Evictions suck. Nobody benefits, and every sane person seeks to avoid getting to that point. Landlords, property managers, and investors don’t like losing income and they definitely don’t want to shell out the time and money required to legally file and evict. The tenant would much rather continue to be housed and they certainly can’t afford the hit to their reputation and credit that results from an eviction.
The news has been churning with the requests to extend the eviction moratorium. The administration initially declined to unilaterally extend it. The Legislature failed to act on an extension before the recess. And then the CDC just re-issued the moratorium in slightly revised form.
A few evictions can go ahead, but most are again on hold for two months. When the moratorium is lifted, a rash of evictions will come back to bite us and that isn’t a victory for anyone. It didn’t have to be this way. The policy and goals were out of sync from the beginning and as a nation we got it completely backwards. Let me explain.
The eviction moratorium was originally a reaction to a public health crisis. The CDC was concerned that people would be forced from safe spaces during a pandemic and end up moving around and congregating in mass shelters. In doing so, the risk of transmitting the disease would logically increase. So, the government said, “stop forcing people from their current housing”, which makes sense. However, in the cases where people became unable to uphold the contract they entered into with their landlords, said landlords were left holding the bag.
In the US, housing providers are overwhelmingly for-profit entities – mostly private individuals with a rental property or two, professional investors, or corporations specializing in housing and real estate – and this moratorium has been pinching off their revenue stream. They’re stuck providing housing to non-paying tenants. If the main housing provider was the government, (which I am not advocating at all) then the government could have directly absorbed the consequences of the moratorium instead of the public.
The eviction moratorium, the rescue plan and policy that executed it will eventually miss the original goal of helping people in a housing crisis by going about it backwards. There are two separate Emergency Rental Assistance (ERA) programs have been established: ERA1 provides up to $25 billion under the Consolidated Appropriations Act, 2021, which was enacted on December 27, 2020, and ERA2 provides up to $21.55 billion under the American Rescue Plan Act of 2021, which was enacted on March 11, 2021. Under these acts, the federal government provided money to the states and local jurisdictions to help people pay their rent and utilities. It was a nice idea, but in practice they were requiring quite a bit from those least able to navigate the labyrinth that is federal, state and local bureaucracy.
Who is more likely to get money from the government? A non-native English speaking, food-insecure single parent who is suddenly home-schooling children while job searching and worried that their next home will be a car or a shelter? Or a healthy and wealthy banker who deals with loans and government programs daily? The system we set up requires the tenant to go find and get the funding. The system tells the landlord that ‘It may be in your best interest to work with your tenants’, to help the tenant apply for housing money under the ERA programs, all while asking the bank for forbearance on the mortgage.
It’s no surprise that only 12% of the money allocated for the programs has made it the people most in need of support, while eviction filings have steadily piled up under the moratorium.
A simple change in focus at the beginning would have been better able to keep those in need housed for the duration of the crisis and provided a cushion to remain housed after the crisis.
This could have been done by placing the onus on the BANK. With this change in focus, if a tenant during a crisis–like the ongoing pandemic–stops paying rent, the landlord or investor can in-turn stop paying their mortgage, and the bank will automatically grant forbearance on the loan. It is the bank that then gets the assistance from the government to either A.) forgive those months of principal and interest, or B.) transfer them to the end of the loan–at which time they will repay the government for any short-term assistance. As we have seen multiple times in the recent past, the banks know how to apply for and receive federal help.
With this shift of focus, the tenant in crisis remains housed, the homeowner/investor remains solvent and the bank is assisted by the government. Yes, there are still some required guardrails to avoid a free-for-all, most likely a ding on personal credit ratings for those who don’t pay, but they remain safely housed through the crisis so that is a public benefit.
I can hear the wails already.
‘But the tenant gets to stay for free! That’s not fair!’ ‘I pay my rent and don’t get such benefits!’ ‘You’re letting deadbeats get away with living on my hard-earned taxes!’
Remember that this is a worldwide crisis– it was always going to take extraordinary communal support to get through the pandemic. Those same people are not paying rent right now, but the small business owners/investors are stuck in the middle and aren’t getting any help from the government while still paying their mortgages.
I would rather allow a few to get a free ride in the short term to keep the investors healthy and investing in our economy in the long term.