Eviction Ban Hits Small Landlords, Risks Affordability

Financial squeeze on moms-and-pops could worsen housing shortage

Worried man looks down at papers.
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The federal government’s eviction moratorium is meant to protect people who rent, but who’s looking out for the small individual landlords who own many of those rental properties?

Key Takeaways

  • The new eviction moratorium is taking a toll on “mom-and-pop” investors, who make up more than 40% of the country’s landlords.
  • Government rental assistance, which has been slow to be disbursed, may not be enough to save them, especially as mortgage forbearance is coming to an end.
  • If banks start selling distressed properties or landlords have to sell off their units, affordable housing could become more scarce.

The moratorium, initiated in March 2020 to keep renters who lost jobs due to the pandemic from being evicted for nonpayment, was extended several times. In March 2021, the National Rental Home Council, a nonprofit group representing the single-family rental home industry, said that 20% of 1,000 respondents to its February survey said they would “have no remaining financial options to cover costs related to their rental property” if the moratorium were extended beyond March 31, when it was due to expire. Nevertheless, the ban was extended beyond March, to the end of July.

The moratorium finally expired on July 31, and landlords who hadn’t been paid in months could finally file to evict their tenants. But on Aug. 3, the Centers for Disease Control and Prevention unexpectedly imposed a new, two-month eviction moratorium on properties in high coronavirus transmission areas.

Many may think of landlords as faceless corporate entities that could easily withstand a lengthy eviction moratorium. But in reality, 42% of landlords are so-called moms and pops, or individual investors, according to 2018 Census Bureau data. In 2015, about 22.7 million units in 16.7 million properties were owned by individual investors, who were more likely to own single-family and duplex rental homes, Department of Housing and Urban Development data showed.

And whether or not they’re collecting rent payments, landlords are still fully liable for their properties including paying mortgages, utilities bills, property taxes, maintenance costs, and other property-related expenses. 

The Brookings Institution, a nonprofit public policy organization, estimated last year that about 30% of landlords are low- to moderate-income individuals with annual household incomes of less than $90,000. For landlord households earning less than $50,000, property income provides nearly 20% of their total household income, Brookings said.

“Our culture likes the narrative that big landlords are soaking residents or kicking people out as fast as they can,” said Gregory Brown, senior vice president of government affairs at the National Apartment Association, a nonprofit trade group, “That’s as deep as the stories go. There’s no conversation about who is really in this business. Half are not that, and it is unfortunate. There are a lot of people who are trying to build wealth, including immigrants. They don’t have an investment portfolio and use this as part of their retirement.” 

What About Government Rental Assistance?

Although the federal government approved two tranches of rental assistance totaling $46.55 billion to help renters make their monthly payments, the money has been slow to be disbursed for a myriad of reasons, including cumbersome paperwork and inconsistent rules in different states.

Also, in order to receive the funds, both landlords and residents have had to participate in the process. “Sometimes the owners would start an application, but residents weren’t completing the paperwork,” Brown said. “It required them to have pay stubs, details about their income, and sometimes the resident couldn’t or didn’t want to disclose that information. So there are a lot of incomplete applications out there.”

At other times, Brown said, it was the landlords who declined to participate. Some landlords didn’t want to take funds that had strings attached by local state and government and institutions—called grantees—that were seen as using the funds to force policy changes. “For example, the grantee would pay arrears rent for that person, but you would have to forgo the ability to evict that person for the next three to four months,” Brown said. “So if he doesn’t pay, then you can’t evict him. How is that fair for the housing provider?”

In some places, like California, landlords were originally asked to accept only 80% of the rent due. While California has since changed that policy, it served as a huge deterrent, Brown said.

The National Apartment Association encourages everyone to participate in the rental assistance program, but Brown said he continues to find roadblocks. “At an event yesterday, a lot of residents still didn’t know it existed or where to go,” he said. “And there are still some residents who don’t respond at all because they know they are protected and take advantage of the system. We hear at least a handful of those stories with every provider.”

Landlords and realty associations across the country have filed lawsuits trying to overturn the various eviction moratoriums, so far without much success. On Aug. 13, D.C. District Court Judge Dabney L. Friedrich rejected a plea by the Alabama Association of Realtors and other property groups to stop the latest moratorium from being enforced, although she made clear the CDC’s extension was likely illegal. The property groups promptly filed a plea with the D.C. District Court of Appeals, asking it to reverse Friedrich’s decision.

The longer the moratorium continues, the more difficult it will be for landlords to hold on to their properties, especially as final mortgage forbearances are due to expire Sept. 30. 

“The silver bullet has been mortgage forbearance, but that is still only one aspect,” Brown said. He added that landlords still bled money over the last 18 months, as they had to continue paying taxes, upkeep, and other bills on their properties. Once mortgage forbearance expires, they could be in real danger of foreclosure, he said.

Implications for Affordable Housing

If the eviction moratorium doesn’t end soon, and banks start taking back properties or mom-and-pops are forced to sell their units, the entire housing landscape could change, resulting in less affordable housing as many properties get snatched up by larger investors. In the National Rental Home Council’s survey earlier this year, 23% of mom-and-pop landlords said they would be forced to sell at least one of their properties because of the eviction moratorium.

“It’s very distressing for long-term housing affordability,” Brown said. “The types of housing from these providers are what’s called ‘naturally affordable housing.’ It’s a twisted outcome. The ones who will lose the most are the low- and moderate-income families they want to help with the moratorium. God help us. We have got to get this rental assistance working, but even that won’t be enough.” 

Since the government approved its last tranche of rental assistance money in March, $26 billion more in uncovered rental debt has accumulated, Brown said. And with the new moratorium, the amount of uncovered rent continues to rise, he noted.

Financial difficulties over the last year have created “real uncertainty” among rental home property owners, said David Howard, executive director of the National Rental Home Council. Indeed, he added, “while rental assistance programs will certainly help, for many property owners it may be too late.”

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