A federal ban on evictions is putting the squeeze on smaller landlords, who are unable to directly access Covid rental relief funds, and some are starting to sell properties to recoup losses.

This will likely reduce the much-needed, affordable rental stock in an already unaffordable housing market.

Covid relief bills out of Congress have earmarked over $50 billion to go toward rent relief. But the requirements vary depending on state and even local jurisdictions.

Any application for relief must start with a tenant. They have to file paperwork declaring they are unable to make payment in order to get the government money, which is then funneled through to landlords. Landlords cannot request it themselves. In some areas, they can help their tenants with the process, but in others they may not.

“So if you happen to be in a jurisdiction that allows you as the property owner to work on behalf of your resident, to be an advocate, to get those funds into their hands as quickly as possible, then you’re going to be much more successful,” said David Pinnegar, president and CEO of the National Apartment Association. “If you’re in jurisdictions that have taken an approach that is not so customer service friendly, then it’s going to take longer.”

The Centers for Disease Control and Prevention on Monday extended the eviction ban until the end of June, as the Biden administration proceeds with the next phase of its plan to stamp out the coronavirus.

The program is intended to keep renters safe. Yet while large multifamily rental companies can offer concessions and weather some missed payments, smaller landlords often cannot.

Sixty percent of single-family rental homeowners who are owed back rent received the necessary paperwork from their tenants, as required by the CDC, to receive the relief money, according to the National Rental Home Council. 

With so many still waiting for relief, however, about a third of landlords said they will be forced to tighten standards when evaluating future rental applications, and 11% said they have already been forced to sell at least one of their properties.

In the current housing market, which is seeing very high demand and a record low number of homes for sale, homes listed by landlords will likely sell to owner occupants and evaporate from the rental housing stock. The pandemic-induced run on housing in the past year has caused the amount of rental stock to decrease by over a quarter of a million units. Rental housing is generally more affordable than ownership.

“The thing that keeps me up at night is we had a housing affordability crisis going into Covid-19,” said Pinnegar. “If we lose that critical naturally occurring, affordable housing that is out there across this country, we’re going to have a catastrophe on the other side of this.”

Marilyn Blackburn, a landlord in Washington state for 20 years, has decided to sell her nine rental properties as soon as she can. 

“It’s been six months with these tenants and we’ve lost, I think I’m out about $12,000 so far just in the rents,” said Blackburn. “And you know they don’t allow us to collect late fees either, so there’s a couple of thousand [dollars] in late fees as well. And again, you still have to keep paying the mortgage every month.”

Blackburn said the tenants who are not paying are refusing to respond to her. If they don’t file the paperwork for the relief, she gets nothing.

“It’s just frustrating. You know people are living in my house, taking advantage of me, and there’s nothing I can do about it,” she said.

A Census survey this month found 15% of renter households, or 6.7 million, said they were behind on their rent. Additionally, nearly 27%, or 11.8 million households, have slight or no confidence in their ability to pay next month’s rent. Some estimates are that close to $60 billion in back rents and fees are owed since the pandemic began.

“You get to a point where you get that far behind that you just, the world begins to cave in on you and you don’t have the desire to try to go through a process that is very difficult and complex to get the assistance that you need,” said Pinnegar.

More than half the rental stock in the nation is owned by smaller landlords, and more than half of those landlords have tenants who have missed payments during the pandemic, according to a new survey from the NRHC. Of those, more than one-third said they have had to dip into personal savings or take out a loan to make payments for mortgages and maintenance on their properties.

“The financial difficulties encountered by rental home property owners over the past year have created real uncertainty concerning the direction of the rental housing market, uncertainty that has only been exacerbated by myriad local, state, and federal eviction moratoria,” said David Howard, executive director of NRHC. “While rental assistance programs will certainly help, for many property owners it may be too late.”

Steffen Landrum owns several rental properties in Massachusetts. He said he finished 2020 with a more than $10,000 deficit in owed rent, three of four properties in forbearance and $6,500 in utility payment arrears.

“Despite this I think that I’m lucky to be holding on. This is mostly due to a few reliable residential tenants and my business tenants,” said Landrum. “Unfortunately, I may have to hit the reset button and sell one if not two properties before this is all over with.”

— CNBC’s Lisa Rizzolo contributed to this report.