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Eviction moratorium gave renters relief but property owners face billions in unpaid rent

FILE - In this May 20, 2020, file photo, signs that read "No Job No Rent" hang from the windows of an apartment building during the coronavirus pandemic in Northwest Washington. (AP Photo/Andrew Harnik, File)
FILE - In this May 20, 2020, file photo, signs that read "No Job No Rent" hang from the windows of an apartment building during the coronavirus pandemic in Northwest Washington. (AP Photo/Andrew Harnik, File)
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President Joe Biden extended the nationwide pause on evictions through March 31 as one of his first official actions and he aims to extend it further through the end of September in the American Rescue Plan, a proposal pushed through the Senate Friday.

Since taking effect, federal and state eviction moratoria have prevented the convergence of a homelessness crisis on top of a public health emergency but they have also created a host of new challenges for tenants and landlords.

Richard Brown is a landlord of several properties in Winchester, Virginia, mostly small, single-family homes. In August, Brown found himself having to pay the mortgages on his properties as well as maintenance and utilities while income from his tenants was dropping due to the pandemic.

One of Brown's tenants hadn't paid him in months and owed close to $10,000 in back rent and he feared he would fall behind in his mortgage payments and lose his other properties. A Virginia moratorium on foreclosures prohibited him from taking action against his tenant until the state order expired Sept. 7.

By that time, the Centers for Disease Control and Prevention had issued a nationwide order that made it illegal to evict tenants based on nonpayment. Landlords could face criminal penalties, including fines or jail time, if they evicted a tenant who would likely be rendered homeless or forced to move into close quarters with others. The action was unprecedented, in terms of the use of a public health authority for this purpose and federal reach into traditionally state and local law.

After the order was issued, the New Civil Liberties Alliance filed a lawsuit against the CDC on Brown's behalf arguing the public health agency did not have the constitutional authority to deprive his client of due process in a state court system.

"After we filed case, we heard from people all over the country...They were all experiencing this same problem," said Caleb Kruckenberg, a litigation counsel at the New Civil Liberties Alliance. Several other plaintiffs have joined the lawsuit in recent months, including the National Apartment Association, an advocacy organization for rental property owners.

The moratorium on evictions provided necessary help to renters who lost jobs and income but property owners hadn't seen similar relief. They faced the same monthly expenses with fewer resources as many renters stopped paying or were only able to make partial payments. That has increased the risk of foreclosures against landlords who have also started falling behind on mortgage payments.

Brown recently reported that half of his tenants are no longer paying monthly rent. He and many other property owners in a similar situation don't expect their renters will ever be able to repay the thousands of dollars in back rent when the moratorium is lifted eventually.

"They're never going to be able to collect on it and everyone knows that," said Kruckenberg, noting none of his clients qualify for federal mortgage forbearance or other coronavirus relief. "A lot of landlords are small mom and pops. They pay mortgages on these properties and if they don't get rent, they can't pay the mortgage."

As of January, 1 in 5 renters reported being behind in monthly payments or more than 9 million households. According to Moody's Analytics, renters owed $57 billion in back rent, with a typical delinquent renter almost four months behind with a balance of $5,600, plus fees for late payments.

To address the domino effect of unpaid rent, Congress authorized $25 billion in rental assistance in its December coronavirus relief bill. President Biden has requested an additional $25 billion in rental assistance in the American Rescue Plan.

In a letter to Congress last week, a coalition of a dozen real estate and rental housing organizations called the funding a good start but said the funding was not sufficient to address the scope of damage to renters and housing providers. Constraints on rental assistance have also prevented many property owners from qualifying for the relief.

"Together, thousands of housing providers and their residents will be left without aid under eviction moratoriums," the coalition warned.

The rental assistance passed so far is a "good start," according to Paula Cino, vice president of construction, development and land use policy at the National Multifamily Housing Council, one of the signers of the letter. However, it's likely that most property owners will never recover the unpaid rent.

"Ultimately, we think the amount of back rent residents will accrue is likely too great to ever be repaid," Cino said. "That means renters and businesses could face an unrecoverable financial burden."

That could be devastating to the stability of the rental housing market and the accessibility of rental housing units nationally, more than 40% of which are operated as small, mom and pop businesses.

"Before COVID, housing affordability was already a national crisis," Cino said. "We were already in a position of not producing enough rental housing to meet affordability requirements. This is putting us further behind that threshold."

Absent additional forms of relief, renters may also be hurt by the moratorium in the long-run.

When the national eviction moratorium was first authorized, the National Association of Realtors warned that the federal government was "kicking the can down the road" and creating a mountain of debt for renters that would inevitably lead to a flood of evictions when the moratorium ended.

For renters, a failure to pay may show up on renters' credit scores and impact their ability to finding housing in the future. Certain consumer reports collect information on evictions that could also make it harder to rent in the future. Renters may also face court costs if their landlord seeks to get a judgment.

During the crisis, landlords have been able to file eviction paperwork, but the courts and sheriffs' offices have not been allowed to take action. When the pause is lifted, it's possible that the courts will go into overdrive and take action on a backlog of eviction orders.

In response to that scenario, President Biden has called on Congress to provide legal assistance to help households facing eviction or foreclosure.

Despite more than 20% of rental households currently behind in payments, Cino does not expect to see the "tsunami" of evictions that others have forecast.

"We always said there were external supports being provided to renters and that those were going to help stabilize the economy," she said. Beyond the $25 billion in rental assistance, the federal government has provided support for individuals that indirectly contribute to their housing security. That includes continuing enhanced unemployment benefits and additional stimulus checks.

Biden's $1.9 trillion coronavirus relief bill would increase weekly unemployment by $400 through the end of September, provide many households with a$1,400 direct payment check and increase the child tax credit to $3,600 for every child under 6 years old and $3,00 children under 18. The bill is expected to pass the House after clearing the Senate last week.

According to a Bureau of Labor Statistics survey, more than half of the recipients of stimulus checks used the money to pay for basic necessities, including housing and food. Another 13% used the money to pay down debts.

Data suggests that the eviction moratorium enacted as a public health measure has had an impact beyond keeping people in their homes. A research paper published late last year found that states that allowed for evictions saw mortality rates 1.6 times as high as those that left them in place.

Another study published by the National Institutes of Health tested a number of scenarios and found that evictions lead to significant increases in COVID-19 infections.

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Individuals are not immediately protected from eviction under the moratorium. Renters must sign a CDC declaration and provide it to their landlords and, in some cases, to local housing courts.

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