A Solution for Some, a Crisis for Others
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Empathetic people can agree that displacing people from their homes is bad. Therefore, the eviction moratorium, which New York City just extended once again until January, must be good. This thought process is the reasoning of those who repeatedly pressed federal and local governments to extend the moratorium past the two-year mark. The idea of resuming evictions sounds so heartless that only a self-destructive politician would dare propose it. Simply banning them, however, does not solve the underlying problems in the housing market. Without additional policy actions taken at the same time, banning evictions risks creating as many problems as it solves.
While evictions may be barred, capitalism continues. Mortgages have not been eliminated, and many small landlords who have let renters stay for free for months are now deeply underwater to banks. One building owner whose family has maintained units in New York City for years says that he owes $180 thousand in property taxes alone and is at risk of losing the last of his family’s buildings. Without relief for building owners, the eviction moratorium itself was never a solution to the COVID economy. Now that most of New York City is back to work, extending it only threatens to deepen another real estate crisis.
Besides troubles faced by indebted building owners, the moratorium also harms those entering the rental market. By allowing existing renters to continue to occupy their apartments rent-free, this moratorium unfairly reduces the amount of available housing for new renters and prices them out of the market. Not only is there that effect, but a third of landlords also stated that they would be forced to tighten standards for future rental applications, worsening conditions for new renters. The eviction moratorium has always been defended not only on economic grounds but also on public health grounds: those who are evicted will go to live with relatives or in shelters, crowding these locations and accelerating the spread of COVID-19. Though the vaccine is now available, this same reasoning still applies to those unable to enter the rental market in the first place because apartments are unavailable. They would be just as likely to crowd into shelters. Meanwhile, if small landlords, who have always been the most willing to rent to lower-income individuals, are unable to keep their buildings, the stock of affordable housing will be further reduced in the long run.
The impacts of the loss of rental income on small landlords have fallen disproportionately on minorities. Black, Hispanic, and immigrant landlords are more likely to own buildings with less affluent tenants, own fewer buildings, and have mortgages rather than owning their buildings outright. These factors place them at a higher risk of foreclosure, which has spillover effects on the economy of the nearby area. This impact threatens to economically devastate neighborhoods that have already been struggling during the pandemic.
While billions of dollars have been allocated for rent relief to building owners across the U.S., the process of applying is complex, and many small landlords are not eligible. The aid is often not enough to make up for the shortfall from rent losses. Selling buildings or leasing to real estate investors or larger management companies is sometimes an option, but it is not clear whether it is a desirable one for small immigrant landlords. For many, their buildings have been handed down for generations and are the only assets their families have in this country. Punishing these communities and neighborhoods for better optics is politics gone wrong. Those who will suffer include not only landlords, but low-income renters as well. In the long run, they will find it harder to find suitable apartments that will have been sold to management companies less favorable to poor renters or occupied by tenants unable to pay rent by then.
By itself, the policy of an eviction moratorium is not a sustainable one. Blanket eviction relief needs to be accompanied by corresponding protection for building owners, or the cure will be as bad as the disease.