Many people who lost their jobs because of Covid are not able to pay their rent until they return to work. What should we do about it? Most landlords will work out an arrangement for deferred rent with tenants that are otherwise trustworthy. Most overdue debts are handled this way. But a case can be made, and has been made, for temporary government assist. Where you think the money should come from to bridge the income gap tells a lot about your general attitudes toward our market economy. When renters lose their incomes and stop paying their rent, they are passing on part of that loss to their landlords.
But landlords are people with financial needs as well. As noted by George Will: “As of June, landlords were owed $27.5 billion in unpaid rents. Almost half of landlords, who include many minorities, own only one or two rental units. They continue paying mortgages, property taxes, insurance and utilities while the CDC requires them to house nonpaying people or risk jail. Landlords can plausibly argue that the moratorium is a “taking.” https://www.washingtonpost.com/opinions/2021/08/04/eviction-moratorium-exacerbated-americas-institutional-disarray/
The income supplement to out of work renters can come from the general taxpayers (us) or from landlords. Investing in real estate is one of the primary ways in which lower middle-income families build wealth and move up the ladder. They should not be the ones to bear the cost of this assistance. The CARES Act and subsequent programs was meant to share this burden more fairly, but its disbursements seem to have been slow. The eviction moratorium, in addition to being illegal, is immoral.
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Author: Warren Coats
I specialize in advising central banks on monetary policy and the development of the capacity to formulate and implement monetary policy. I joined the International Monetary Fund in 1975 from which I retired in 2003 as Assistant Director of the Monetary and Financial Systems Department. While at the IMF I led or participated in missions to the central banks of over twenty countries (including Afghanistan, Bosnia, Croatia, Egypt, Iraq, Israel, Kazakhstan, Kenya, Kosovo, Kyrgystan, Moldova, Serbia, Turkey, West Bank and Gaza Strip, and Zimbabwe) and was seconded as a visiting economist to the Board of Governors of the Federal Reserve System (1979-80), and to the World Bank's World Development Report team in 1989. After retirement from the IMF I was a member of the Board of the Cayman Islands Monetary Authority from 2003-10 and of the editorial board of the Cayman Financial Review from 2010-2017. Prior to joining the IMF I was Assistant Prof of Economics at UVa from 1970-75. I am currently a fellow of Johns Hopkins Krieger School of Arts and Sciences, Institute for Applied Economics, Global Health, and the Study of Business Enterprise. In March 2019 Central Banking Journal awarded me for my “Outstanding Contribution for Capacity Building.” My recent books are One Currency for Bosnia: Creating the Central Bank of Bosnia and Herzegovina; My Travels in the Former Soviet Union; My Travels to Afghanistan; My Travels to Jerusalem; and My Travels to Baghdad. I have a BA in Economics from the UC Berkeley and a PhD in Economics from the University of Chicago. My dissertation committee was chaired by Milton Friedman and included Robert J. Gordon.
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I fully agree. Working with a few property attornies I have learned that many who applied for rent help, and kept the rent help, and stayed in the apartment certain they would not be evicted. The small and large landlords could not pay their mortgages. In some areas, 20% to 50% of the multifamily debt was in “special servicing”. Special servicing is where you go when a payment is missed. It also artificially kept units and homes off the market leading to rent inflation and property price inflation. Now that the moratoriums are ending, rents and home prices have stopped inflating. The market should come back to more of its natural equilibrium from September to Novermber as people are evicted and homes are foreclosed and resold. Excellent Post.
I concur. What are landlords to do.
I could see direct rental payments to owners for some months, but now jobs are readily available and non payment of rent in not excusable and should result in jail time. Don’t these tardy renters ever put money aside for a rainy day?
There are fewer greater infractions than not paying your rent.
I completely agree, Warren. Also, the US Supreme Court has already ruled against these eviction moratoriums, so it’s pretty amazing that the CDC still wants to pursue this.