Amid controversies and legal challenges, the Centers for Disease Control (CDC) and Prevention recently extended the federal eviction moratorium once again, this time to October 3, to cover areas with high levels of Covid-19 (which are about 80% of U.S. counties as of August 18, 2021). A few states, including California and New York, have also imposed their own eviction moratoriums. While there are certainly benefits in helping low-income renters stay in their rented housing units during this pandemic, the persistent eviction moratorium is an extreme form of government intervention that does more harm than good.
Renters made up about 36% of the nation’s 123 million households in 2019, the last year of reliable estimates. Renters tend to be younger and with lower incomes, compared to homeowners. Of the 44 million renter households in 2019, more than 45% paid out rent equal to 30% or more of their gross household income. Rent is often a large and important component of household expenses. Many renters have experienced some difficulty in keeping up with their rent payments during this pandemic. According to the Aspen Institute, more than 15 million people (among them 7.4 million adults in 6.5 million households) owe as much as $20 billion to their landlords. The Household Pulse Survey found, as of July 5, 2021, that roughly 3.6 million people said they faced eviction in the next two months.
The moratorium on evictions that began in March 2020 through the Cares Act was initially justified as a protection for those who lost their jobs or missed work due to the coronavirus and would have trouble paying their rent. This was further justified as helping those who through no fault of their own had been put out of work by government-imposed business shutdowns. By September 2020, the CDC imposed a national temporary moratorium based on the (somewhat controversial) claim that evictions would cause a large public health problem, with evicted persons moving into homes with larger concentrations of people and therefore with a higher likelihood of spreading Covid-19. The CDC’s moratorium has been extended several times and the latest extension has come in spite of a Supreme Court ruling that the CDC could not continue with the extensions without legislative action.
The benefits to specific tenants of staying in their rented properties without paying rent are clear. However, there is a cost borne by landlords. There is also a cost borne by all participants in the rental market, both current and future potential tenants, and current and future potential landlords. Evictions are not just for failure to pay rent – they can occur for a number of reasons. The top five legal reasons include late rent, lease agreement violation, illegal use, no longer renting, and rehabilitation/demolition/sale. Evictions are not all that rare even in normal times, occurring in about 2~3% of rental units annually, a bit more during recessions and a bit less during good times. The legal rational for eviction is to provide landlords protection against breaches of the lease contract. Evictions, or the threat of eviction, is the ‘stick’ that makes the rental market function. The threat of eviction provides a strong incentive for tenants to make every effort to keep current with their rent, and to honor other parts of the lease agreement.
Why do landlords need protection? To begin, individual landlords are less akin to Bill Gates or Jeff Bezos and more like your neighbor next door. According to the U.S. census and a Zillow analysis, a typical property might give landlord rental revenue of $1,723/month. But 54% of this revenue goes to mortgage payments, property maintenance, insurance, capital improvements, and property taxes. Net remaining revenue is $795/month. That is $9,540 per year for the landlord per unit. So, unless a landlord has many units, she is not exactly getting rich from these rentals. Furthermore, most rental properties – about 7 in 10 – are owned by individuals, and these individuals typically own just one or two properties, according to the 2018 census data. The IRS also reports that 6.7% of individual income tax filers reported rental income in 2018, and these individuals held 1.7 properties on average.
The eviction moratorium harms landlords by taking away a critical legal protection. In an average year before the pandemic, landlords filed 3.7 million eviction cases. The eviction moratorium has made it unduly difficult for small landlords to collect rent from tenants. Stories of landlords experiencing financial hardship due to the eviction moratorium abound. When a tenant doesn’t pay rent, the expected rental income quickly turns into a net loss for the landlord. Without rent, the landlord not only loses her net income but actually has to dig into her own pocket to pay all of the expenses incurred in the rental business: mortgage payments, insurance, property taxes and property maintenance. A tenant not paying rent can turn an expected net income of $795 per month into a loss of $928 per month.
The eviction moratorium also hurts renters because it is prone to abuse by some tenants and, as a result, ultimately makes the price of renting higher for every other renter. This exacerbates the housing shortage and drives up rental prices. Even the non-paying tenants may well experience a decline in service quality regarding repairs and maintenance from their unhappy landlords. In the long run, landlords will be less interested in continuing in the landlord business. Single family units will be converted from rental units to homeowner units, so occupants will require a mortgage. Multi-family units such as apartments may also be converted to condominiums, and again occupants will require a mortgage. There may develop some clever contracting arrangement whereby current renters can somehow stay in a unit but with some other incentive device to encourage payment, including requiring a larger amount of deposit or additional employment or income requirements. It is easy to see that, under such a shifting in the rental market power dynamics in response to a persistent eviction moratorium, low-income renters would be the most vulnerable.
Advocates of extending the eviction moratorium typically make an argument like this: we must use the eviction moratorium to buy time because state and local governments have been slow in distributing the $46.6 billion in federal rental assistance meant to prevent tenant evictions. This argument, however, commits the injustice of forcing a group of people to shoulder the burden the government itself should bear. Moreover, the fear of a sharp increase in evictions without the moratorium is inconsistent with the reality on the ground. The Federal Reserve Bank of Philadelphia found that more than 80% of tenants in arrears had formal or informal arrangements with their landlords to pay back their missing rent. This took place even before Congress appropriated an additional $21.6 billion rental assistance in March, adding to the earlier appropriation of $25 billion signed by former President Trump in December 2020.
Distribution of the legislated federal assistance funds to landlords has been hampered by the fact that no mechanisms were in place to efficiently process and distribute the funds. Only $3 billion had been distributed by the end of June. Some landlords are wary of participating, as they have to agree to not pursue further evictions against the tenant, at least temporarily, as a condition of receiving funds.
Our Constitution includes the Fifth Amendment’s Takings Clause, “Nor shall private property be taken for public use, without just compensation.” In Armstrong v United States (1960), the Supreme Court wrote “The Fifth Amendment’s [Takings Clause] . . . was designed to bar Government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole.” Yet the eviction moratoriums have taken the property of landlords, their income stream, without just compensation. These same eviction moratoriums have forced these landlords to alone bear a burden in the public interest that should be borne by the public as a whole. The government acted, purportedly in the public interest, to remove the ability for landlords to effectively enforce the legal contract signed with their tenants. This amounts to a government taking, so far without adequate compensation. And like justice, compensation delayed is compensation denied.
The policy goal of helping low-income renters stay in their rented housing units during the Covid-19 pandemic can be achieved without a persistent eviction moratorium and without landlords being denied recompense for lost rent. The eviction moratorium is unfair to landlords, especially the millions of small landlords who are also experiencing considerable financial hardship during the pandemic. The government should move quickly, and with minimal restrictions, to compensate landlords for this public taking. And the Supreme Court should move quickly to end the eviction moratorium and allow the rental market to function normally.
 “With Federal Moratorium Expiring, 15 Million People at Risk of Eviction,” by Sam Gilman, Jacqueline Woo, Katherine Lucas McKay, Zach Neumann and Tim Shaw, Aspen Institute, July 27, 2021. https://www.aspeninstitute.org/publications/with-federal-moratorium-expiring-15-million-people-at-risk-of-eviction/
 “Week 33 Household Pulse Survey: June 23 – July 5,” U.S. Census Bureau, July 14, 2021, https://www.census.gov/data/tables/2021/demo/hhp/hhp33.html
 “In a Typical Year, Landlords File 3.7 Million Eviction Cases,” Eviction Lab, accessed on August 17, 2021. https://evictionlab.org
 “Biden’s Illegal Eviction Ban Is Destroying People like Lincoln Eccles,” by Howard Husock, American Enterprise Institute, August 14, 2021.
 “The Vulnerable Pay the Price for Covid Eviction Moratoriums,” by Jillian Kay Melchior, The Wall Street Journal, August 14-15, 2021.
 “Renters’ Experiences during Covid-19,” by Davin Reed, Eileen Divringi, and Tom Akana, Federal Reserve Bank of Philadelphia, March 1, 2021, https://www.philadelphiafed.org/-/media/frbp/assets/community-development/reports/renters-experiences-during-covid-19.pdf