This story appeared on StrongTown.org on August 9, 2021
Pandemic rental assistance has been a chaotic mess. In December 2020, the federal government authorized $25 billion in rental assistance through the Federal Emergency Rental Assistance program. Another $21 million was authorized in March 2021. However, to date only 7% of that money has been distributed to its intended recipients. As David Dayen at The American Prospect reports in one of the best breakdowns of the issue, this fact is at the heart of the current prospect of an “eviction cliff.” Why has the rental relief program — which should have eliminated most of the need for an eviction moratorium — been such a disaster? In two words: it’s complicated. (I mean literally. It’s too complicated to administer.)
The federal government did not administer the rent relief program directly, but instead left it to states and localities to create literally hundreds of their own such programs from scratch in almost no time. New York State, for example, did not open its application portal until June 1, 2021. And in that first month, although the state received 120,000 applicants for rent relief, no money whatsoever was disbursed. The state’s own eviction moratorium is set to expire August 31.
In Texas, rent relief has been slow to arrive, and eviction court judges have proceeded to evict tenants who qualified for relief but simply hadn’t received the money yet.
In the absence of comprehensive rental registries, Vox’s Jerusalem Demsas argues that states were left with no clear way of identifying who is eligible for and in need of aid, and many individual tenants either didn’t know they were eligible or struggled to navigate the process of proving eligibility. An elaborate set of means-testing requirements has only exacerbated this: residents must demonstrate that they have experienced financial hardship due to the pandemic, or have an income below 80% of area median, and not be on other rental assistance.
The clock is ticking, and even a 60-day extension of eviction protections seems a short window for states to get their act together and actually help tenants pay off their rental debt accrued during the months of COVID shutdowns.
Does the eventual expiration or invalidation of the CDC moratorium mean a tsunami of evictions is coming? There is almost certain to be an uptick in evictions, and in fact we’ve already seen it in the window of time after the federal moratorium ended on July 31st. Paul Williams of the Jain Family Institute observed a 100% growth in eviction cases in Jackson, Mississippi, this week, in a state where tenants who lose an eviction case can be removed from their home same-day, and homeless shelters have little to no extra capacity. There are many places where a surge in evictions would overwhelm homeless services and result in a great deal of near-term human misery.
Whether there will be an unprecedented “tsunami” is less clear cut. 11 million Americans behind on rent will certainly not mean 11 million homeless Americans. Among others, Salim Furth of the Mercatus Center has argued since mid-2020 that, in practice, there is no evidence a “tsunami” is coming, and such an outcome would be in no one’s interest.
“The vast majority of nonpayment cases are resolved through late payment, forgiveness, or negotiation,” Furth observed on Twitter.
The key to understanding why it’s less clear is to try to play out in your mind what would actually happen if 11 million American tenants were all evicted in short order, with housing courts working overtime. (Assume the courts could even handle that kind of flood of cases without months-long backlogs, which they couldn’t.)
You now have millions of empty houses and apartments to fill. This supply glut exerts a lot of downward pressure on rents, particularly if landlords keep up the (currently common) policy of refusing to rent to people with prior eviction records. A giant, chaotic game of “musical chairs” with many winners and losers would soon ensue. This puts many landlords, especially those in neighborhoods with weaker property markets or with lower-quality units, at risk of having a vacant unit for months on end instead of just one with a tenant who pays rent irregularly. Williams argues the effects are likely to play out differently in different places, even down to the neighborhood level.
In a complex system, what makes sense at the individual level doesn’t scale up linearly to the societal level. When an individual tenant is delinquent on rent, evicting them makes sense. When an enormous share of Americans are delinquent on rent, evicting them all makes no sense. Many landlords understand this and might be predisposed to come to an arrangement with their tenant… say, forgiving a portion of the back rent owed.
Or maybe not. The whole scenario poses a sort of Prisoner’s Dilemma problem, in which what appears rational for an individual landlord to do is very different from what happens if they all do it.
Market conditions matter, but aren’t everything. The likely experience of a Cleveland is very different from the likely experience of a San Francisco. Multiple housing experts I spoke to in Cleveland earlier this year told me they did not expect a flood of evictions when the moratorium ended, because there are so many vacant homes in Cleveland, and so much slack in the city’s housing market as a result, that landlords would rather hold on to a paying tenant.
Research by Desmond suggests the serial eviction rate — landlords repeatedly filing eviction claims against the same household in order to collect rent and fines — is negatively correlated with vacancy rate: in other words, that “the repeat threat of eviction is deployed to a greater extent in tighter markets.” I’ve written before about how the vacancy rate is a measure of the balance of power between landlords and tenants: a lower vacancy rate will always favor landlords.
Market conditions, though, are not the only factor in this not-yet-post-pandemic moment. Laws also matter. The Wall Street Journal reports the South might be the region hardest hit by a wave of evictions, not because rents are highest or housing is scarcest in that region, but because of a lack of local moratoriums and generally landlord-friendly laws.
It also may matter what kind of landlord you have.
Institutional landlords and mom-and-pop landlords face vastly different incentives when it comes to eviction. To a small-time landlord, the quality of the relationship with the tenant may matter a lot more: you have more face-to-face contact with them, and may even live on or near the property. This means there’s incentive to negotiate an informal arrangement when rent is late.
There is evidence that corporate landlords, and in particular investment firms, are much more likely to evict their tenants, as well as to use threats of eviction as a routine business practice. Many are faceless to their tenants, even going so far as to automate both rent payment and eviction filings.
Corporate owners with investor backing have also reportedly faced recent pressure from those investors to accelerate eviction filings.
Eviction moratoriums may hurt mom-and-pop landlords and favor corporate ones. Mom-and-pop landlords play a larger role in America’s rental housing market than is often realized. 48% of rental units are in 1–4 unit buildings; of these, small-time owners manage 77% of them.
One of the scarier potential long-term effects of eviction moratoriums (federal and state/local) is that they could have punishing effects on small landlords, many of whom have a mortgage to pay on the property themselves. This could ultimately drive many of them out of business and increase the consolidation of real estate in corporate hands. (In turn increasing eviction pressure and reducing renters’ recourse against eviction, as observed above.) A CNBC report in June said as much: the moratorium is “killing small landlords.” CNBC quotes the head of a landlords’ organization arguing that these small businesses should have been treated fundamentally differently from large ones, including by making them eligible for the Paycheck Protection Program (PPP) loans that bailed out the likes of restaurants and bars.
There are other reforms on the table that are worth watching.
Mass eviction is ultimately not a problem that is going to yield to a silver-bullet answer. Many local reforms were underway before the pandemic, and some of them have gotten a kick start from the unusual circumstances of the pandemic.
Access to legal counsel is a main thrust of many efforts in this area, and an important one if your goal is to keep people in their homes who will be gravely harmed by losing them. A 2013 study in New York City found that providing legal counsel to tenants was associated with a 77% decrease in the number of cases resulting in a warrant for eviction.
As far as the pandemic situation goes, the Mercatus Institute’s Furth recommends three measures which, in combination, would do a lot to limit the effect of an “eviction cliff.” States and localities, Furth writes, should simultaneously (1) encourage renegotiation of rent between landlords and tenants, and provide model agreements to facilitate this; (2) explicitly limit the pace of evictions through the housing courts and prioritize those which involve violence, nuisance, and property damage over those limited to nonpayment of rent; and (3) create financial rewards to landlords for rent forbearance.
Bloomberg reported recently that Philadelphia has explored an “eviction diversion” program to send cases to mediation instead of housing court, with the hope that landlord and tenant will reach a negotiated settlement. The program has already produced 1,500 successful settlements out of 2,300 mediations.
These experiments and many others are worth watching.
Daniel Herriges serves as Senior Editor for Strong Towns, and has been a regular contributor since 2015. He is also a founding member of the organization. Daniel has a Masters in Urban and Regional Planning from the University of Minnesota, with a concentration in Housing and Community Development.