The Unintended Consequences of COVID-19 Eviction Bans

Everyone is trying to keep pace with the hour-by-hour changes in news about the spread of COVID-19. But the quality of government’s response to the crisis — at all levels — has been mixed.

So-called tenant advocates have even called for rent strikes, rent control, or rent holidays, and some localities have imposed eviction bans on housing providers. But while eviction bans may appear to help tenants, they create a huge income problem for housing providers, ultimately leading to higher rents for those who struggle to afford housing.

Eviction bans don’t help. In order to get the policy response right, we need to bring providers, residents, and lenders to the table, and develop loans and forbearance to get through the next 90 days.

Author’s note: Almost every day, the government at some level issues a new order related to housing and COVID-19. I’ll update this article with significant changes as they emerge. Also, in subsequent posts this week, I’ll be elaborating on these issues in more detail.

There are so many actions from all levels of government on eviction and COVID-19, and so many changes ongoing with those proposals and new ones every day that it’s difficult to accurately list them all. But Million Acres has a good, regularly updated list.

Here is a more general summary of COVID-related housing policy activity, from the federal level down to the local level.

Federal level: No evictions; some forbearance

Interestingly, the Federal Government has been the most measured and sane with its directives affecting the program it controls, offering forbearance on loans in exchange for no evictions, and offering increases in subsidies for people who’ve lost income.

Housing choice vouchers and public housing agencies. Recent communication from the Department of Housing and Urban Development (HUD) “encourages [Public Housing Agencies] PHAs and Owners to prevent the displacement of families through eviction which significantly increases the risk of homelessness and overcrowding.”

Since decreases in income can lead to higher subsidies in both the voucher program and PHA-operated facilities, most people receiving assistance should not have a long term problem, although if their income drops to zero, voucher recipients would not be able to pay the difference between the voucher and Fair Market Rent (FMR). There hasn’t, apparently, been any new guidance on this in the last two weeks.

Mortgages. The Federal Housing Finance Agency (FHFA) issued a statement about two weeks ago directing “Fannie Mae and Freddie Mac (the Enterprises) to suspend foreclosures and evictions for at least 60 days due to the coronavirus national emergency. The foreclosure and eviction suspension applies to homeowners with an Enterprise-backed single-family mortgage.” This is relevant to single-family residents but also to others who might be renting that housing.

For multifamily properties with loans from the Enterprises, the FHFA announced that it “will offer multifamily property owners mortgage forbearance with the condition that they suspend all evictions for renters unable to pay rent due to the impact of coronavirus. The eviction suspensions are in place for the entire duration of time that a property owner remains in forbearance.”

State level: Eviction bans; no forbearance

States have been rapidly issuing moratoriums and orders prohibiting eviction based on emergency powers.

California. In California, for example, Governor Gavin Newsom initially issued an order allowing local governments to stop evictions and collection of utility payments, and then followed it with another more prescriptive order “banning the enforcement of eviction orders for renters affected by COVID-19 through May 31, 2020. The order prohibits landlords from evicting tenants for nonpayment of rent and prohibits enforcement of evictions by law enforcement or courts.” Residents have to produce some kind of declaration in writing that their lack of payment is caused by COVID-19 response, although they don’t have to share that with the landlord.

Washington state. In contrast, Washington Governor Jay Inslee’s order doesn’t require any documentation at all but simply bans action on evictions for a 30 day period ending April 17th. His order allows eviction for “nuisance or commission of a crime on the premises.” Neither California nor Washington have sought relief for housing providers who will still have to pay their own mortgages, property taxes, and other costs even while rent revenues drop. California did manage a voluntary 90 reprieve from some larger banks for single-family mortgages, but not multifamily or commercial mortgages.

Ohio. Ohio has one of the most egregious proposals offered by State Representative David Leland and 23 other Democratic legislators, House Bill 562, not only bans eviction but stipulates that housing providers “shall not be entitled to rental amounts that went unpaid during the state of emergency.” Again, as in every state I have surveyed, there is no concomitant mandate for mortgage and loan relief for housing providers, nor is there any relief for property taxes.

New Jersey. Finally, there is New Jersey Governor Phil Murphy. New Jersey Governor Phil Murphy threatens his constituents.

“We’ll make an example of you,” says Governor Murphy, ignoring the fact that hard-working housing providers in his state are just as much in need of compassion as everyone else being hit by the impact of COVID-19.

County level: Efforts extend property tax relief, enforcement confusion

Property taxes. Counties are often the jurisdiction that collect property taxes and disperse them to the state and other local governments. Because of the loss of income faced by many individuals and businesses, Counties are scrambling to respond. If the tax revenue doesn’t come in, it will harm many local governments that provide services. But for housing providers, if rents don’t come in, paying property taxes will also be difficult if not impossible. Many counties are trying to find ways to delay due dates or defer late charges and interest.

In Kane County, Illinois, County Treasurer David Rickert has proposed legislation to waive interest and penalties for late payments if they are received by September 1, 2020. In King County, Washington, Assessor John Wilson has asked Governor Inslee, to use his “authority to delay any payments for residential and commercial taxpayers in hardship situations and waive any penalties and interest.” In California, San Luis Obispo County has already initiated such a program, and Fresno county is considering the same thing.

Enforcement and the courts. Contrary to what some might think, finalizing an eviction is difficult, requiring a court proceeding, an order, and then follow through by local law enforcement to remove residents if necessary from private property. The COVID-19 response has created a mix of reactions from courts and sheriffs departments, each of which have a fair amount of discretion over when and how to complete eviction orders.

In North Carolina, the response is mixed. A story on local television station WBTV, found different reactions ranging from a decision not to carry out any evictions in Mecklenburg County to Gaston County where the sheriff there is executing evictions already ordered. In Washington state, King County Sheriff Mitzi Johanknecht said she was suspending evictions “until further notice,” and the superior courts there would not be hearing any more eviction cases until the end of March.

Cities: Piling on during a crisis

As far as cities go, Oakland seems to be leading the way in opportunistic attacks on housing providers with Seattle not far behind. A story in The Mercury News chronicled the decision by the Oakland City Council to ban eviction and freeze rents until May 31st with no late fees or penalties for unpaid rent. Rent would still be due when the emergency is passed, but residents don’t have to pay until it’s over (making Ohio Democrats more radical than the Oakland City Council). The Council ignored the pleas of housing providers who explained that they had mortgages and bills to pay as well.

Not to be outdone, the Seattle City Council is preparing legislation that would extend it’s 60 ban on evictions to 6 months beyond the “end of the emergency,” and require a 12 month no penalty, no fee, and no interest allowance for residents to make a payment plan for unpaid rent during the period of emergency and the following 6 months. Keep in mind that Seattle’s winter eviction ban begins in November and runs through the end of January. It seems likely that Seattle Mayor Jenny Durkan will extend the emergency beyond the end of April, but even if she doesn’t, the proposal would allow tenants, without even the minimal documentation required by California, to not pay rent without any concern about eviction for 8 months.

At least Oakland’s legislation, almost as an afterthought, said that Oakland

Hereby requests and urges banks and financial institutions to suspend mortgage payments, foreclosures, and late fees for low-income homeowners and landlords, with immediate forgiveness, and encourages financial institutions to provide zero-interest emergency unsecured loans and grants to small businesses and non-profits within Oakland that are unable to meet rent, mortgage, or other fixed operating costs.

Eviction under COVID-19: What’s the right answer?

Oakland, in spite of its overreach, at least got something right. While it is absolutely true that many people will be facing very difficult months ahead without jobs and income, banning eviction won’t solve the problem if they still owe it. And worse, if Ohio Democrats get their way and forgive everyone’s rent, housing providers could be broke and foreclosed. Already, anecdotally, many smaller owners of single-family properties are selling to owner occupiers, a trend that was already well underway.

What efforts by “housing is a human right” activists and the Eviction Lab sought to accomplish, COVID-19 is completing almost over night: the end of private rental properties. If, that is, we let this current trend continue. My next post will give advice about what providers can and should do as this unfolds. First, housing providers must remember they are not bad people for owning and operating rental property. Next, local governments must take a broader approach, and ask banks and financial institutions to partner with residents, providers, and others to bridge the gap until this crisis subsides.