated Total Spent on Evictions in Chicago in 2011||$181,445,820.84
(or $5704.95 per case.)
Let me put that in perspective for you.
It’s 61% of the entire projected Chicago budget deficit for 2013, which was projected last autumn to be $298 million.
It’s enough to put over 2500 in-state students through four years of undergraduate studies at UIC. That’s about two Chicago public high schools worth of kids.
Or even better – let’s suppose that landlords had all of that money and time to devote instead to purchasing and rehabbing additional apartment buildings.
It would cost them $37,018,375 to purchase every bank-owned, foreclosed apartment building of any size that is currently listed in the MLS in Cook County. All of them. That’s 1043 apartments that are currently sitting empty, hazardous and useless.
Suppose you even double the purchase price so that you’d have money to rehab all of those buildings, since many of them are really run down.
You’d still be able to purchase and rehab all of the foreclosed apartment buildings on the market in the entire county 2.45 times over.
You could house 2556 families. That’s 16.4% of the children who were homeless at the end of the 2010-2011 school year according to this Sun-Times article.
Want all of that in handy infographic form? Here you go.
A lot of tenants get angry over how the court system treats them if they can’t pay their rent and wind up in eviction court. It’s true that the process is humiliating and the results will follow you around like a scarlet letter for years. If you’re already in a situation where you can’t afford to pay your rent, it adds a whole lot of insult to an existing injury. However, there’s also a lot of so-called “professional tenants” out there who go from eviction to eviction, dependent on the court’s slow process to live rent free for huge spans of time.
Landlords and both of these sectors of tenants need to be aware of the true effect of their actions. Time and money spent on evictions may be an unavoidable cost of being in the rental business in Chicago, but it is all time and money that could be better spent elsewhere. A huge portion of the amount spent each year could be minimized through mediation, negotiation and basic communication without invoking the threat of court enforcement. I said at the beginning of this article that a year without evictions was impossible, but maybe we should try to make it happen.
Wednesday this adventure will come to an end with a general wrap-up article. If there’s something I’ve missed over the past 9 parts of this series please let me know, as it will be the last time I focus on evictions for a very long time. (I can year you cheering from here.) See you then!