Imagine being a small business owner that provides a service that is in high demand. On the surface this would sound like a profitable endeavor, however now imagine that you are not allowed to charge any money for this service. All of a sudden, the situation changes dramatically. Unfortunately, this is precisely what landlords offering affordable housing have been facing since the start of the pandemic. Although these landlords are not able to collect rent, the current unconstitutional eviction moratorium also prevents them from evicting their tenants in order to find tenants that will actually pay rent. The end result is thousands and thousands of unpaid back rent not collected for these landlords. Meanwhile, the obligations to pay any mortgages, taxes, repairs, etc… still exist. There are now more than 15 million people living in households that owe as much as $20 billion in back rent, according to the Aspen Institute. Needless to say, something has to give for these landlords and for many this means exiting the market entirely.
Cutting their losses
As we have reported in prior articles, the Center for Disease Control and Prevention (CDC) recently extended the eviction moratorium through October 3, 2021. We should also add that this decision was made in pure defiance to a recent Supreme Court ruling stating that this was unconstitutional and that the CDC was overstepping its authority. This blatant disregard of the Supreme Court was even supported by the current administration. In other words, the Constitution exists but does not need to be followed.
Smaller landlords, also known as “mom and pop” landlords, represent approximately half of all landlords in the country. According to a survey from the National Rental Home Council, 50% of these landlords say they have tenants who have missed rent during the pandemic. According to U.S. Census Bureau data, some 6.5 million renter households are behind on rent with nearly 72% of them owing this rent to smaller “mom and pop” landlords. To add insult to injury, many of these landlords admit that they have tenants that would have (& could have) paid their rent if not for the eviction moratorium. Instead, many of these tenants have taken advantage of this situation and instead purchased new cars, enjoyed food deliveries, and have even taken vacations.
The end result in many cases for these landlords is simply to sell their properties. Oftentimes, these units are being sold to deep-pocketed investors or developers that have intentions of either remodeling the units to sell them at a higher price or simply leave them empty while waiting out the expiration of the eviction moratorium. Either way, the end result is fewer affordable housing units for rent, which continues to be one of the areas of highest need in the current and foreseeable housing market.
Summary
The federal government has approved a package containing $47 billion in rental assistance, which was supposed to make landlords whole on these financial shortfalls. Needless to say, this assistance has been extremely slow to materialize with only about $3 billion being distributed thus far. Unfortunately, the end result has been landlords suffering tremendous financial hardships. In many cases, these landlords have had to delay their retirement, take on second jobs, or even re-enter the workforce just to try and cover their losses. With many of these landlords understandingly opting to sell off their properties, this will create a further bottle neck for affordable rental housing moving forward. Unfortunately, it is evident that the current administration either does not realize this or simply does not care.
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