Housing Crisis Looms with End of Eviction Moratoriums

The United States is on the cusp of a housing crisis. As states begin lifting eviction moratoriums, and with the July rent coming due, millions are still suffering from the economic damage caused by the pandemic. In Congress, Senator Elizabeth Warren has proposed a nationwide eviction ban that would protect struggling tenants in 2021 and expand the existing federal moratorium to include most renters (a description of her proposal is below).

In Virginia, where six of the ten cities with the worst eviction rates in the nation are located, Governor Ralph Northam is calling for circuit courts to individually extend a ban on evictions, while rushing to enroll renters in a rent-relief program that was rolled out on June 29. The Virginia state Supreme Court mandated moratorium on evictions expired on June 29. Meanwhile, the Virginia Department of Housing & Community Development is only getting 25% of the $200 million it requested for the new program. Even the $200 million will not come close to meeting the $1.6 billion needed, according to the National Low-Income Housing Coalition.

The COVID-19 crisis is nowhere near to being over, and while states are opening up (and in some cases closing down again), millions have lost jobs or had hours cut. This confluence of events could lead to a tsunami of evictions, one that could lead to a spike in homelessness at a time when the best defense against the pandemic is to stay home.

As noted above, Senator Elizabeth Warren is introducing legislation that would implement a nationwide eviction moratorium. The Protecting Renters from Evictions and Fees Act would extend eviction protections for nonpayment of rent for one year, starting from March 27, 2020. It would also substantially expand the current federal eviction moratorium to include most renters.

Currently, states and localities have their own rules, which amounts to a confusing patchwork of eviction policies. The CARES Act, passed by Congress in March, imposed a 120-day moratorium on evictions for tenants in federally assisted housing (including housing under the Low-Income Housing Tax Credit program) or in homes with federally backed mortgages – about 12.3 million of the 43.8 million rental units in the United States, according to The Urban Institute. These protections will expire on July 25, 2020, unless extended by Congress.

Warren’s bill would keep those protections in place for an additional eight months and extend the benefits beyond those in federally backed housing to almost all renters. The bill would also bar landlords from charging additional fees for nonpayment of rent and require landlords to give 30-days’ notice of eviction after the moratorium ends.

Representatives Jesus Garcia (D-IL) and Barbara Lee (D-CA) are pushing similar legislation in the House.

This new legislation is a stand-alone bill. The HEROES Act, the $3 trillion stimulus package passed by the House that is awaiting Senate action includes a similar nationwide eviction moratorium for nonpayment for most renters.

The HEROES Act also comes with additional cash stimulus, expanded unemployment insurance, and almost $200 billion in financial support for housing and homelessness programs, including $100 billion for emergency rental assistance. Importantly, this Act will also keep money flowing to landlords, especially smaller landlords, who may rely on rental income to pay for building maintenance, utilities, mortgages, taxes, and other expenses.

The eviction moratorium does provide a stopgap, preventing renters  from becoming immediately homeless during the pandemic. A national policy is also much more effective than the current confusion of state and local rules. As before, this bill does not “waive” or forgive the rent; tenants may still be evicted for nonpayment after the moratorium expires. Ultimately, these renters will need to be able to pay their rent – including the rent that has been delayed.

It is likely that the early CARES Act benefits (the one-time stimulus checks and $600 per week in additional unemployment) did assist renters in being able to pay their rent.  However, these benefits expire at the end of July and so far, Congress has not replaced or extended any of those benefits.

The Urban Institute estimates that about 8.9 million renter households – almost 20 percent of all renter households – have seen at least one household member lose a job in the past two months.

Some housing activist groups are calling for dramatic steps to assist both tenants and landlords. These include cancelling or pausing both rent and mortgage payments.  Unlike the current system, this would not be a deferral of payment; it would be an erasure. This is going to be a tough hill to climb, especially because there is no indication that private mortgage lenders will agree to forgive parts of mortgage loans. Many of the investors holding these mortgages are in pension funds, and loan forgiveness would negatively impact retirement accounts.

The only viable alternative may be a direct infusion of money into the pockets of renters or to lenders to cover them for lost mortgage income. This could be part of the next economic stimulus package.

Unless the federal government fills this gap with a huge stimulus package, owners should be prepared for severe operational and monetary disruptions in the months ahead.