As New Eviction Moratorium Is Ushered In, Frustrated Landlords Are Still Waiting For Rental Assistance
Covid-19 cases and hospitalizations are soaring across the U.S., the latest surge in a pandemic that continues to affect the health and livelihoods of both tenants and landlords.
As cases began to skyrocket in July, the Centers for Disease Control and Prevention’s first eviction moratorium came to an end. Unable to extend that order any further, the CDC issued a new moratorium in early August, specifically targeting areas suffering from elevated levels of transmission.
It’s a welcome reprieve for some tenants, but another blow for landlords struggling with delinquent rent and payments of their own. Billions of dollars in rental assistance have been made available, yet the glacial pace of distribution has left landlords wondering if relief will ever come.
“The fact that there has been [at least] $45B of rent relief approved by the federal government and less than $4B distributed to renters is a problem,” Camden Property Trust CEO Ric Campo told Bisnow. “The CDC moratorium is a blunt policy mechanism that has stopped evictions that are not just about past due rents.”
On Aug. 3, the CDC issued a new 60-day moratorium on residential evictions for areas impacted by the highly infectious delta variant. The new eviction ban is intended to target specific areas of the country where cases are rapidly increasing, a trend that would likely be exacerbated by mass evictions.
The moratorium applies to any county experiencing high or substantial levels of community transmission levels of Covid-19. If a county was not at those levels of transmission at the beginning of the order, but reaches the threshold during the 60-day period, it will also become subject to the eviction moratorium, according to the CDC order.
As of Aug. 8, approximately 90% of U.S. counties were considered to have high or substantial levels of community transmission, CDC data showed. The moratorium is slated to end on Oct. 3.
The new CDC eviction moratorium is a separate order from its predecessor, which was extended several times over the past year. The first eviction moratorium order came into effect on Sept. 4, 2020, aimed at providing housing stability to vulnerable renters during a public health crisis, and was supposed to end on Dec. 31.
When the second stimulus package passed, that moratorium was extended to Jan. 31. From there, several more extensions followed: When President Joe Biden was sworn into office, he pushed the expiration of the moratorium to March 31, then June 30, before a final extension that ended on July 31.
The CDC noted that evicted tenants tend to move into shared housing and close quarters with other people or experience homelessness. Both scenarios risk exacerbating the transmission of the delta variant, which medical experts say is much more contagious than past variants.
National Low Income Housing Coalition President and CEO Diane Yentel said that the new moratorium could provide protection against eviction for the majority of U.S. renters, giving time for helpful rental assistance dollars to reach landlords.
“The most essential and certain thing this moratorium provides is time — time for states and cities to further ramp up their efforts to get the tens of billions of unspent rental assistance dollars to tenants and landlords,” Yentel said.
The commercial real estate sector’s reaction to the new moratorium was less enthused. A coalition of 11 industry groups, including the National Multifamily Housing Council, the CCIM Institute and the National Apartment Association pushed back against the moratorium, issuing a statement condemning the CDC’s decision to halt evictions.
“The recent CDC order will leave rental housing providers in legal limbo while many renters continue to accrue more and more back rent and face a mounting debt cliff,” the groups said in a statement issued Aug. 4.
The CDC’s original eviction ban attracted criticism and legal challenges for being too broad and exceeding the agency’s authority, but Morris, Manning & Martin LLP partner Bonnie Hochman Rothell said that the new CDC moratorium is well-reasoned, detailed and clear in its parameters.
“It addresses some of the concerns and some of the legal issues that had been raised, criticizing the original order," Rothell said. "And it really stands on its own, in the sense that it is more focused. It doesn't apply everywhere; it applies in those areas where the delta variant has really increased the level of risk right now."
However, Rothell noted that the new CDC moratorium will impact landlords that haven’t been receiving rent for a long time. The ramifications could also be felt by mortgage companies servicing smaller landlords unable to pay their mortgages.
Congress appropriated a total of $46B in emergency rental assistance during the pandemic, but only a small fraction of it has been spent, as states and cities continue to struggle with propping up programs to distribute the money. Some localities have done a better job than others, but landlords say that the slow distribution of funds has, in some cases, forced them to pursue evictions.
Princeton University’s Eviction Lab has been tracking eviction filings for 31 major U.S. cities throughout the pandemic, using publicly available information. The team found that as of July 31, landlords have filed for 458,731 evictions since the onset of the pandemic last March.
Rothell said that the three-day gap between the expiration of the prior moratorium and the new one was not long enough for landlords to ramp up their eviction filings or legally push any more cases through that would cause a significant uptick in actual evictions.
The older moratorium expired on a Saturday, which also would have delayed the opportunity for a landlord to file or pursue action against a tenant, Rothell added.
“Even if they had been started over the weekend or early in the day before the new moratorium came out, I think they would be stayed, based upon the CDC's latest order. So I think it would be kind of irrelevant if they were filed the day before,” Rothell said.
Campo noted that the new moratorium is not a major issue for large, well-capitalized multifamily owners like Camden — only 239 out of nearly 80,000 Camden tenants have filled out the CDC declaration. But it presents a bigger problem for small apartment owners with small cash operating margins.
The RADCO Cos. sold off a significant amount of its multifamily portfolio over the past two years, but still has interests in 12 properties and roughly 3,000 units, with many in the Southeast.
Radow said that because the order expired on a weekend, and it takes time to file and schedule eviction-related proceedings, his firm was not able to move forward with any evictions. If the new CDC moratorium had not been implemented, hundreds of evictions across his portfolio would likely have taken place over the next few months.
“We would have probably had several hundred evictions over the next 60 to 90 days," he said. "There probably would have been a backlog, and it probably would have taken longer."
He noted that pre-Covid, evictions in Atlanta generally took about 54 days. However, because of the backlog and the court system not functioning at 100%, many evictions would likely take longer.
Universe Holdings Chief Operating Officer Jonathan Cohen said that his firm has not been pursuing evictions because the bulk of its multifamily portfolio, 53 of 54 apartment communities, are in Southern California, where a state-level moratorium has also been in place.
“We really haven't been filing for evictions, [but] we've been performing all the regulatory tasks that lead up to it,” Cohen said.
His firm participates in all the various rental assistance programs and has been proactive in contacting tenants to make them aware of available aid. Cohen noted that the slow distribution of rental assistance has been extremely frustrating as his company hasn’t reduced any services or fired any employees to deal with financial shortfalls.
“There has never been a reduction in what we do," Cohen said. "I mean, we have thousands and thousands of people living in our communities. So we can't stop maintaining them. Fortunately, we're well-financed, and we can support it, but it's difficult."
Davenport Worldwide Development Group CEO Lance Davenport said that the new moratorium has not changed how his firm approaches tenant delinquencies and nonpayment of rent. The firm’s strategy has been to not pursue evictions, in favor of working with tenants.
The firm has 32 apartment buildings across the U.S., France and the U.K., and about 38% of the portfolio has unpaid rent, Davenport said.
“By our calculation, had we taken a more hard-lined approach of pursuing unpaid rents and evictions, or attempted to do so in between and around the moratoriums, we would have had greater than 50% of our tenants not paying, with 50% paying,” he said.
But losses are losses, and some multifamily owners have been actively selling off some of their portfolios in response to the ongoing challenges facing the sector.
Davenport Worldwide Development is in the process of selling 742 units, primarily in its European portfolio. Davenport said that in the current environment, with international travel challenging, it has proven better to focus on the firm’s domestic portfolio.
“Because our cost basis is pretty good, even selling at a discount will allow a profit on the back end,” he said.
Despite ongoing eviction moratoriums, multifamily has emerged as one of the winners of the pandemic, owing to its recession-proof reputation. Radow noted that although RADCO Cos. aimed to sell much of its portfolio before the pandemic, the company accelerated some of its plans during the crisis.
“This a very strong market. So we made a lot of money ... this is a great time to sell. But there are assets that we would have held longer and completed our business plan if it wasn't for the moratorium,” he said.
Rothell said that there have been legal challenges filed over whether the CDC was allowed to issue the new moratorium in the first place. If it holds up, she said she wouldn’t be surprised to see it extended further because the purposes and rationale are all still there.
Cohen said that he expects the new eviction moratorium to be extended until at least the end of the year, given rising Covid-19 cases and the slow pace of getting rental aid distributed.
“It shouldn't be this hard, with all the willing participants on both sides to get the money from point A to point B,” Cohen said.