How eviction moratoria could increase homelessness

How eviction moratoria could increase homelessness
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Although the Supreme Court recently annulled the Centers for Disease Control and Prevention’s (CDC) eviction moratorium, some states still have eviction moratoria in effect. In the short run, these policies appear to benefit tenants at the expense of their landlords. In the long run, however, moratoria make it harder for people with low credit scores or unstable employment records to find any place to rent. Ironically, prohibiting evictions now may result in even more people being homeless later. 

As originally enacted, the Virginia Poverty Law Center explains that the CDC eviction moratorium applied to individuals with annual incomes less than $99,000 and couples earning less than $198,000 who “have lost income due to COVID-19 or have extraordinary medical expenses, have been unable to pay full rent, and would be homeless or would have to move in with others if evicted.”

Where eviction moratoria are still in effect, landlords would incur criminal penalties if they tried to evict tenants for not paying rent.

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More than 41 percent of rental units are owned by individuals, with most trying to supplement their household income. Many live in the same neighborhood as their rental units and are only a little better off than their renters. If renters don’t pay what they owe, the owners may be unable to keep up with their expenses, which typically include mortgages, property taxes and maintenance.

Although the original CDC eviction moratorium was temporary and set to expire at the end of 2020, it was subsequently extended through Aug. 26, 2021. Progressive lawmakers recently introduced a bill to reimpose a federal eviction moratorium.

Landlords in states where moratoria still apply aren’t sure when they’ll again be allowed to evict nonpaying tenants. As a result, landlords who are renting to tenants who aren’t paying their rent now, or are likely to have difficulty paying their rent in the future, may be hesitant to maintain or improve their rental units. Most rental owners ordinarily do so because they expect to earn a decent rate of return on their investment. But if they might not be able to evict nonpaying tenants in the future, it could make sense to sell existing property and not buy more, especially if the units are located in lower-income and working-class neighborhoods. This will lead to a reduction in the supply of rental units, especially to people with unstable employment records or low credit scores. 

As with other problems created by heavy-handed government regulations implemented in response to the pandemic, Congress recognized a political problem with forcing landlords to forego billions of dollars in unpaid rent. They allocated $46.6 billion of Emergency Rental Assistance (ERA) so states and cities might assist tenants in paying their rent. But landlords in many states have received little of that money. 

Only 11 percent of the $46.6 billion of rental assistance had been paid out as of July. Much of this is due to application processing delays. Rules for qualifying also vary from state to state. Many tenants who are behind in their rent turn in incomplete applications or disqualify themselves by how they answer screening questions. Others simply haven’t applied. 

It’s likely that some landlords will never be compensated for the rent they lost due to the eviction moratorium. It gave some tenants an excuse to pay less rent than they could actually afford. Government bureaucrats cannot possibly know what options are available to some tenants for paying rent when their income declines. The possibility of eviction would increase a tenant’s incentive to find a way to pay. Some could negotiate a reduction or a delay with their landlords.

Though some are genuinely unable to pay, moratoria make it easier for others to be irresponsible, increasing discretionary spending instead of paying rent or not putting enough effort into finding or keeping a job. The advantage of being allowed to freely evict tenants is not from those who are actually evicted, but because, as Cleveland State University Professor Dennis Keating notes, the threat of eviction motivates “many potentially bad tenants” to “decide to become good ones.” 

So far, the surge in evictions forecast by moratoria advocates hasn’t occurred. According to a Princeton study, evictions have risen in 11 of 31 major cities since the CDC moratorium ended, but weekly eviction filings are still lower than before the pandemic in 30 of the 31 cities.

Combining billions of dollars in government-funded rent relief with an eviction moratorium isn’t the best way to help renters or reduce COVID’s spread. That spending will ultimately be paid by future taxpayers or through inflation. Tenants can always try to negotiate with landlords, but the threat of eviction provides an important incentive for renters to keep working, find a new job and carefully manage their finances so they can pay when the rent comes due.

Tracy C. Miller is a senior policy research editor with the Mercatus Center at George Mason University.