The pandemic and resulting skyrocketing unemployment left millions at risk for eviction. An eviction moratorium reduced that threat for many households, but left landlords struggling with billions of dollars of unpaid rent. The ban is likely to be lifted at the end of July. The consequences of the moratorium and its removal will continue to have major impacts on the lives of tenants…and landlords as the struggle for affordable housing continues across the country.
An Unprecedented Eviction Moratorium
In September of 2020, the CDC instated an eviction moratorium. The CDC declared that allowing people to remain in their homes and out of highly populated settings like homeless shelters was critical to reducing the spread of Covid-19. The moratorium did reduce evictions, but quickly resulted in an estimated $13 billion in unpaid rent in 2020 and eventually, a flurry of lawsuits.
The eviction ban has been extended several times as lawsuits representing landlords and real estate constituents maintain that Congress never gave the CDC the authority for the extended moratorium. Helping renters stay in their homes is destroying the livelihoods of some independent property owners who have no rental income. The lawsuits reached the Supreme Court with the highest court ruling in favor of an additional extension until July 31, 2021, but also making it clear this would be the last extension without “specific congressional authorization.”
The Risks to Renters
As of late February, 13.5 million people reported being behind on rent – 20% of all renters - according to a Center on Budget and Policy Priorities. And they collectively owe a staggering $57 billion in back rent, according to a Moody's Analytics report, with some estimates ranging closer to $70 billion.
An estimated 3.2 million of those behind on rent are facing imminent eviction once the ban expires, according to the U.S. Census Bureau’s Household Pulse Survey.
The Supreme Court’s explanation for their decision included the fact that federal funds are available for rent relief but need more time to be distributed. The December stimulus package included $25 billion in rent relief. An additional $22 billion was allocated in the March stimulus – yet most of the original $25 billion had not reached families in need.
While the $45 billion plus allocated for rental assistance (but not yet distributed) is extraordinary compared to only $1.5 billion in the great recession, it still may not be enough.
The media has covered countless stories of families struggling to pay rent and buy food. They apply for rent relief, but it can take weeks or months to hear back on their application. And they can be denied for not meeting the specific criteria of their local rent relief program, such as needing to be current on rent as of a certain date.
The race is now in the final leg between the eviction mortarium expiring and more than 400 state and local programs getting available funds into the hands of those who need it before it’s too late. To date, it’s been a complicated process with varying results across the country.
Eviction will have long-lasting impacts for renters, who will forever be labeled as high-risk tenants and may have difficulty not only securing their next home, but every subsequent home.
The Impact on Landlords
While landlords are often portrayed as the villains in these scenarios, real estate associations argue that this is rarely the case. They prefer rent relief over evictions because they are suffering too. While helping tenants with rent relief is helping landlords, it remains unclear if the help will get to tenants in time. And while rent relief will help with current and future rent, it may not erase the massive debt owed to property owners in back rent.
The moratorium extension is especially hard on smaller property owners, who own about half the country’s rental units. Many of these 22.1 million properties have been operating at a loss and owners are struggling to pay their bills and provide upkeep. Landlords are at risk of foreclosure and are often delaying payments on property taxes. Reduced taxes and neglected maintenance have consequences for the entire community as the availability of safe and affordable housing declines.
The National Apartment Association has called for direct relief to property owners to compensate for the backlog of unpaid rent from the eviction moratoriums. They fear overwhelming debt and imminent foreclosures on apartment buildings will cause “our nation’s housing affordability crisis [to] spiral into a housing affordability disaster.”
While the situation appears bleak for many, there is an opportunity for real estate investors and developers to help landlords, tenants, and communities while still generating a healthy return. An investment in a deteriorating property can free the owner from debt and bankruptcy. Distressed homes – with the right development firm - can be renovated into attainable housing that helps those in need of affordable housing and their communities.
What’s Happening in the Rocky Mountains?
At least 80,000 tenants in Colorado renters are behind on rent payments, according to recent U.S. Census survey data. Colorado’s Department of Local Affairs has distributed more than $80 million in Emergency Rental Assistance but many applicants are still waiting weeks, if not months to receive aid. Of the 54,000+ applications, about 25% are still in process.
17,000 Montana residents are likely to be evicted within the next two months. Rent relief funds exist but are only helping a fraction of those in need. In 2020, Montana was given $50 million from the CARES Act for rent relief and delivered just $8.4 million to 2,500 tenants. In late 2020 and 2021, the federal government provided Montana with another $352 million in rental assistance funds. Under the new program, Montana has dispersed just $7.6 million to 1,300 tenants.
“There just aren’t enough affordable housing options for Montana renters — even if they’ve been good tenants in the same place for years,” said Amy Hall, an attorney with the Montana Legal Services Association.
As we watch this potential wave of evictions unfold due to the pandemic and complicated relief programs, Fort + Hom is more committed than ever to our mission of providing long-term solutions to affordable housing. We care deeply about the communities we serve and creating attainable houses and apartments that people are proud to call home.