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Landlords Could Lose As Much As $21.5B In Rental Payments As Eviction Wave Begins

Close to half of all U.S. apartment renters may be evicted in the coming months, now that eviction moratoriums are fading in most places, as the commercial real estate market adjusts to fewer unemployment benefits to pay the bills and political dynamics change nationwide.

As a measure of the pain that landlords will suffer, especially those depending on rent to pay their own expenses, global advisory firm Stout Risius Ross estimates a $21.5B shortfall in rental payments over the same period. More than 40% of U.S. renter households are at risk of eviction, Stout estimates, or about 17.3 million households. Of that total, it estimates that there will be 11.6 million eviction filings over the last four months of 2020.

The federal eviction moratorium has now expired, though the 30-day notice requirement written into the law will hold off most filings until after Aug. 24.

In August, the Aspen Institute, a nonpartisan think tank, said that 30 million to 40 million people are "at risk of eviction" over the next several months. In addition, an unspecified but large number of small landlords stand to lose their properties for nonpayment of mortgages or property taxes. The National Low Income Housing Coalition predicts a similar range of 30 million to 40 million people at risk of eviction this year. 

"The next three weeks are going to be critically important,” NLIHC President and CEO Diane Yentel said. “There will be a bill at the end of it, one way or another, and the scope and extent of it will determine if a tsunami of evictions happens.”

In July 2020, evictions were down in a number of cities in which they were possible, compared with the average number of evictions for July in the years between 2012 and 2016, CityLab reports.

Even so, a study covering 44 cities and counties by the Federal Reserve Bank of Cleveland published in July found that eviction filings by landlords have almost returned to "normal" levels wherever moratoriums have expired. Even before moratoriums expired, a scattering of landlords have aggressively pursued illegal evictions, or at least trying to strong-arm tenants into "voluntarily" leaving their apartments, the Washington Post reports

It isn't too late to prevent an eviction and homelessness crisis,  Yentel said, though time is short. Eviction moratoriums have expired in many, but not all of the places in which they were enacted early in the pandemic.

"This would have enormous consequences because evictions put lives at risk, push families deeper into poverty, and make it harder to contain the virus," Yentel said.

"Now Congress has gone on recess, leaving millions of people on their own as they face eviction and, in worst cases, homelessness," she said. "There is no excuse. Congress needs to do its job and pass a comprehensive relief package.”

Currently, the only states with moratoriums in place include Arizona, Connecticut (until Aug. 25), D.C., Florida (until Sept. 1), Hawaii (until Aug. 31), Illinois (until Aug. 22), Massachusetts, Minnesota, Nevada (until Aug. 31), New Jersey, New York, Oregon, Pennsylvania, Virginia and Washington state.

"New filings are trending upwards in most of the sites that we’re monitoring, especially those not currently covered by some form of local moratorium," statistician and quantitative analyst Peter Hepburn at the Eviction Lab at Princeton University said."We expect this to get worse in the coming weeks." 

In most places, eviction filings are concentrated in the second and third weeks of the month, so there might be larger increases in the coming weeks, Hepburn said.

"The end of unemployment insurance expansion is likely to have more immediate consequences, especially for households that could not pay August rent," he said. "Making rent in September is likely to be more challenging, so we're likely to see even more filings then."

Not everyone is persuaded that the grand total of multifamily evictions this year will be in the cataclysmic millions, however. 

"When benefits end or shrink, an eviction wave will occur," Lee & Associates principal Warren Berzack said. "Will it be as extensive as they say? No, it never is. A rough guess might be in the hundreds of thousands in the near term."

States with less-interventionist governments, typically the redder ones, will probably see more evictions, while bluer states will see fewer, Berzack said, though it isn't possible to generalize completely along those lines.

A number of factors will go into whether a tenant is evicted, Berzack said. "It will depend on each market, and where the building is, and who the landlord is."

Also, he noted, evictions will be more likely among Class-B and C apartments, partly because there is strong demand for those properties and not enough supply in many markets. The supply of Class-A apartments, on the other hand, is more than adequate in a lot of places, making landlords less certain about finding a new tenant. Tenants in those properties are less likely to live paycheck to paycheck in any case.

"I don't think that there will be massive evictions in the millions," Multicultural Real Estate Alliance for Urban Change President Carmen Hill said. Her organization is a coalition of local real estate professionals whose goal is economic and community development in South Los Angeles, including the promotion of homeownership and affordable housing.

"Most landlords, the mom-and-pop landlords, will try to work out payment arrangements with existing tenants," Hill said. "After all, if they evict the existing tenants, who will they rent to? Everyone is subject to the economic crisis."

As a microcosm for the nation, California itself is a patchwork, with Gov. Gavin Newsom initially allowing cities and counties to enact eviction moratoriums through Sept. 30 via executive order. Los Angeles County, for example, has a moratorium in place until the end of September, though it has faced resistance in the form of a lawsuit by the Apartment Association of Greater Los Angeles.

Early in the coronavirus pandemic, the Judicial Council of California stopped evictions for nonpayment of rent statewide, but last week ended the restriction as of Sept. 1, noting that the state legislature needs to enact a more permanent solution, which it has not done yet.

"There is every reason to expect a dramatic 'outbreak' of eviction cases only a few days after ... the day the Judicial Council first permits the issuance of a summons in unlawful detainer cases," writes Gary Blasi in a report by the UCLA Luskin Institute on Inequality and Democracy.

The institute estimates that as many as 365,000 households in Los Angeles County will face eviction in the coming months, with as many as 120,000 of them at risk of homelessness. 

In New York, whose moratorium is still in place, at least 14,000 tenants would be subject to eviction immediately after the end of the moratorium, The Wall Street Journal reports. In Washington state, the number of immediate evictions might be 50,000, The Stranger reports. The COVID-19 Defense Project estimates that as many as 400,000 Colorado residents might be evicted soon.

On the federal level, the Senate went into recess in mid-August without taking up the matter of rental relief. The House relief package, known as the HEROES Act, passed in May, would provide $100B for that purpose. The original federal moratorium, included in the CARES Act, prohibited landlords or housing authorities from filing eviction actions on properties backed by federal loans. It expired on July 24.

In early August, President Donald Trump issued an executive order calling on the Department of Health and Human Services and the Centers for Disease Control and Prevention to consider whether an additional eviction ban is needed. The order did not attempt to reinstate the original moratorium. 

"It bears noting that President Trump’s executive orders from Aug. 8 offer no substantive support or protections to renting households," Hepburn said. "By sowing confusion on the subject of eviction moratoriums and unemployment insurance, they may make things worse for renters."