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Eviction Moratoriums – Who Benefitted?

Barring any further legal, illegal, or extra-legal extensions, the moratoriums on eviction of non-paying renters have expired – California’s on September 30, the CDC on October 3rd. The CDC extension was actually struck down by the Supreme Court back in August when it agreed with plaintiffs that the federal agency did not have the power to order such a ban, stating: “It is indisputable that the public has a strong interest in combating the spread of the COVID-19 Delta variant, but our system does not permit agencies to act unlawfully even in pursuit of desirable ends. It is up to Congress, not the CDC, to decide whether the public interest merits further action here.”

But various states, including California, have provided their own cushion for renters with most expiring only recently. So now what? Well according to some ‘experts’, a new pandemic will be visited on the country, a surge of evictions. Others say not to worry. Lenders, landlords and governments all have a vested interest in making sure this doesn’t happen for a variety of reason – some altruistic, some not. Thus far there has not been a run on the courts to evict so we will see how this plays out over time. 

It’s currently estimated that close to 1 million of California’s 7 million renters are delinquent, having paid either no rent or just some portion thereof during the past 18 months. That equates to some $2.5 billion in delinquent payments – money landlords have not been able to collect while still being responsible for their own mortgage, utility, and maintenance costs. That’s a bunch of money that landlords may only be able to collect a fraction of assuming the government can actually process and distribute moneys that have been allocated to subsume some of these delinquencies and avoid that wave of evictions. That process is still in its early stages so hopefully the process will run smoother and more expeditiously than unemployment benefits and other government sops, allowing landlords to return to some measure of fiscal certainty. 

So if owners of rental properties took a hit during this period, how did renters make out? Well, according to a recent disclosure from the Consumer Finance Protection Bureau, renter’s finances actually improved during the pandemic, making the need for all the moratoria questionable, at best.

The CFPB report noted, among other things, that while homeowners with mortgages increased their credit scores by an average of 10 points during the pandemic, the credit scores of renters increased 16 points. Renters earning less than $40,000 increased their score by 18 points and those with children added 25 points. Even as unemployment spiked prior to June 2020, thanks to government largesse, and lacking the necessity to pay rent, fewer renters fell behind on non-rent payments and bills. The share of renters with credit delinquencies fell to 28% in April of this year compared to 33.3% in December of 2019. According to the CFPB report, ‘As of spring 2021, renter finances appear to have been in a stronger position than they were before the pandemic.’ 

Trillions of dollars in pandemic transfer payments from Congress helped lower income Americans the most, including those most likely to be renters. Thanks to stimulus checks, enhanced unemployment benefits, student loan forbearance, increased child credits, and eviction moratoriums, the U.S. poverty rate fell nearly 23% from 2019 – 2020, from 11.7% to 9.1%. While that is an admirable result, the long-term cost to accomplish that are questionable at best. Inflation is just one of the by-products of these policies – and as we all know, inflation acts as a regressive tax, impacting lower income families the most. Those increases they saw during the wealth transfer, are likely to be eliminated over the next few months as they are again expected to not only start paying rent again, but will face significantly higher prices for gas, food, clothes, etc. All that free stuff was paid for by somebody, and increasingly that cost will be borne by the broad populace.

Closing with a quote from a recent Wall Street Journal, “The claim that the eviction moratorium was necessary to prevent hard-up renters from being thrown into the streets was always dubious, and now it appears even more so.” Couldn’t have said it better myself. 

Written by Gene Wunderlich, Sr. Staff Writer

Gene Wunderlich is the Government Affairs Director for Southwest Riverside County Association of Realtors. If you have questions on the market please contact me at GAD@srcar.org or to keep up with the latest legislative and real estate trends go to http://gadblog.srcar.org/.

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