/Residential Evictions Bearing Down on Many Tenants

Residential Evictions Bearing Down on Many Tenants

As we’ve been saying on several fronts, winter is coming, and that includes the January 1 expiration of the Presidential order barring residential evictions. If Trump loses next week’s election, he presumably wont’ extend it even the few weeks to the end of his term, and Biden has not made any noise about taking measures to keep people who’ve suffered income hits under Covid housed.

And if Team Dem’s fallback is a stimulus bill under Biden, good luck with that. It’s unlikely that citizens would get cash before early March, and even that charitably assumes the relief would be large enough to make up for months of no or inadequate income. Nolo provides a summary of each state’s eviction laws; you can see they are all short-trigger.

And that’s before getting to the fact that the CDC eviction moratorium wasn’t comprehensive (for instance, it didn’t address month-to-month rentals) and that it calls on tenants to make attestations, which some landlords are challenging. From MarketWatch last week:

The U.S. Centers for Disease Control and Prevention’s nationwide eviction ban has been in effect for nearly two months — but landlords and tenants alike are still trying to figure out how the moratorium works and what protections it offers…

The moratorium’s protections were not granted automatically to all tenants. Instead, renters essentially have to opt in by notifying their landlord with a signed affidavit that they cannot afford their full monthly rental payments…..

Because renters need to be proactive to receive protection under the moratorium, those who don’t do so can still face eviction. Since the moratorium was first announced in early September, the country has seen nearly 9,500 eviction filings by private-equity firms and other corporate landlords, according to data from the Private Equity Stakeholder Project. These represent filings in just five states: Arizona, Texas, Tennessee, Georgia and Florida.

And the number has trended up recently — in the week ending Oct. 16 there were nearly 2,000 eviction cases filed, which was nearly double the number from the previous two weeks.

New guidance from the Trump administration suggests that even tenants who fill out the required affidavit could be taken to court by their landlord.

Even so, it appears that most renters in arrears are getting a stay of execution until January, where the prospects for landlords giving relief don’t look great. As the Wall Street Journal reports, a lot of tenants are already borrowing on their credit cards to try to keep from falling too far behind. Yet given the way Covid-19 has hit broad swathes of middle and lower income workers, such as restaurant and hotel employees, trainers, beauty salon operators and owners, it’s not clear how evicting landlords expect to find creditworthy replacements, even at lower rental levels. From the Journal:

A large number of renters have been unable to pay some or even all of their rent since March, when the pandemic temporarily shut down most businesses. Many businesses remain closed or only partially open, pushing renters into unemployment and draining their savings….

A study of unemployed workers released last week by the Federal Reserve Bank of Philadelphia calculated outstanding rent debt would reach $7.2 billion before the close of 2020. Moody’s Analytics estimates that it could reach nearly $70 billion by year-end if there is no additional stimulus spending. The economic-research firm calculated that 12.8 million Americans would then owe an average of $5,400 from missed payments.

Even the larger figure would be far less than what was lost when the $1.3 trillion subprime-mortgage bubble burst, leading to a national wave of defaults and foreclosures. But the tens of millions of people potentially caught in a web of home-rental debt and eviction would far exceed the 3.8 million homeowners who were foreclosed on in 2007-2010.

Another difference is that the foreclosure crisis played out over time. Some foreclosures were triggered early on by resets of subprime “teaser” loans, which were intended to trigger a refi, but none were to be had after the subprime market shut and housing prices were falling, particularly in the Sunbelt states that saw the frothiest lending. More defaults followed as a result of financial crisis job losses or cuts in hours.

Moreover, foreclosures proceeded at different speeds in different states. Generally speaking, in “title theory” states, the lender holds the deed until the final payment is made. There’s thus no need for a title transfer to execute a foreclosure; the typical process is to notify the borrower and advertise. In lien theory or judicial foreclosures states, by contrast, the borrower has the title to the property but the bank has a lien on the home. The lender thus needs to go to court to foreclose, which takes more time.

And a final factor that spread foreclosures out was the Treasury’s half-hearted rescue efforts, which Treasury Secretary Geithner told SIGTARP chief Neil Barofsky was intended to “foam the runway” for banks as opposed to help homeowners.

By contrast, unless Something Happens before January 1, and that seems unlikely, evictions will start full bore in the new year. Back to the Journal:

But about a quarter of American renter households with children are now carrying debt from not paying rent, U.S. Census Bureau surveys show…

Mounting rental debt could also impede the path to a U.S. economic recovery, when 30 million to 40 million people from New York City to San Francisco face potential eviction once moratoriums expire….

In the early weeks of the pandemic, many renters tried to scrape together their rent by borrowing money from friends or family. Some moved to credit cards, which could mean the total debt tied to rent is greater than what can be counted from missed payments alone.

Credit payments to small and medium-size businesses connected to rental real estate increased by more than 70% in the spring, according to the Philadelphia Federal Reserve. The data showed that through the fall these payments have remained some 50% higher than during the same period in 2019….

Other renters falling behind are now on payment plans arranged with their landlords, allowing them to pay small minimum amounts each month. Some landlords are charging punitive late fees on top of what is already owed, making the debt higher than just the face value of the rent.

The article adds that many landlords won’t forgive the amounts owed and will seek to garnish wages and assets.

The Journal comments section was disheartening. Even though there were some who advocated for sharing the pain, the “hate the poors” remarks were vicious. For instance:

Howard S
Single mothers are suddenly discovering why its good to have a responsible husband who works and supports his family before you start making babies. Bad decisions have bad consequences.

Richard B

The government, especially an agency like the CDC, has no business dictating the terms of private real estate contracts!

It’s called Capitalism. Save for a rainy day and don’t buy that 75 inch LED 4K TV or lease a brand new car.

Others pointed out collateral damage of the moratoriums (scarcity of rentals in some areas due to lack of turnover as tenants stayed in place) and the reluctance of landlords to accept reduced rents despite the collapse in incomes in their market.

But more serious is the lack of willingness to discuss this looming train wreck, let alone build consensus around policy proposals. Unless something changes, the level of evictions that appears likely for 2021 will be greater than anything the US has seen since the Great Depression. The CDC invoked public health powers for a reason. Homeless living on the streets or in encampments with no or few toilets and showers is a great way to propagate more disease, like hepatitis A and B, tuberculosis, and typhus.

But the Democrats, as they did with the foreclosure crisis, seem to think the solution to every problem is better PR. So perhaps they’ve persuaded themselves that if members of the press don’t pay much attention to millions being turfed out of their dwellings by Covid-caused loss of income, they can pretend it isn’t happening.

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