By Strategic Passive Investments
After days of frantic attempts to push a last-minute extension of the nationwide moratorium through Congress, House Speaker Nancy Pelosi issued a call to the U.S. Centers for Disease Control and Prevention (CDC) to extend the ban just days after it expired. Following a Supreme Court ruling indicating that at least one justice would block another extension unless it was congressionally requested, President Biden had announced he would permit the ban to expire a few days before the final day of July 31, 2021. Despite a congresswoman spending the night on the Capitol steps in protest, it appeared that the moratorium on evictions would end and that landlords would be able to evict tenants who had not, in some cases, paid rent in nearly 18 months. According to the National Apartment Association (NAA), the ban cost apartment owners alone more than $26 billion.
While most landlords have been actively working out solutions with willing tenants since the start of the pandemic, now the community must figure out how to navigate the sticky situation that is a result of long-term, non-paying tenants remaining in residence in rental properties for, in some cases, more than a year after last paying rent. The president and Congress represent the roughly $46 billion allocated for rental assistance since the start of the pandemic as a panacea for this issue, but much of that money is tied up in administrative quagmires or completely unavailable to landlords unless tenants agree to seek assistance and successfully complete the request process. As of the beginning of August, millions of dollars in “rental assistance” were stagnating across the country despite the president’s demand that the funds go out “as soon as possible.” Readers should note that the expiration date was not a surprise nor should the failure to extend it have been. After all, the Supreme Court notified the entire nation in June that another extension would require Congressional action.
While many landlords may be breathing a sigh of relief at the end of the moratorium “saga,” the truth is that the relief might be a little preemptive. Here are three things every real estate investor should know about the “end” of the eviction ban that might change the way you are thinking about handling your rentals moving forward.
#1: The CDC is not out of the equation just yet.
In June, the U.S. Supreme Court issued a ruling indicating the CDC’s national eviction moratorium was an overextension of authority. In that ruling, Justice Brett Kavanaugh, who cast the deciding vote, wrote that the CDC would not have the “clear authority” to extend the moratorium unless Congress granted that authority to the body. The president, for his part, ordered the Departments of Housing and Urban Development (HUD), Agriculture, and Veterans Affairs (VA) to extend moratoriums on single-family homes financed or insured through these offices. However, he notified Congress just days before the ban expired that he would not challenge the Supreme Court ruling further.
Many have assumed that with Congress out of session, the CDC would essentially be out of the equation. However, not every lawmaker agrees. Specifically, House Speaker Nancy Pelosi stated via Twitter that the CDC does have unilateral authority to extend the ban and issued a challenge. “The CDC has the power to extend the eviction moratorium,” she wrote. “As they double down on masks, why wouldn’t they extend the moratorium in light of the Delta variant? It is a moral imperative to keep people from being put out in the street which also contributes to the public health emergency.”
Action from almost any quarter in conjunction with the president’s demand that landlords not evict anyone without pursuing all avenues to obtain rental assistance (this was not clearly delineated) could stall eviction processes in many states where the electorate is already “friendly” to the idea of challenging the Supreme Court ruling. House Democrats have proposed extending the moratorium until the beginning of 2022.
#2: Landlords in southern states are more likely to see their evictions go through.
According to the U.S. Census Bureau, landlords in southern states are the most likely to successfully evict non-paying tenants swiftly following the expiration of the ban. As many investors already know, southern states are often considered to be the most “landlord-friendly” in the country. In some cases, tenants may lose an eviction case and be removed the same day. Investors should remain aware of what their state governments have done in response to the eviction ban. For example, a federal judge in Tennessee had already ruled the CDC ban unconstitutional, clearing the way for evictions. In other states like Georgia, landlords were permitted (in some cases) to file for eviction even if they did not evict their tenants at that time, thus clearing the way for an expedited eviction when the ban ended.
On the other hand, states like New York and California reacted in the opposite extreme. Governors in these states issued add-ons to the CDC policy, noting that they would extend the moratorium until their own states’ state-of-emergency status expired.
#3: There is a lot of “rental assistance” out there.
For landlords who truly do not want to evict their non-paying tenants, there are other options available. However, the tenants will have to cooperate in order to obtain that assistance in most cases. Many states received millions of dollars to distribute during the Trump administration and in the early days of the Biden administration, but very little of that money has been successfully distributed. Government analysts blame a variety of factors for this, including a lack of awareness on both tenants’ and landlords’ parts, a lack of access to resources needed to file for assistance, and tenant fears that paying part of the money owed will result in landlords demanding more back rent that the tenant does not have. Not surprisingly, landlords have been vilified in this scenario; because rents are rising throughout the country, many housing advocates accuse them of opting to evict in order to raise rents more quickly.
Investors Must Watch, Listen & Learn in Today’s Market
Today, more than ever, the power of observation will serve real estate investors well. Whether an investor owns rentals, wishes to acquire them, or has another strategy in mind for generating real estate investing returns, it will pay to observe every policy move in the eviction-ban standoff moving forward. Observing how your state defends the rights of landlords and tenants will help you determine whether renting (be it long-term or short-term) is a good strategy for you in 2021 and beyond.