As multiple sectors of real estate attempt to discern what effects of the past year will be permanent and what will turn out to be temporary, there appears to be no going back for one block of public real estate investment trusts.

CoreCivic and GEO Group, the two REITs that dominate the private prison sector, have ceased paying out dividends while each has put out a statement saying it is "evaluating its structure as a REIT," Hoya Capital Real Estate wrote in an article for Seeking Alpha.

Two changes in the climate for the U.S. carceral system have combined to damage the two REITs' long-term prospects: the coronavirus pandemic and the Democrats' sweeping of the 2020 federal elections.

Crowded prisons without effective protocols for treating and isolating prisoners infected with the coronavirus made them hot spots for the spread of Covid-19, which further accelerated a trend of declining prison populations that began in 2009 and sped up in 2018 with the passage of the First Step Act, Hoya Capital reports. Since private prison contracts with state governments have mostly designated such facilities as "suppliers of last resort," they were most directly affected.

What may have sealed the fate of GEO Group and CoreCivic as REITs was President Joe Biden's executive order, signed six days into his term, prohibiting renewals of any federal contracts with private prison operators. Federal contracts account for roughly half of the business for GEO Group and CoreCivic, Hoya Capital reports.

In 2021, prison REITs have been by far the worst underperformers among all real estate sectors, losing 10.7% of value while real estate indexes averaged around 10% gains, Hoya Capital reports. Though funds from operations declined by over 20% for prison REITs in 2020, the sector still returned positive cash flow, leading Hoya Capital to conclude that a take-private deal is likely, for the right price.