Late Tuesday, as temporary, coronavirus-related eviction protections in several states had expired, the Trump administration announced a somewhat creative plan to stop most rental evictions through the end of the year.
The White House issued an order through the Centers for Disease Control and Prevention that declared evictions during a pandemic are a national health hazard. The unprecedented order by the CDC came after a federal moratorium on evictions from properties with federally backed mortgages expired at the end of July.
While tenant advocates applauded the eviction action, most said the administration’s move lacked the necessary financial relief for both tenants and landlords to keep them all from falling further into debt.
“The CDC order is really quite extraordinary, but if it’s not coupled with rental assistance, it’s just pushing the issue down the line and it will snowball into a crisis that landlords and tenants will be recovering from for decades,” said Emily Benfer, a law professor at Wake Forest University and co-creator of the COVID-19 Housing Policy Scorecard with the Eviction Lab at Princeton University.
“We need $100 billion to cover this deficit and that investment is far less expensive than the cost of eviction, the cost of homelessness — all of the downward effects that this causes,” Benfer said.
For landlord financial assistance, administration officials pointed to leftover CARES Act funds as well as money from the Department of Housing and Urban Development’s Community Development Block Grants. Experts, however, claim much of this money is already gone.
“If tenants are unable to pay their rent, then millions of our nation’s housing providers – many of whom are individual landlords and small business owners – will be unable to meet their mortgage obligations, make payroll to their own employees, maintain a safe and healthy living environment for their tenants and pay their state and local government property taxes,” said Bob Broeksmit, CEO of the Mortgage Bankers Association. “The result would be a cascading reaction that would only exacerbate the current economic crisis, leading to more job loss, financial pain, and long-lasting economic effects.”
Taylor Denchfield, a landlord in Maryland who owns about a half dozen very small apartment properties, said the expiration of the various federal and state eviction moratoria over the past month has actually helped landlords and tenants to work together. This new order puts an end to that.
“A tenant who is behind on rent today would have a lot easier time making a payment arrangement with their landlord now, rather than not paying rent for four more months knowing that they cannot be evicted and facing an even larger balance come Jan. 1,” said Denchfield. “I am afraid that in the long term, this will result in even more evictions due to the snowball effect of renters’ debt surpassing what may — as of right now — be a more manageable number. Generally speaking, it is a lot easier to work with a tenant now who may only be two to three months behind on rent than it will be at the end of the year when they would be an additional four months behind if no payments are made.”
Small, mom and pop landlords make up the majority of single-family rental homeowners. Close to 23 million units in 17 million properties are owned by individual investors, according to the most recent count by the U.S. Census Bureau. If they don’t have rental income, they can’t pay their mortgages, taxes and the insurance on the home. That could trickle into the broader health of the housing market.
“Without sufficient rental income, a number of properties would be pushed into foreclosure. Congress must act now to assist renters and property owners,” said Chuck Fowke, chairman of the National Association of Home Builders.
Large multifamily operators have more of a cushion to weather lost payments, but they also have large, commercial mortgages to pay.
“Without mortgage forbearance protections and protections from other property-level financial obligations such as property taxes, insurance payments and utility service, the stability of the entire rental housing sector is thrown into question,” said Doug Bibby, president of the National Multifamily Housing Council.
The multifamily housing sector has, until now, been something of a safe haven for commercial real estate investors. Housing has been the only real bright spot throughout the pandemic. Some investors have moved out of the beleaguered office and retail sectors and moved into multifamily.
“I believe that this new regulation — and even greater eviction crisis that we will be seeing come 2021 — will cause a significant decline in multifamily values,” Denchfield said.
It could also lower the value of single-family homes, as small landlords default on their mortgages and those homes go into foreclosure.
The action to slow the spread of the virus and to keep people safe in their homes seemed to have the right motivation, but perhaps the wrong execution.
“It’s a pretty bold and unprecedented action that can save lives and can prevent tens of millions of renters who are otherwise on the verge of being evicted, but this doesn’t quite do everything we want,” said Diane Yentel, CEO of the National Low Income Housing Coalition.