Commercial real estate industry insights.

CDC’s Eviction Moratorium Harms Housing Providers While Kicking the Can Down the Road

by Mary Ann Barnett, MAI | Dec 14, 2020

A national residential eviction moratorium in effect through the end of the year is harming the multifamily sector while failing to provide adequate protections to tenants.

The U.S. Centers for Disease Control and Prevention (CDC) on Sept. 4 issued an order regarding the “Temporary Halt in Residential Evictions to Prevent the Further Spread of COVID-19.” The order posits that mass evictions would increase the interstate spread of the virus and prohibits residential landlords from evicting certain tenants through Dec. 31. Tenants eligible for protection sign a declaration stating—among other attestations—that they are unable to make full rent payments due to substantial income loss or medical expenses and that they have put forth their “best efforts” to make partial payments. The order provides no mechanism for enforcing the partial payment stipulation.

After some initial confusion, federal officials clarified in a document with answers to frequently asked questions that landlords can start eviction proceedings for non-paying tenants while the moratorium is in effect, but they cannot physically remove those tenants until after Dec. 31. Landlords can still evict tenants for reasons other than non-payment of rent.

Nevertheless, the CDC order harms the multifamily sector because it provides no relief for property owners who must still pay bills and payroll, while also maintaining units without collecting rent. Landlords cannot evict non-paying residents nor regain possession of units and lease them to people who are just as deserving of housing and can actually pay the rent. Moreover, the CDC order potentially limits landlords from providing contracted services to paid-up tenants and from meeting financial obligations like taxes, mortgages and insurance. Thus, the order threatens the financial solvency of properties, which “puts entire communities of renters at risk for displacement and will exacerbate housing affordability challenges in the long term,” according to the National Apartment Association (NAA).

Housing providers who violate the order by ousting non-paying tenants can be fined or jailed,  while offering opportunistic tenants an opportunity to game the system.

The CDC order puts both the housing provider and the resident in a bind because if the renter is unable to pay now, paying later is unlikely. The order does not forgive rent payments and late fees but rather defers them until the order ends with the calendar year. That means renters keep accruing debt, and when the time comes, they will be hard-pressed to repay it.  This will lead to very difficult choices in the new year.  Evicting millions of tenants is very unappealing but continuing to kick the can down the road lead to tougher choices in the future.

The multifamily sector has been dealing with financial pressure due to eviction bans since the early days of the pandemic. The CDC order is the latest of a patchwork of restrictions precluding landlords from evicting renters for nonpayment. Months ago, many states and cities enacted their own eviction halts to keep struggling renters in their homes, and the CARES Act included a 120-day eviction ban affecting certain landlords. Several local moratoriums are still in place. The CDC’s order does not preempt existing moratoriums that offer more protections for renters.

Throughout the pandemic, multifamily groups including the NAA and the National Multi Housing Council (NMHC) have advocated for a government cash assistance program to pay rent. Rent assistance helps residents keep on top of payments and remain in their homes, and it’s also a policy that addresses landlords’ needs.

The CDC order has been the target of several legal challenges, but one suit failed in Georgia and the rest are slow to wend their way through the courts leading up to the order’s termination. However, the issue won’t cease to exist come Dec. 31. Setting aside the possibility of an extension of the order and whatever actions the new administration might take, an additional COVID-19 relief package is probable, perhaps with some provision for renter protection. While policymakers hammer out details, multifamily associations will join a chorus of voices—including renters’ advocates—calling for direct rental assistance, which would offer protections to both landlords and tenants.