Arlington, VA…When the Supreme Court ended the nationwide eviction moratorium, media outlets were filled with dire predictions. Millions of American families and their belongings would be tossed unceremoniously into the streets, they said. The newly homeless would overrun shelters and create new hotspots of COVID-19. Alarmists seemed to imagine heartless landlords were constrained only by the CDC’s 11-month emergency measure, and as soon as the provision ended, they’d evict en masse and plunge renters into fresh financial and personal chaos.
NEW YORK, NY – JULY 31: Housing activists gather to protest alleged tenant harassment by a landlord and call for cancellation of rent in the Crown Heights neighborhood on July 31, 2020 in Brooklyn, New York. Since the onset of the coronavirus crisis, millions of Americans have fallen behind on rent payments, leading many to speculate that an eviction crisis and drastic rise in homelessness is inevitable unless drastic action is taken by state and federal lawmakers. (Photo by Scott Heins/Getty Images)
But does this prediction reflect real-world conditions between renters and landlords? Overwhelmingly, the data show it does not.
To understand the impact of a ban on evictions, we must understand who owns properties that renters rent. About 10 million Americans own at least one property they rent out to someone else. Most own one or two properties, often single-family units or duplexes. Some are purchased as investments, but most were, or will be, the owners’ primary residence. Individuals renting properties to other individuals represent about half of all residential units nationwide.
Even in pre-pandemic 2018, only about half of individual landlords actually profited from renting a property, with just as many taking a net loss (sometimes used to offset taxable income).
Offering a property for rent is only marginally more profitable than, say, investing an equivalent sum in the stock market. Being a landlord requires not just financial investment but a significant amount of work. A landlord must either split the potential profit with a property management company, or else be the on-call superintendent himself, responding to a leaking toilet or a blown fuse with his own time and resources. Each tenant makes an average of six such calls per year.
When the CDC’s overreach effectively made paying rent optional, these “mom and pop” landlords faced the prospect of hosting strangers in their private property for free: doing a job with no guarantee they’d ever get paid. Small landlords are more likely to rely on rental income to pay the property’s bills, keeping the lights on for tenants, and are also likely to house lower-income renters who might easily fall behind.
The moratorium removed key parts of the landlord-tenant contract: the property owner was effectively being forced to house (at significant expense) people who may or may not pay rent. With late fees banned and evictions suspended, rent became an optional expense, at least for a while.
Even if landlords could find a prospective tenant who would pay, they couldn’t move in someone new because nonpayers were protected from being asked to leave.
Eviction bans were not limited to renters whose income was impacted by COVID-19 closures, nor did residents generally have to prove any special hardship. Landlords couldn’t insist on rent being paid on time, but mortgage payments to lenders, repairs, and maintenance costs continued as usual. Some face tax liens, foreclosure, or bankruptcy.
The marginal return on individual investment properties is not high, and the frustrations, even with generally cooperative tenants, can be daunting. Property taxes (consuming about 14 cents of every dollar paid in rent) continue to rise. Absent rental income, some owners can’t afford to improve or even preserve units, which fall into disrepair.
A small shift in the likelihood that rent will be paid on time—like the shift engineered by eviction moratoria—can push landlords into the red. Higher risks and lower returns mean fewer people offering units for rent, pushing prices for remaining rentals still higher.
Property owners already comply with a complex web of regulations and legal processes regarding renters. They may not arbitrarily raise rent, end a lease early, or discriminate against protected classes of tenants. Evicting tenants for nonpayment or other violations of the lease requires a lawsuit and sometimes-lengthy court procedure, where a housing court judge rules whether the tenant may be removed, or not.
Eviction is a costly business for landlords, who must weigh rental arrears (nonpayment of rent is the most common reason for initiating eviction proceedings, in any year) against court costs, vacancy, and relisting and reletting costs. At the height of the pandemic, that process was further complicated by the need to disinfect the unit, show the unit to prospective tenants, and complete the necessary legal paperwork, all while abiding by emergency health measures and social distancing.
Quite aside from the personal sympathies of landlords (who, like the rest of us, showed solidarity and generosity throughout our global crisis), eviction in a pandemic is a tricky business.
When landlords have to evict tenants, they themselves face a greater risk of foreclosure. Landlords have a high incentive to work with tenants to avoid evictions, and always have.
The CDC moratorium invoked a WWII-era legal authority to limit the spread of disease and was limited to the actual removal of non-paying tenants from units. If landlords were chomping at the bit to chuck out tenants, we would expect to see pre-eviction procedures rising, even as actual evictions were temporarily halted. Those initial filings (not restricted) were just 50 percent of the expected average. When local moratoria and renter protections were allowed to lapse, there was no immediate surge in eviction filings.
According to estimates by PolicyLink, 14 percent of all renters in the U.S. owe back rent as of August 2021, nearly twice the rate of pre-pandemic years, but already down by half from December of 2020. Those debts aren’t cancelled by the moratorium: in most cases, tenants will have to pay the arrears, eventually. It is difficult to know how much of the ongoing shortfall is pandemic hardship, and how much is a conscious response to suspending consequences for nonpayment of rent.
The end of the federal moratorium leaves many state and local bans in place. But even without these, the relationship between tenant and landlord is largely cooperative and mutually beneficial. Each has much to gain, and just as much to lose. The less federal fiddling in the terms of private contracts, the better for both.
The Supreme Court rightly recognized that the CDC does not have the ability to alter millions of private contracts. If landlords were to be prevented from removing tenants from their property for nonpayment of rent, the Court ruled, Congress must authorize such a measure. Congress failed to find the votes to do so.
The end of a national moratorium on evictions is unlikely to trigger a travesty for renters. Landlords remain very willing to work with tenants to avoid eviction proceedings, which damage both parties. Instead, the restoration of property rights is a promising sign for increasing affordable housing in the future. With some legal recourse restored, property owners will be less hesitant to put units up for rent, and more likely to take a chance on lower-income renters.
By BRITTANY HUNTER Pacific Legal Foundation