Working like the rent is due tonight: That’s the challenge for many as we near the one-year mark of the COVID-19 pandemic.
As of the end of last year, some 10.7 million Americans remained unemployed. One study found that 60% of COVID-related business closures are now permanent. Food insecurity has increased, and people struggle to pay their bills.
In an effort to help those struggling through the pandemic, the U.S. Centers for Disease Control and Prevention enacted a moratorium on evictions in September 2020. It has since been extended to the end of January 2021, and President Biden wants to extend it for another eight months.
The moratorium has been described as “essential relief” for struggling renters. On the surface, such a policy has immense appeal. No one likes the idea of people being put out of their homes amid a global public health crisis. But what proponents of this moratorium fail to recognize is what a positively disastrous policy it is, not just for landlords but for tenants, too.
While, at the moment, delinquent tenants may appear to be a protected class, make no mistake: In the end, they lose. The moratorium does not mean rent is forgiven; it merely prevents landlords from evicting tenants for not paying. When all this is over, the renters will still owe their back rent and fees, and there will be nothing stopping landlords from evicting them.
Plus, while an eviction doesn’t appear on a person’s credit report, many landlords employ collection agencies in an attempt to recover money owed. These collections can wreak havoc on someone’s credit for years. Evictions also appear on a rental history report, hurting tenants’ prospects for their future rental applications.
Many are quick to demonize landlords. How can someone be so heartless to evict someone during a pandemic? While people often envision landlords as wealthy, this is not always the case. Nearly 50% of all rental units are owned by “mom and pop” landlords, people who own one or two properties. Renters may be able to escape paying their rent temporarily, but landlords must still pay the mortgages, property taxes, and maintenance costs.
It’s not hard to see how this could lead to financial ruin for these property owners. Foreclosures are likely to occur as a direct result of this policy, further exacerbating a national housing shortage. The result of all of this will be fewer rental units and higher rents.
In the future, potential landlords are likely to use this moratorium as a cautionary tale. Instead of renting their properties, they may elect to occupy them or look for other investment opportunities. And those who do decide to rent their property will scrupulously screen possible rental applicants, require higher rents, and expect larger deposits, lest they again find themselves in a position where they cannot evict a nonpaying tenant. Tenants with questionable rental histories or little access to cash will find themselves out of luck.
The CDC’s mandate on evictions is problematic for other reasons. For one, scholars have questioned the legality of the moratorium, as the CDC is not a lawmaking body and has no accountability to voters.
More importantly, in a free society, the government’s first and most important job is to protect private property, and private property means that an individual has an exclusive right to a particular asset. No one may use it without his permission. He profits from its use, but he also incurs the costs of maintaining it. As a result, he has an incentive to take care of his property, to make it better, and to use it to the benefit of his community. By failing to uphold property rights in this way, the government hurts these incentives.
There are no easy answers to the current rent crisis. One alternative option is to allow tenants and landlords to work out arrangements on their own. Renters may be able to set up a timeline to settle back rent or exchange working on the property for a reduction in what they owe. Landlords don’t like evicting their tenants, and many have actively helped their renters by making payment plans and even not charging rent if their finances allow.
Another option is for state and local governments to lift the restrictions on economic activity that is causing unemployment in the first place. In any case, policymakers should think twice before considering the eviction ban a clear winner. It’s an affront to the foundations of a free society, and it will ultimately fail renters and landlords alike.
Abigail R. Hall is an associate professor of economics at Bellarmine University in Louisville, Kentucky, and a Young Voices contributor. Her work has appeared in Forbes, Huffington Post, and the Hill. Follow her on Twitter: @Abigail_R_Hall.