I wrote this piece not for us. We know this stuff already. It's an attempt to help others understand why the eviction moratorium was a misguided and ultimately very destructive policy, and that we had other options.

Your thoughts and critiques are appreciated!

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Eviction Moratoriums are Unjust, Unconstitutional, and Harmful to Everyone

As our economy begins to re-open after the fastest and 2nd largest crash in history, the ripple effects of slamming to door shut on roughly 1/3 of our nation's employed people are only beginning to be felt. 20% unemployed or sharply reduced hours have led to an “echo” economic disaster for our nation's housing providers: land lords. This nightmare was caused willfully and intentionally as governors throughout the US put moratoriums on a land lord's tool of last resort for non-paying tenants: eviction.

I have been a land lord for 15 years. During that time, it has been my privilege, joy, and yes, also a profitable venture to provide clean, safe, and functional housing to my residents. Most of our residents stay with us at least 2 years, and some stay for 5 years or more. They seem pleased with the product we offer and are willing to pay us for it.

Early on in the Covid-19 response, governors recognized that throwing people out of work means they lose income, and those who are tenants would not be able to pay rent. Yet, the solution they came up with to “solve” this problem wasn't to offer direct assistance to ensure rent got paid; rather, they decided to shift the burden of no rent onto land lords. That's right: almost every state in the USA is currently under an eviction moratorium created either by law or de facto because courtrooms are closed and cannot process eviction cases for non-payment of rent.

What does that mean for land lords? It means tenants can stay in your house without paying. Technically, they still owe the rent, but there is nothing I or anyone else can do to require them to actually pay. Some cities talk of rent “forgiveness”, meaning the land lord will lose that rent, plain and simple.

Think about that for a minute. Shelter is one of the basic needs to sustain human life along with food and clothing. It also promotes safety and provides them the means by which to obey the “shelter in place” orders that were also made in most states. However, unlike providers of the other two basic human needs, land lords have been told that we should not expect to be paid any time soon, if ever.

Do grocery stores have to give out free groceries due to the shut down? No. Does Amazon or Wal-Mart have to let you take clothes without being paid? No. Why are only land lords singled out as unworthy of pay?

Land lords have been told we get to bear the burden of non-paying tenants for the indefinite future. There are no “bail outs” for us, because the IRS classifies most of us as passive investors, not businesses. Therefore, the vast majority of land lords do not qualify for things such as the PPP or any type of SBA loans. Large scale land lords might qualify to some extent: those that have full time staff such as maintenance workers and property managers can apply for the loans. But when you consider that over 50% of the nation's rental housing stock is owned by people who only have 5 or fewer units, it is clear that there are going to be a lot of land lords left in crisis.

Contrary to popular belief, most land lords are not rich. They are mom and pop operations who invested a large chunk of their savings into real estate to generate income. Many are retirees with no other pension or retirement account. Many own their property free and clear of debt or have local bank mortgages; therefore, they do not get any benefit from foreclosure moratoriums that only apply on Federally insured loans.

Land lords are not the only ones being hurt by this. Numbers will vary, but generally speaking between 40-50% of rent received does not go into the land lord's pocket, even on houses that are owned free and clear of any mortgage. Rather, that money is paid toward yearly property taxes that fund local schools, libraries, and fire departments. It also pays the maintenance man or contractor who does repair work on the property and mows the yard. It pays for insurance on the dwelling. A portion of it also gets set aside into savings each month for big dollar items to be replaced, such as roofs and heating and air systems. If we're talking about houses with debt payments, often the land lord only gets to keep about $100 per month per unit, so even when tenants pay half the normal rent, there isn't enough money to ensure all obligations are met and the land lord is forced to pay out of their personal savings. This means home repair supplies will not be purchased, insurance policies may expire, taxes won't get paid, and contractors will not be hired, setting off a secondary wave of economic distress among providers of those goods and services and the public employees (teachers, librarians, fire fighters) who rely on tax revenue for their salaries.

The 5th Amendment in the Bill of Rights forbids taking private property for public use without just compensation. What else can we call demanding that land lords shelter their residents according to Government mandate without any hope of compensation if the resident refuses to pay? Too, while the 3rd Amendment forbids “quartering of soldiers in private houses”, forcing us to quarter civilians is essentially the same thing.

Let's also consider this: many, if not most, tenants who are wage employees that got furloughed or fired have some resources to fulfill their rent obligations. Many are now receiving not only state unemployment checks, but also a generous $600/week federal unemployment check. Many also received the stimulus checks of $1,200 per adult and $500 per child. But they are not required to pay rent with these funds. People are paying for groceries, cable TV, cell phones, and internet, because if they don't pay those businesses can and will cut them off. Land lords are prevented from doing this, though. Our last ditch tool to enforce our rental agreement has been denied to us; we cannot evict. If it comes down to no rent paid, we have been ordered to work and provide housing for free. This is both unjust and unconstitutional.

People who are not land lords may not understand why land lords cannot “just wait” and get paid up in 2-3 months. That is fantasy thinking. As a novice land lord 15 years ago, one of the first lessons I learned is that once tenants fall behind paying rent, they rarely ever catch up. I would try different plans to help tenants catch up if they lost a job or had a personal emergency, but what I learned after many unsuccessful attempts is if they cannot pay rent this month, 3 months from now they will pay 3 months of rent, unless I force them to with the threat of eviction. Even when I would split up the past due rent into a 12 month payment plan, it rarely ever worked out until I was ready to file the papers in court. I lost a lot of money learning that lesson, and therefore it has stuck with me to this day.

Nationwide, it is estimated that almost 1/3 of tenants paid no rent or only partial rent in April. May's numbers have yet to be determined. This means that once eviction courts open back up, they will be flooded by desperate land lords who need to get non-paying tenants out so they can try to find someone who will pay to avoid going broke. The eviction moratorium has not prevented a wave of evictions: it has prolonged it and likely is going to make it much worse once it hits. Tenants who cannot or will not catch up the rent quickly will have evictions on their records for a life time. Unlike bankruptcies or charged-off debts, evictions stay on the record permanently. This will make it harder for evicted tenants to find housing in the future. Land lord will have no incentive to wait with tenants who are 2-3 months behind already. They will have to file quickly and will make no exceptions.

This may sound surprising, but most land lords do not want to evict our tenants, even when they are struggling. The court fees are expensive, it is time-consuming, and going to court is a major hassle. For tenants who agree to a reasonable plan, we're willing to make payment adjustments as long as we know there's a method to enforce it in case the plan fails. But without that final “or else” tool of eviction, there is no way to enforce these plans. Unfortunately, there are some people who need to be motivated to do the right thing by the thread of a negative consequence. If that consequence is not available, no amount of positive encouragement helps.

Thanks SID. All true but unfortunately tenants would never read it and our legal system could care less.

When our country was first proposed religious freedom and tyranny topped our list of what we want and wanted to get rid of. The colony's wanted the British to stop taking over their property-- and living in them for free along with taking all the food in site. We as LL's are now faced with this scenario. People living in our houses for free and taking the food off my table -- for my family and giving it to others.

Very well written.

Who did you write it for?

Would you mind if I copy it and use it to communicate with elected representatives & others?

2 Minor critiques:

first line: "slamming the door shut"

para 12: "they will not pay 3 months of rent"

A good (educated) read, Sid.

Congratulations on not using actually,basically,literally,

having said that, like, like, like,

Sid, Thanks. Can we get some email addresses of governor or county governement to email the letter?

Excellent Sid. I would recommend mailing it to every newspaper and magazine outlet out there. And to all of our representatives and local leaders.

AMEN, Sid!

An individual I know has been posting that real estate investors need to understand that they are investing, and that sometimes investments don't lead to a profit. Sometimes investments end up with a loss.

She got upset when I agreed that yes, investments do sometimes end up with a loss, but that is a separate issue from rent. My losses come from vacancy, increased taxes, storms. If I have a long term vacancy, it may lead to a loss, which I fully accept.

Hi all who have responded so far and thank you for the commented and the editing. I am the worst proof reader of my own material, because my brain knows what I meant to say, even when I did not say it.

For whom is it intended? Anyone who would read and think. Yes, it would be nice to publish it. Too long for a news paper Op Ed, but maybe there are other ways to publish that I haven't though of yet.

Paragraph that begins with “People who are not land lords...

The sentence discussing 3 months of back rent is possibly missing the word not. ..three months from now they will NOT pay three months of rent..

Paragraph beginning with “This may sound surprising” replace thread with threat of eviction.

Paragraph beginning with “In conclusion”. Take out ‘In conclusion’ . The paragraph stands fine on its own. It was more of a closing than a conclusion. Either way, closing or conclusion are not needed.

Sid,

It may not be too long for a newspaper Op-Ed!

While most are shorter, not all are.

If needed, I believe you could shorten it a bit to meet their guidelines.

I Googled length of Newspaper Op-Ed and found the New York Times requirements, and while yours is longer than the typical one, it isn't overly long.

Submit it and see what happens!

Ditto ditto ditto, well written. After this is over landlords need to be quite vocal about how we were treated during this time. I strongly agree a fund should have been created to pay rents!!!

People I really worry about are those who recently started a business, haven’t gotten over those first few years of loss, aren’t big enough to qualify for some loans, have been drawing down saving to support the business in early years, and ruining their credit scores to get the thing going. My daughter’s favorite little Vietnamese restaurant that opened just six months before this mess. The hair salons, nail salons, who really do have abilities to take clients one at a time, and already have some health safety training ( months and months of training to be stylist in my state, includes dealing with infectious diseases/ parasites. But, they were completely shut down.

So very well written. I hope that you do publish it in multiple places.

Great job Sid.

I agree, publish it.

SID,

YOU Sir are a Master Wordsmith!

My concerns:

-allowing people to get deeper into debt makes it harder to get help and harder to climb out. My local aide agency director would plead with LL to not let renters fall behind. It just makes their struggle worse.

-I understand the kneejerk reaction to announce a moratorium on evictions. None of us knew what what to do and did not believe it would still be going.

BUT...

The only people on MY eviction list are two hold outs, wrapped in the American flag proclaiming we cannot evict so they won't pay. Almost all are paying normally, a few are a week or two behind but that's it.

My city has an estimated 5600 rental units. United Way gathered $400K in DONATIONS, the city granted $183K, and Aide agency has $10K = $593,000 available to assiat with rent and utils.

I'm hearing 5% of renters are behind. That's 280 in my city. That yields $2117 per home of money sitting and waiting for folks to apply.

I believe it's unfair to the people who ARE working and going without to pay their rent while others won't even fill out the free form online. Let us evict the ones who will not try.

BRAD

BRAD

Sid,

Yes, you are a Master Wordsmith but you already know that. I enjoyed reading your statement (dissertation) and I wish the governor of my state would read it.

My only tenant who did not pay, like Brad said, is wrapped up in the American flag saying 'my LL can't evict me, so I will not pay rent'. The good news here is I have 15 other tenants who are doing the right thing and continuing to pay rent.

The shut down was necessary to get people onboard with using masks everywhere. There is only a 1.5 percent chance of you getting the virus if everyone is wearing a mask and keeping a distance and not talking right in someone's face. It flies out of the throat. I think I had a mild case before the masks rule went in. Kid at the hardware store who helps me with my forty pound sacks of bird seed wasn't around for awhile. I asked about him and it turns out he was sick with covid, got hydroxy early, recovered but was quarantined for two weeks. So one night I woke up and my feet were burning. I looked and my toes on both feet were kind of reddish not quite purple. I thought maybe I was cutting off my circulation so I adjusted a pillow I have under my knees All night I moved my feet to keep the circulation going. I had a cough since last August and my nose would run as soon as I put my head on the pillow. So I dealt with that. I had allergies the year before. When I finally got to the ENT dr. in November, he told me I had had a virus and an allergy together and it would stop when everything froze up. So in December everything froze up and gradually I felt better. Then two things happened after Covid hit. In Janauary on the 14th I had an appointment for an eye treatment from an eye doctor who had been on a cruise to the ANTARCTIC over Christmas. He is also Chinese married to a non Chinese woman And I also had the run ins with the Covid kid at the hardware store. So between these two episodes, I think I had it. My August allergy seemed to come back. Then the purple toes happened. Then I found out the symptom for covid called "covid toes". And yes they turn purple. As soon as I can reasonable secure a test for the antibody, I am going to get one. I don't seem to have any after effects though I may have gotten a little stupid since rencently I managed to get a plastic bottle stuck in the upstairs toilet and a few other things so I might have had some damage to thinking skills.

Sid

Very good Post.

To bolster your argument you may want to Google -

Ally, There is no reason anybody has to physically go to court for an evection. The courts need to get on board and do hearings and the like via zoom.

I would change the word "land lord" (which should be one word) to "housing provider".

Sid,

This is very well written. I agree with many of your points and do hope that it is published somewhere and in some form. It is great food for thought.

Anecdotally, most people actively commenting on this board report that most of their tenants paid on time, and the ones who did not pay were the ones that they expected issues with anyway, or had pre-existing payment problems. If that is representative across the nation, only a small percentage of landlords will have true COVID related non-paying tenants.

The “de facto” eviction moratorium caused by the closing of courtrooms is not targeted to eviction cases. It is affecting all cases, at least in my neck of the woods. One local courthouse is open for filings, but cases of all types are not being scheduled until at least August due to backups, except in certain circumstances. Another local courthouse has been completely closed, so no filings could occur in cases of any type. It is a smaller jurisdiction, so when it reopens, a court date of as early as July may be possible. Again, these problems of scheduling court dates are not targeted towards landlords or the result of housing advocates. These situations are simply courthouse staff trying to manage their resources in the light of an unforeseeable world event.

With regards to federally legislated eviction moratoriums under the CARES Act, this brings to mind the old saying “He who has the gold makes the rules.” For the average small landlord, you are affected by the federal gold-holding rule maker if 1) you take Section 8 or a similar housing voucher (so you won’t have a problem being paid) or 2) you have a *federally backed mortgage*.

Ask your mortgage servicer if you have a federally backed mortgage. If so, you are prohibited from filing an eviction for nonpayment of rent for 120 days from March 27, 2020. You cannot charge fees for nonpayment during this period. You also have to give 30 days notice before evicting, so you are looking at an August 24, 2020 date before you can file for an eviction for any reason except for a tenant perpetrating a serious crime that threatens health, life, or safety. You will also likely have backed up court dates on top of what is the usual time to regain possession in your area.

Under the CARES Act, you can get mortgage forbearance for up to 180 days, but you then also have to give tenants rent relief for the same period with no guarantee that they will pay. That can be extended for another 180 days, but you may be tied to a non-paying tenant during the entire forbearance period.

Make certain that you also understand the details of any applicable state and local moratoriums, if any, as well as court schedules, so that you can make considered decisions.

I’m not happy about the federal eviction moratorium, but I do think has been wise for our country to take steps to avoid the severity of the spread of the pandemic that Italy and some other countries have had. We don’t want our country to be in a situation where missed rent payments are the least of our problems.

I do, however, urge everyone to understand whatever they can about how to operate in the environment in which we are temporarily in, and work to identify a Plan B, C, or D accordingly so that you can see a path to the future. If you have ample reason to believe that you will not be receiving rents for a while, and then have a vacancy and turnover afterwards, plan accordingly. Look at all of your options: providing the renter with a list of rental assistance programs (Brad has a great starting list), tightening your belt, lines of credit, borrowing private money, mortgage forbearance. * Cash for keys * may be your least costly solution, even if you have to borrow that cash. Pay them to move out quickly, breathe a sigh of relief and thank God they’re gone, then screen very carefully and get a paying tenant in. Section 8 or another housing voucher program will guarantee payment if it is a must for you, but then you will have other bureaucracy to deal with. If you need to do a mortgage forbearance, look into whether you can legally do cash for keys to get non-payers out first so that you are not tied to them during the forbearance period.

Regarding some other points you have made, going mostly paragraph by paragraph:

1. I don’t see the formally instated moratoriums as being willful by governors, although they were intentional. The intention was not to have a worse crisis on our hands. There seems to be no good choices here. India’s coronavirus migration crisis of newly homeless showed that there were definitely worse choices, but we don’t regularly see other world events in detail on our nightly news in the U.S. There is much that I disagree with AllyM on regularly, but she is so on point in her post about minimizing the spread in multiple ways.

2. Regarding proposing that governors should initially have offered “direct assistance to ensure rent got paid”, that would have created a worse financial mess than people choosing to not to go back to their jobs because they make more on unemployment. However, I really do hope that there is subsequent legislation later in the year to provide government reimbursement to landlords whose non-paying tenants during the COVID-19 period are not cooperating with repayment, while simultaneously having the IRS pursue the reimbursement amounts from the non-payee. The IRS is much more effective at collecting than any landlord could be. Now that would be a great addition to some Congressional bill, particularly for small landlords. This is a dream that I would like to see made a reality. Also, providing relief on the back end as opposed to the front end reduces the number of people who would take advantage, and simply stop paying rent that they could otherwise afford to.

3. As stated above, there is a time limit for non-payers through the CARES Act, after which you can take action. Your state or local jurisdiction may have other restrictions. If there is talk of “rent forgiveness” in your area, and you may be affected, try to understand from whom and where that talk is coming from, and if it has a chance of being passed. Some groups and politicians get a lot of air time, but have little true effect.

4. Of the three basic needs, food is being provided by both government and private groups for those in need, and who have the wherewithal to reach out for help. For most people, new clothing is not an immediate need. My observations on landlord rent and moratoriums are above.

5. Regarding the next four paragraphs, I’m in agreement with most of this, except for the indefinite future part. At least on the federal level, there is a time limit, so you can reasonably project how long a situation can last, from now to a reasonable eviction date.

6. Regarding “People are paying for groceries, cable TV, cell phones, and internet, because if they don't pay those businesses can and will cut them off”, this is mostly incorrect. Except for grocers, the CARES Act prohibits these providers from cutting off service, so they are just as jammed up as landlords who have non-paying tenants. Their websites may have flowery words about them being generous and helpful during this crisis, but they are in the same “you will comply” situation as landlords, but in a corporate kind of way.

7. In the next paragraph, you are correct that tenants rarely catch up on unpaid rent, unless there is a threat of an eviction. In fact, many evictions filed are simply for that reason. That is a great lesson for you to share with us. This is probably why more seasoned landlords automatically file each month. There is an interesting article about that here. www.citylab.com/equity/2019/06/eviction-notice-process-rental-landlords-collect-late-rent/591553/ . It describes a situation in Baltimore where more evictions are filed, but not completed, in a year than there are renters in the city, simply because of repeat filings in order to collect rent.

8. Regarding the estimate that 1/3 of tenants paid no rent or only partial rent in April, I’m going to take that with a big truckload of salt. I saw the CNN article which gives that number for April, with a link to NMHC’s rent payment tracker. The tracker shows 87.7% of their renters have made May rent payments as of May 13, and over 85% of renters paid in April. This information is found at www.nmhc.org/research-insight/nmhc-rent-payment-tracker/. The dip is not that much lower than in 2019. They even have downloadable data. They do state a caveat that their data does not include small landlords. However, the eviction rate nationwide in 2016 was 2.34%, according to Statista. This includes all evictions, even those for nonpayment. If we assume that nonpayment rates would triple during the crisis, and those landlords who would evict for nonpayment will still evict, we would still be at about a 7% non-payment rate. I am assuming that the numbers would be a wash between the evictions for other reasons and the non-payers who leave without an eviction filed, so I am keeping with the 7% non-payment rate assumption across all property types and property owners. However, I am in full agreement with you for the rest of the paragraph. Even if 7% of small landlords (owning less than 5 properties) are not being paid during the COVID and subsequent eviction periods, I would estimate that less than half of those would seek forbearance, and still less than half of those seeking forbearance would not catch up. So I don’t see a mass foreclosure wave originating from landlords. As Busy mentioned, newer landlords and business owners are more likely to be vulnerable. My predictions would be different for owner occupied properties, though.

9. I’m in full agreement with the next paragraph.

10. In your final paragraph, I disagree that you are the exception with most of your tenants paying. With that said, it is a brutal situation when you have a non paying tenant, and I would want no one to have that issue. It is a giant issue when it is happening to you.

Thanks so much for writing your post. I’ve learned a lot by reading your post and analyzing how it fits into my business model. In some ways, I’ve been reassured by being forced to go into analysis mode. In other ways, I’ve seen areas where I need to tighten up procedures or make contingency plans so that I can reduce my chances of being caught out in the cold.

I do hope that you find an outlet to publish it.

PG [SC]

The article you referenced reinforced to me that there are some markets that I just don’t have the ability to be in.

I wish the article had reference which trade associations are lobbying Congress to cover the rent shortfall, and which proposals they are backing.

ROY [AL]

Before filing, if you have a single or multifamily mortgage, please check whether it is federally backed, and strategize as appropriate for your situation.

Sid ,hi.

Great summary of what is happening

Sir Walter

Never heard, but I will not forget, the "He who has the gold makes the rules". I don't take section 8 - to many horror stories. And for loans I have used private banks didn't plan it that way just worked out that way.