Eviction Moratorium Threatens Financial Security of Both Landlords and Renters

When last year’s global health crisis hit, the U.S. economy quickly ground to a halt. In what seemed like the blink of an eye, the nation’s unemployment rate reached its highest level since the Great Depression. The government quickly turned its attention to the personal economic viability of America’s citizens.

Seemingly countless sums were injected into the country in various ways to keep both individuals and the nation as a whole upright. One of those ways included an eviction moratorium – a legal mandate preventing landlords from evicting tenants for nonpayment of rent. It was a welcome short-term solution for suffering renters. But some Americans worry this could have unwelcome long-term consequences.

The technicalities of the eviction moratoriums that have been strung together since March 2020 aren’t necessary for the purposes of this discussion. To sum it up, the Coronavirus Aid, Relief, and Economic Security (CARES) Act passed last March and was designed to bring a wave of financial relief to Americans. The act included an eviction moratorium that basically said landlords who owned their properties through federally backed mortgages couldn’t evict tenants for nonpayment of rent for 120 days.

Since that initial moratorium expired, the Centers for Disease Control (CDC) picked up the baton. They imposed and have since extended its own moratorium in the interest of public health and safety. They said it’s in the urgent public interest that people remain in their homes during the health crisis, and a substantial wave of mass evictions would be at odds with that goal.

The CDC mandate applies to U.S. counties experiencing levels of COVID-19 transmission that could be considered “substantial” or “high.” Right now, that translates to about 80% of U.S. counties and roughly 90% of the country’s population.¹

Some landlords and others have challenged the moratorium and those challenges are expected to persist. But the bottom line is that for more than a year – and through October 3 as things stand now – a significant number of America’s renters have been spared the requirement to meet their monthly housing obligation.

And landlords left in the financial lurch say this act of generosity at their direct expense not only threatens their own personal economic viability but risks worsening an affordable housing crisis already poised to jeopardize an already-struggling economic recovery.

No Government Assistance Available to Landlords

To many, the word “landlord” conjures up images of wealthy villainous characters pulling on the ends of their handlebar moustaches as they decide which poor family to displace next into a cold, wintery night. But the reality is that a large number of American landlords are of relatively modest means and unable to withstand the effects of an eviction moratorium for very long.

As a matter of fact, a 2016 Brookings Institute survey revealed nearly a third of landlord households in America “are considered low to moderate income.”² What’s more, of those landlord households that earn less than 50,000 dollars per year, their income from rental property ownership represents roughly 20% of total household income. A recent article in Yield Pro – a national magazine devoted to the interests of landlords – says the “vast majority” of U.S. landlords own just one or two houses.³

Greg Brown, senior vice president of government affairs for the National Apartment Association, recently underscored the vulnerability of so many landlords.⁴

“When you start having this pile up of unpaid rent and the unpaid rent debt, what you have is small operators that are hanging on, frankly, by their fingernails to stay solvent throughout this, in spite of the fact that they’re not getting paid rent. And so the extension of the moratorium is going to add to that outstanding rent debt,” Brown said. “It’s clear there’s not enough federal resources that have been allocated towards this problem to cover what is outstanding. Therefore, a lot of housing providers are going to be, and the residents are going to be, left out.”

Rental assistance programs are out there, but one of the inherent problems with the way many are structured is that there’s not a reliable, efficient way to get the money into the hands of renters. Exacerbating the issue is that some renters don’t seem to care if they – or their landlords – get the money at all.

According to Fox Business, the federal government has allocated nearly 50 billion dollars in rental assistance throughout the crisis, yet just 6.6% of the money has been distributed.⁵ Noting “the rental assistance can’t flow unless the resident participates,” Greg Brown said some residents are having difficulty accessing the program and many aren’t even trying.

The situation potentially could improve if landlords were able to sidestep renters altogether in the relief funds distribution process, but right now that’s not possible. “While there are assistance programs available to help tenants pay, too few apply, and there is no assistance available specifically for the property owners,” property management company spokesman Andrew Hay told Yield Pro.⁶ “It would be extremely helpful if landlords were able to apply on the tenants’ behalf.”

To what should be no one’s surprise, many rental property owners now are deciding they’ve had enough and plan to bail on their holdings. The result could be an intensification of the ongoing affordable housing crisis that itself has been shown to act as a significant drag on the nation’s economic output.

Landlords Forced to Sell Properties, Upending Renters, Hurting the Economy

Jon Frickensmith is president of the South Wisconsin Landlord Association. As a “boots on the ground” observer of the eviction moratorium in real time, he can attest to the significant interest of many landlords to get out of the business as soon as possible.

“Multiple landlords have told me they are selling out,” Frankensmith revealed to Yield Pro.⁷ “They ask us how to get out of the business and how to get the tenants out of their houses. These are mom-and-pop operators, the kind of landlords who are willing to take tenants with bad credit or a criminal history. This will only add to the housing crisis.”

Don James, president of the Florida Landlord Association in Coral Gables, agrees that the moratorium ultimately does no favors for renters, either.⁸ “We as landlords cannot enforce our rental contracts and, this being a seller’s market, it is forcing landlords to sell their properties,” James said. “This is going to cause shrinking of rental facilities, thus hurting renters.”

And that can be a big problem not only for those renters but the economy as a whole. Overall, there’s research suggesting a lack of affordable housing costs the country $2 trillion annually in productivity and lower wages.⁹ An article last month in the Press Times about affordable housing included an assessment by United Way Wisconsin detailing the unfortunate domino effect that soaring, unaffordable rents can have on families struggling to get ahead.

Skimping on essentials, from food to health care, leads to greater long-term problems. Failure to pay bills on time leads to fees, penalties and low credit scores, which in turn increase interest rates, insurance rates and costs for other financial transactions (from check-cashing fees to payday cards). And without enough income to cover current and unexpected expenses, ALICE (Asset Limited, Income Constrained and Employed) households cannot save for future expenses like education, retirement or a down payment on a house.”¹⁰

In my opinion, the potential fallout from a protracted eviction moratorium could include the exacerbation of an affordable housing crisis that in turn both further diminishes national economic output and essentially makes necessary a further increase in government assistance. Assistance, by the way, which the Biden administration and the Federal Reserve seem all too happy to “pay” for with ever-higher levels of deficit spending and associated ultra-easy-money policies.

Gold and Silver Could Help Mitigate Potential Consequences of Moratorium Fallout

This situation is a great example of how the economy is being affected several layers down from the “big picture.” And it’s a perfect example of the kind of issues retirement savers should be keeping an eye on to help them navigate the path to a successful retirement.

In an economic landscape like the one that’s making evictions impossible, you have to be ready for anything – and I’ve learned over many years of working with American retirement savers that means diversifying. That’s exactly why I created Augusta Precious Metals. Gold and silver are one of the best ways to add a balancing, stabilizing asset to retirement portfolios.

The potential negative implications for the economy of an ongoing eviction moratorium could be substantial. But assets that have demonstrated the capacity to strengthen during periods characterized by such implications – including gold and silver – could help retirement savers mitigate the fallout by potentially offsetting losses in other assets.

As a matter of fact, since the beginning of a millennium the best performing asset class (except for cryptocurrency) has been precious metals.¹¹

¹ Nancy Cordes, CBSNews.com, “CDC issues new eviction moratorium” (August 4, 2021, accessed 8/19/21).

² Lucas Manfredi, FoxBusiness.com, “Eviction moratorium could leave landlords, tenants in the lurch with growing rental debt” (August 4, 2021, accessed 8/19/21).

³ Steven Kovac, Yield Pro, “Small Landlords Call It a Day” (August 15, 2021, accessed 8/19/21).

⁴ Manfredi, “Eviction Moratorium.”

⁵ Ibid.

⁶ Kovac, “Small Landlords.”

⁷ Ibid.

⁸ Ibid.

⁹ National Low Income Housing Coalition, “The Problem” (accessed 8/19/21).

¹⁰ Jeff Bollier, GoPressTimes.com, “Lack of affordable housing is crimping lives, economy” (July 16, 2021, accessed 8/19/21).

¹¹ Claudio Grass, EurasiaReview.com, “Precious Metals Are And Always Have Been The Ultimate Insurance – Interview” (April 9, 2021, accessed 8/19/21).