The COVID-19 pandemic has sent shockwaves through the American economy that have not been felt since The Great Depression. Extended lockdowns in virtually every state choked off the revenue that many small and medium size businesses needed to pay their bills. Job losses totaling tens of millions of Americans has placed incredible financial and psychological pressure on a majority of households. Many of jobs lost to Coronavirus might not ever return.
Because of the lockdown, millions of Americans did not have the cash reserves to pay rent. To prevent landlords from evicting highly vulnerable tenants, the federal government issued a moratorium on evictions, with many states quickly following suit by implementing even more restrictions on landlords and property management companies. According to Utopia Property Management, more than 25 states have issued eviction moratoriums.
Although most of the states have reopened their economies, a few of the states participating in the reopenings have rolled back hours of business operation or have completely shut down the state economy once again. Since many tenants have not recovered from the initial economic shock and the double whammy produced by the second round of state closures, most of the states that had placed moratoriums on evictions have extended the moratoriums for at least another month.
What is a Government Issued Moratorium?
Government issued moratoriums represent a powerful tool the government uses in times of crisis. According to Catherine Hildreth, who is a real estate partner at Fox Rothschild LLP, “A moratorium is some temporary order or law that is passed that prevents people from exercising certain rights they are normally entitled to. For example, an eviction moratorium prevents a landlord from exercising its right to evict a tenant when the tenant doesn’t pay.” She went on to list the governing bodies that have the authorization to issue moratoriums.
Board of County Commissioners
Governors issued the recently extended state eviction moratoriums. The federal moratorium came from United States Congress and Senate as part of the CARES Act. However, the federal eviction moratorium established at the end of March runs out at the end of July. Senator Elizabeth Warren has proposed legislation to create a year-long eviction moratorium on the day the current federal moratorium expires.
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How Eviction Moratoriums are Hurting Landlords
Although tenants have received much of the publicity surrounding state and federal eviction moratoriums, the fact remains many landlords and property owners are getting crushed by the inability to find paying tenants to fill units that currently are not generating any revenue. A little more than 50 percent of the rental unit supply in the United States is controlled by business entities, which means roughly half of all landlords and property managers come mom and pop operations owned by individuals. The small landlord businesses are the ones taking a financial beating.
Another issue concerns the tax breaks handed out to large real estate firms as part of the $2 trillion CARES Act. In addition, mom and pop landlords have not received the green light to write off substantial operating losses. This has frustrated many small rental property owners, as indicated by a statement made by a member of the California-based Coalition of Small Rental Property Owners. “I don’t understand how they can come up with all of this financial aid for the homeless, for renters, for agriculture, for big business, for airplanes. And they’re forgetting about the small mom-and-pop people that have two units or four units and serve such a great need in the community.”
What’s Ahead for Mom and Pop Landlords
Individual landlords that have used personal and/or business savings to ride out the turbulence caused by eviction moratoriums face a difficult time recouping their losses after state and federal governments life the eviction moratoriums. It is highly unlikely that struggling tenants will be able to play catch up of back rent. There is also the likelihood of eviction courts backing up for months on end. Few eviction courts have held hearing since the start of the COVID-19 pandemic.
The big question for individual landlords and property owners is will the federal government provide subsidies to keep the small time operations financially afloat. Individual landlords and property owners do not carry the same political clout that large real estate companies have. Unless the federal government offers some type of financial relief to individual landlords and property owners, there is a good chance many of them will have to shut down their businesses.
States that Have Extended Eviction Moratoriums
These are the states that have extended eviction moratoriums. Many of the extensions go on indefinitely. Because the eviction moratoriums change frequently, you should visit your state’s website to discover how long the eviction moratorium lasts in your state. Remember that some cities have implemented more generous eviction moratoriums.