Moratorium Effects 2021
Wednesday, May 6, 2021, Judge Dabney Friedrich overturned the national eviction moratorium that the Center for Disease Control and Prevention had put in place on September 4, 2020, due to the Covid-19 pandemic.
If you have been living somewhere other than “planet earth” and have no clue what a moratorium is, by definition a moratorium is a temporary prohibition of an activity. That activity I am referring to was a ban on eviction filings as well as many other protections for tenants in certain rental properties with federal assistance or federally related financing.
This has caused a series of debates between landlords, tenants, county officials, state officials, and congress since the start of the Covid-19 pandemic.
I would like to discuss some of the moratorium effects with a focus on a few key topics (listed below) and open it up to the audience for feedback to learn and hear other's thoughts/perspectives on the situation.
I have provided several topics to allow readers to choose one, or all that is most relatable to them.
Discussion Topics:
- #1. How did the CDC ever have control or authority to make this ruling in the first place?
- #2. Who has suffered more due to the moratoriums? Landlords or tenants?
- #3. How do the different branches of government play a role in all this? (State, County, Federal)
- #4. How has the stimulus helped with the recovery process?
- #5. Who is behind on rents and what does this mean?
- #6. As an investor do you still buy during a moratorium or wait?
#1 CDC and control?
For more than 70 years the Centers for Disease Control and Prevention has been the nation’s leading science-based, data-driven, service organization that protects the public’s health. Their bold promise is to work 24/7 to protect the safety, health, and security of America from threats here and around the world.
Great right? Now, what do eviction rulings have to do with safety, health, and security? That is the concern in question, is it not? A federal judge (Dabney Friedrich), not I just struck the ban down that was originated from the CDC and ruled that the national moratorium exceeds the agency’s authority. Yes the CDC did this for safety, health, and safety reasons but was it the right thing to do?
How many pandemics like the Spanish Flu and Covid-19 has America seen? With these other pandemics has the CDC ever stepped in to ban evictions? Do you agree with Judge Dabney or the CDC?
#2 Landlords vs Tenants? & #5 Who is behind on rent payments?
Who has suffered more due to the moratorium? Landlords or Tenants? Well, I would have to go with the landlords. Tenants have had more protections and grants awarded to them if compared to landlords, and landlords have more risk associated with obligations to lenders if purchased with debt financing and the upkeep of the asset itself.
Shepard Smith with CNBC currently estimates that 10 million Americans or 18% of renters or behind on their payments. Presumptively this means that 82% of Americans have found a way to survive through the pandemic, keep their payments current, and adhere to their rental contracts.
As a property owner, your leverage with difficult tenants when they don't follow the rules or are non-compliant is your ability to remove them from your property for issues listed in a lease (contract) that both parties sign and agree to.
If I am wrong someone, please correct me. Let me hear your thoughts, what are other options you think would have been justified in this pandemic? I would love to hear from the tenant’s perspective as well. (I am currently a renter by the way and was in 2020)
#3 Branches of Government? (State, County, Federal)
Since the 19th Century, our government has seen attempted mass eviction. The Trail of Tears removed around 100,000 American Indian families from their homeland and created the Treaty of New Echota in 1835. In the 20th Century, we had the Great Depression from the Wall Street Crash in 1929. Most recently in the 21st Century we had the Great Recession between 2007-2009.
My point is that stuff happens and the government will do its best to step in to normalize and restabilize the economy. However, there always seems to be a problem between the levels of government and their harmony. The states say one thing, the county may or may not allow, and the feds say another, and it comes down to who has the most power.
Well with this pandemic at least 17 states have stepped up and provided their own moratoriums on behalf of their citizens in hopes of doing what is best for the local economy. Did you think they made the right decision?
How do you feel governments should have reacted? Do you feel other states should have a moratorium in place?
Learn more about moratorium policies from Newsweek.
#4 Stimulus Package
The American Rescue Plan Act of 2021 is a $1. 9 trillion Covid-19 rescue package designed to facilitate the United States’ recovery from the effects of the Covid-19 pandemic. We are going to focus on the numbers related to the real estate industry.
$21.55 billion for emergency rental assistance through September 30, 2027
$5 billion in emergency housing vouchers through September 30, 2030
$100 million for tribal housing improvements
$100 million for rural housing through September 30, 2022
$5 billion to assist people experiencing homelessness
The added $21.55 billion has increased the overall assistance to $45 billion from Congress for renters. With the addition of personal stimulus checks, increased unemployment benefits, and assistance for small businesses through programs like the PPP loan (which is forgivable). There have been several opportunities for financial assistance for citizens to take advantage of if used properly.
Prior to the Biden administration, the Trump administration passed the CARES Act which was an initial $2.2 trillion signed March 27, 2020, when the pandemic first began.
The government has been printing bills like crazy to turn this economy around. Quick math here will tell you that total that is $4.1 trillion in economic relief. Any more relief the value of the dollar may just be cut in half.
How do you feel about the relief packages presented by both administrations? Do you think the United States will see an increase in production? Or will goods and services just cost more making our dollar worthless? How has Covid-19 changed the value of the dollar? Check this article out from MoneyWeek.
#6 Investors!!!
Since I wrote this blog to my real estate investor audience the big question is, have you still been buying during the pandemic? Why or why not?
Have your property evaluations changed due to moratorium effects? Are you still able to evaluate properties on cash flow or only value-add?
A quick read from Connected Investors on COVID-19 Impact On Real Estate Investors.
Thanks for reading, I know it's a pretty lengthy blog but I have been holding my thoughts back for some time now and with the most recent ruling it just felt like a good time to communicate with the real estate industry as a whole to gain more understanding.
Fletcher L. Clardy III