An order published in the Federal Register on September 4 outlines the Centers for Disease Control and Prevention’s new temporary eviction memorandum. The memorandum protects U.S. renters from losing their homes during the COVID-19 pandemic. It applies to all rental units nationwide until Dec. 31 and goes into effect immediately.
A previous federal eviction moratorium created by the CARES Act ended in late July and only applied to federally-funded housing. The new moratorium applies to any state in which there is not already a more protective ban in effect. Renters will be eligible for the moratorium’s protection if they received a stimulus check through the CARES Act.
The order includes a declaration for renters to sign and give their landlord. Senior Trump administration officials said the form would be made available on the CDC’s website. Renters must indicate on the declaration that they cannot afford to pay their rent in full and that, if evicted, they would become homeless or be forced to move into congregate housing. Renters also must be able to prove that they made an effort to receive government assistance and that they could not afford rent.
However, the moratorium does not absolve renters of paying the rent. That money is still due to landlords … eventually.
What this means for landlords
The sweeping order effectively requires landlords to subsidize distressed tenants’ housing through the end of the year or face criminal penalties and hefty fines. This affects the country’s 8 million independent landlords — most of whom lease a unit here or there on a property they own, without the financial backing of professional management companies.
More than 22 million rental units, a little over half the rental housing in the country, are in single-family buildings with between one and four units. Most of those buildings have a mortgage, meaning the property owners themselves still need to make their own monthly payments. Because of this new order, they will not be receiving their usual income from which to make these payments.
Most of the units are owned by mom-and-pop landlords, many of whom invested in property to save for retirement. Now they’re dealing with a dramatic drop in income, facing the prospect of either trying to sell their property or going into debt to meet financial obligations including, mortgage and insurance payments; property taxes; utilities; and maintenance costs.
If enough landlords can no longer make those payments, it would threaten everything from the school budgets funded by property taxes to the stability of the $11 trillion U.S. mortgage market itself. Tenants already owe some $25 billion in back rent and Moody’s Analytics estimates that they will owe nearly $70 billion by the end of the year.
Once landlords have paid expenses associated with the property, they keep on average just 9 cents of every dollar paid in rent as profit, according to a National Apartment Association analysis. A July survey by the National Association of Hispanic Real Estate professionals revealed that one in four small landlords said they had already borrowed to make ends meet. An August Avail survey of small landlords found that 35 percent were dipping into savings to cover operating costs.
Where to go from here
Housing advocates and industry groups have come together on the push for rental aid money, which would prevent tenants from being hit with massive back rent bills at the end of the crisis while preserving income for landlords. But few are optimistic about the state of negotiations on a new relief package, and they worry that the CDC order will be extended.
The long-term effects of this eviction ban remain to be seen, but short-term consequences have already been brought to light.