The coronavirus pandemic spurred a joblessness crisis like no other. In April of 2020, the national unemployment rate reached a record high. Recognizing that widespread income loss could quickly lead to a wave of homelessness -- and further fuel the spread of COVID-19 -- the CDC put an eviction ban in place barring landlords from evicting tenants on the basis of being delinquent on rent. All tenants had to do was attest to a financial hardship to avoid eviction.
Landlords, meanwhile, have been trying to fight that eviction ban, citing the fact that it leaves them with few options for financial recourse. In addition to the federal eviction ban (which expired at the end of July but was replaced with a new ban just days later that's set to run through early October), many states have enacted their own bans.
New York is one of them. It put its own eviction moratorium into place last year and has extended it through the end of August.
New York landlords have been working to challenge that state ban. And recently, some progress was made in that regard.
Landlords get some support
On August 12, the Supreme Court partially blocked New York's eviction ban, representing a small victory for landlords in the course of an arduous battle. The court order applies only to a provision of the ban that prevents the eviction of tenants who submit a form stating they've suffered an economic hardship.
Landlord advocates have argued that simply allowing tenants to attest to a financial hardship is unjust to landlords and that tenants should have to provide evidence in court proving that they're incapable of paying rent. The recent ruling supports that notion. But to be clear, the broader New York eviction ban is still in place, and tenants who have already been found to have experienced a financial hardship cannot have eviction proceedings initiated against them.
It's unclear as to how many renters will be impacted by this new ruling. Over 830,000 New York households are behind on rent, the majority of which reside in New York City. All told, landlords are owed more than $3.2 billion, according to an analysis of census data by the National Equity Atlas.
Thanks to the recent ruling, some landlords in New York may now be in a position to start trying to evict delinquent tenants. But other protections, like the CDC eviction ban, could still stop them in their tracks.
Of course, at this stage of the game, it could work to landlords' benefit to hold off on eviction proceedings. New York has been very slow to distribute the $2.7 billion in rent relief funds it was allocated as part of a $45 billion pool. But once the state is able to work through its backlog in processing rent relief applications, that aid could start to hit landlords' bank accounts soon and help delinquent tenants get caught up.
The bottom line for landlords
Landlords across the country may, in the coming weeks, enjoy comparable victories to the one awarded to property owners in New York. But at this point, it may be more financially advantageous for landlords to wait to collect their rent relief funds rather than spend time and energy working to have tenants removed from their homes.
Of course, the big wild card is whether the most recent federal eviction ban will get extended beyond its early October deadline. On one hand, the pandemic has clearly, in recent weeks, taken a turn for the worse, so that could fuel lawmakers' decision to keep the ban in place for longer. On the other hand, new jobless claims have been down for three weeks in a row, and July's unemployment rate represents a pandemic-era low. If things continue to improve economically, lawmakers may have a harder time justifying an extension.
Either way, real estate investors with income properties may still have a long battle ahead of them. Even if landlords get the green light to initiate eviction proceedings, the process of removing a tenant isn't quick. It could still be many months until landlords get meaningful relief unless states really do a better job in expediting the distribution of rental assistance funds.