{"id":153752,"date":"2023-06-07T13:57:42","date_gmt":"2023-06-07T19:57:42","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=153752"},"modified":"2024-02-27T10:42:29","modified_gmt":"2024-02-27T17:42:29","slug":"how-to-protect-against-eviction-moratoriums","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/how-to-protect-against-eviction-moratoriums","title":{"rendered":"If Eviction Moratoriums Ever Come Back, This is How to Defend Against Them"},"content":{"rendered":"\n\n      <iframe loading=\"lazy\" frameborder=\"0\" height=\"200\" scrolling=\"no\" src=\"https:\/\/playlist.megaphone.fm\/?e=BIGPOC3693953724\" width=\"100%\"><\/iframe>\r\n  \n\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">Federal eviction moratoriums lasted nearly 18 months, from early 2020 through late August 2021. Even after the&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/the-end-of-eviction-moratoriums-why-its-not-as-simple-as-it-seems\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">federal eviction moratorium ended<\/span><\/a><span data-preserver-spaces=\"true\">, many cities and states continued preventing landlords from enforcing their lease contracts.&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">Some cities went so far as to use&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.chicago.gov\/city\/en\/depts\/doh\/provdrs\/renters\/news\/2022\/april\/the-chicago-department-of-housing-announces-right-to-counsel-pil.html\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">federal tax dollars to give free legal aid to tenants<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;to fight lawful evictions long after moratoriums ended. And that\u2019s even after taxpayers paid for nearly&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.marketwatch.com\/story\/u-s-families-at-risk-of-eviction-during-pandemic-got-nearly-10-million-rent-relief-payments-treasury-department-says-7e6087ab\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">10 million rent assistance payments<\/span><\/a><span data-preserver-spaces=\"true\">, albeit months after it did many landlords any good.&nbsp;&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">But that\u2019s behind us, right? Never to happen again?<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">I don\u2019t believe so. The precedent has been set, and eviction moratoriums are now in the government\u2019s playbook. When it becomes politically expedient to do so\u2014and it will, sooner or later\u2014politicians will pay that card again.&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">It even makes a twisted sort of sense. Over a third of the U.S. population are renters, while a tiny fraction of that are landlords. And one of those groups is politically sympathetic, while the other is reviled.&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">Five years ago, no real estate investor considered eviction moratoriums a risk. Today, you should bake it into your investing calculus as one more risk and take steps to mitigate it.&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">As you invest moving forward, keep the following options in mind to reduce your risk of lease agreements becoming enforceable only by renters.&nbsp;<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">1. Invest in Commercial Real Estate (Not Offices, Though)<\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">Pandemic-era eviction moratoriums only applied to residential leases. Commercial investors could still enforce their leases.&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">And no, that doesn\u2019t just include office space, with all its&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/the-biggest-crash-imaginable-is-coming-for-commercial-assets\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">current troubles<\/span><\/a><span data-preserver-spaces=\"true\">. It also includes&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/self-storage-investing-pros-cons\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">self-storage facilities<\/span><\/a><span data-preserver-spaces=\"true\">, industrial real estate, retail space, hotels and hospitality, restaurants and bars, and beyond.&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">Of course, each one of those subcategories comes with its own unique risks and rewards. But one risk they don\u2019t have is eviction moratoriums or the government handing money to tenants to fight lawful eviction.&nbsp;<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">2. Buy Rent Default Insurance<\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">A relatively new option in the U.S., landlords can now buy rent default insurance that kicks in and pays the rent if tenants default, up to a point, at least. Most policies put a limit on the number of months\u2019 rent they\u2019ll pay while the landlord evicts the erstwhile renter and finds a replacement.&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">Some companies even structure these so that the tenant pays for the policy, not the landlord. The insurance company bundles it with damage insurance, designed to replace the tenant\u2019s&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/rental-property-security-deposits\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">security deposit<\/span><\/a><span data-preserver-spaces=\"true\">.&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">That helps you sleep at night knowing you\u2019ll collect your rent no matter what, even if the tenant stops paying.&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">As a final point, note that you need these policies in place before the storm hits. During the eviction moratorium, some insurers paused underwriting these policies. Don\u2019t just assume you can run out and buy a policy only if another eviction moratorium strikes.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">3. Report Rents to Credit Bureaus<\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">Even if landlords can\u2019t enforce their lease contracts, they can at least make sure future landlords and creditors know that the renters defaulted and are a credit risk.&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">Reporting rent payments to the credit bureaus creates both a carrot and a stick, rewarding responsible tenants while penalizing bad actors. It adds another layer of accountability for rent payments, another consequence of defaulting beyond eviction.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">4. Invest in Higher-Income Neighborhoods<\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">There\u2019s a&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.creditsesame.com\/blog\/credit-score\/the-relationship-between-income-and-credit-score\/\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">correlation between income and credit,<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;even if no one likes to talk about it. The higher the socioeconomic bracket, the more people engage with banking and credit markets. In turn, consumers also take more care of their&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/why-credit-scores-matter-how-to-improve-them\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">credit histories<\/span><\/a><span data-preserver-spaces=\"true\">.&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">Fewer high-income renters defaulted during the pandemic eviction moratoriums. You can offer up plenty of explanations for this, such as knowledge workers\u2019 easier transition to remote work, but the fact remains that higher earners tend to take better care of their credit in good times and in bad.&nbsp;<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">5. Screen for Government-Subsidized Rents<\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">You can also take advantage of renting to lower-income tenants whose rents are paid by the government.&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">I\u2019ve had my share of&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/real-estate-investing-avoid-section-8-properties\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">bad experiences with Section 8<\/span><\/a><span data-preserver-spaces=\"true\">, but I\u2019ll say this for them: they didn\u2019t default on rent during the eviction moratoriums. The same goes for other government agencies that subsidize rents for various niche recipients.&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">Subsidized renters come with other risks, of course, such as property damage, expensive repairs from annual inspections, red tape, and difficulty in removing bad tenants. But at least you don\u2019t have to worry about rent defaults.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">6. Avoid Anti-Landlord Cities<\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">I will never invest in \u201ctenant-friendly\u201d cities again.&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">I hail from Baltimore originally, and I cut my teeth there as a real estate investor. The laws are so anti-investor that I sold all my properties and never looked back.&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">For example, it once took me 11 months to evict a non-paying tenant. And that was years before the eviction moratoriums of the pandemic. Other anti-landlord regulations include:<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><span data-preserver-spaces=\"true\">Onerous rental registrations and U&amp;O inspections.<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">The requirement that landlords renew lease agreements with almost no exceptions.<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Laws requiring landlords to store tenants\u2019 abandoned junk.<\/span><\/li>\n\n\n\n<li><span data-preserver-spaces=\"true\">Expensive state-level lead paint inspections and registrations.<\/span><\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">Baltimore City doesn\u2019t like landlords, which is their prerogative. And they get to live with the consequence that experienced mom-and-pop landlords largely shun it. That leaves novice landlords who don\u2019t know what they\u2019re doing and faceless corporate landlords with the resources to navigate the choppy waters of anti-landlord regulation.&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/tenant-landlord-friendly-states-difference\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">Tenant-friendly states<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;and cities were quick to impose their own eviction moratoriums during the pandemic and slow to lift them long after the federal moratorium ended. If a deep recession were to hit tomorrow, I wouldn\u2019t put it past any of these cities or states to implement another eviction moratorium.&nbsp;<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">7. Operate Short-Term Rentals<\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">If you operate your rental property as a hospitality business, eviction moratoriums don\u2019t apply to it.&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">Consider investing in high-yield vacation rental markets. Ideally, you want to buy properties that&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/airbnb-calculator\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">cash flow well as a vacation rental<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;or as a long-term rental, offering a contingency in case one strategy gets undermined by regulation.&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">Of course, you\u2019d need to operate the property as a short-term rental before an eviction moratorium strikes. Once an eviction moratorium is announced, you\u2019re stuck with any long-term tenants living in your properties until they leave voluntarily.&nbsp;<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Final Thoughts<\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">In unaffordable cities without enough new housing construction\u2014like, say, San Francisco\u2014lawmakers are quick to throw every regulatory solution behind bolstering tenants except actually fixing the problem by adding new housing supply. Rent control, rent stabilization, restrictive security deposit rules, lease renewal requirements for landlords (but not renters), and a dozen other regulations all make for an anti-investor environment.&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">That regulation keeps expanding alongside affordability problems in these cities and states. With nearly half of&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/listwithclever.com\/research\/stress-in-america-2023\/\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">millennials skipping meals to try to afford housing<\/span><\/a><span data-preserver-spaces=\"true\">, I don\u2019t see any end to this cat-and-mouse game of anti-landlord regulators using every trick in the book to placate angst-riddled renters.&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">You might like living in these cities yourself, and there\u2019s nothing wrong with that. My brother loves living in Los Angeles, and it suits his politics. But that doesn\u2019t mean he buys rental properties there, and you, too, should think twice about protecting yourself against government intervention in rental markets, both present and future.<\/span><\/p>\n\n\n\n<div id=\"hero-block_62ee867235a1c\" class=\"first:mt-0 hero-block py-4    has-background has-slate-300-background-color has-text-color has-slate-800-color\">\n    <div\n        class=\"gap-10 lg:gap-20 flex flex-wrap lg:flex-nowrap max-w-screen-xl mx-auto px-4 relative lg:items-center \">\n\n        <div class=\"relative z-30 lg:w-2\/3 \">\n            <main class=\"py-4\">\n                \n\n<p class=\"has-theme-slate-color has-text-color has-large-font-size wp-block-paragraph\" style=\"font-style:normal;font-weight:800\">Prepare for a market shift<\/p>\n\n\n\n<p class=\"my-3 md:my-5 lg:my-8 has-theme-slate-color has-text-color wp-block-paragraph\" style=\"font-size:16px\">Modify your investing tactics\u2014not only to survive an economic downturn, but to also thrive! Take any recession in stride and never be intimidated by a market shift again with <em><a class=\"rank-math-link\" href=\"https:\/\/store.biggerpockets.com\/products\/recession-proof-real-estate-investing?utm_source=blog&amp;utm_medium=blog%20banner\" target=\"_blank\">Recession-Proof Real Estate Investing<\/a><\/em>.<\/p>\n\n\n\n<div id=button-custom-event-block_64138705d4d27 class='button-custom-event'>\n      <a href=\"https:\/\/store.biggerpockets.com\/products\/recession-proof-real-estate-investing?utm_source=blog&#038;utm_medium=marketing_block\" x-on:click=\"window.analytics.track(&#039;Blog Block | Publishing: Recession Proof Book&#039;, {\n      referrer: &#039;https:\/\/www.biggerpockets.com\/blog\/how-to-protect-against-eviction-moratoriums&#039;,\n    });\" class=\" btn-shape inline-block no-underline has-background has-theme-blue-background-color has-text-color has-white-color\" target=\"_blank\">Get Yours Now<\/a>\n  <\/div>\n\n            <\/main>\n        <\/div>\n\n                <div class=\"lg:w-1\/3 first:mt-0 relative h-full lg:flex lg:items-center\">\n            <img decoding=\"async\" class=\"object-cover w-full relative z-20 my-0  rounded-md hidden lg:block\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2021\/04\/recession-proof.png\" alt=\"\" title=\"\">\n        <\/div>\n            <\/div>\n<\/div>","protected":false},"excerpt":{"rendered":"<p>Don&#8217;t lose all of your money if moratoriums come back. This is how you can defend yourself.<\/p>\n","protected":false},"author":158586,"featured_media":153753,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[7384],"tags":[],"class_list":["post-153752","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-politics-policy"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/153752","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/158586"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=153752"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/153752\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/153753"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=153752"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=153752"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=153752"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}