Concern over a potential flood of evictions in the wake of the COVID-19 pandemic has prompted a variety of measures but perhaps none more sweeping than a new eviction moratorium led by the Centers for Disease Control and Prevention (CDC). Why the CDC? Partly because the pandemic has led to a greater awareness that housing plays a key role in keeping both individuals and communities safe and healthy.
President Trump has issued an executive order that allows the CDC to pause residential evictions through December 31, 2020, for tenants who are unable to pay rent or make a housing payment due to loss of income because of the COVID-19 pandemic. Similar to other eviction moratoriums issued in the past, the order prevents a landlord from evicting tenants but does not relieve anyone from the obligation to pay rent. Landlords are still allowed to pursue evictions against tenants who are endangering the safety of other residents or damaging property. Estimates say that as many as 40 million people could be facing eviction during this crisis.
Requirements for renters
In order to qualify for protection, the tenant has to meet certain expectations, including having made an effort to obtain government assistance for rent or housing and making timely partial payments. The Department of Housing and Urban Development (HUD) has allotted nearly $7 billion in grants that can be used for rental assistance, although the distribution of these funds has been slow to roll out in some areas.
The renter must also give a signed declaration to their landlord and has to have an expectation of earning no more than $99,000 ($198,000 for couples) within the 2020 calendar year. The order extends to properties leased for residential purposes but doesn't include hotels.
Housing advocacy groups, including the National Low Income Housing Coalition, have described the moratorium as a half measure. Because the moratorium doesn't relieve people of the obligation of paying back rent, there's a concern that this latest move may just delay the inevitable. Housing attorneys in states where eviction moratoriums have expired have seen courts flood with eviction proceedings.
What landlords need to know
While this new moratorium protects tenants, it doesn't address the needs of owners of rental properties, which is a matter of great concern. National Multifamily Housing Council (NMHC) President Doug Bibby issued a statement expressing disappointment that the federal eviction moratorium was established without official funding for rental and unemployment assistance. Bibby pointed out that the moratorium may make it hard for landlords, especially smaller rental property owners, to meet their own expenses, including property taxes, mortgages, insurance payments, and utilities.
The Federal Housing Finance Agency (FHFA) announced last week that Fannie Mae and Freddie Mac will extend the moratoriums on single-family foreclosures and real estate-owned (REO) evictions until at least Dec. 31, 2020.
There are multiple potential proposals for the next tranche of relief to follow the CARES Act, and some of these, such as the HEROES Act, could provide relief for landlords, including expanded forbearance programs.
It's also important to note that because this doesn't address commercial businesses, those property owners are still dealing with a patchwork of state and local eviction moratoriums that may include their tenants. The HOPE Act could help prevent commercial real estate foreclosures by extending relief to borrowers with CMBS loans.
Much depends on how quickly the federal government can move forward on legislation that hopefully protects real estate investors as much as it does their tenants.