By Brian Skinner, Esq.
The United States may be facing the most severe housing crisis in its history. Many who suffered from unstable housing before the start of the COVID-19 pandemic, are now in an even worse situation. In Sunday’s New York Times, author of “Evicted: Poverty and Profit in the American City”, Matthew Desmond, tells the harrowing story of one family -- Jhon Loaiza, his wife, Sugey Bedoya and their three daughters. After detailing the details of the family's experience, Desmond writes that not only was the family's eviction unnecessary, but --
efforts to defeat Covid-19 and recover from the economic damage it has wrought will be deeply compromised if we fail to help families keep their homes. Besides pushing up coronavirus infection rates, the eviction crisis will also aggravate our unemployment crisis, as workers get displaced far from their jobs, and it will further complicate school reopenings, as evicted children, themselves at heightened risk of infection, shuffle from one school to the next.
A recently published policy memo indicates that the current economic recession, coupled with job and wage loss, has magnified and accelerated the existing housing crisis. As of July 2020, nearly 50 million Americans have filed for unemployment insurance. Between March and July, unemployment rates fluctuated between 11.1% and 14.4%. By comparison, unemployment peaked at 10.7% during the Great Recession. More than 20 million renters live in households that have suffered COVID-19-related job loss.
As a result, an estimated 30–40 million people in America could be at risk of eviction in the next several months. Many property owners, who lack the credit or financial ability to cover rental payment arrears, will struggle to pay their mortgages and property taxes, and maintain properties. The pandemic has increased the risk of foreclosure and bankruptcy, especially among small property owners. Those who rent have lost federal rental assistance or federal protection from eviction. Over 30 million people receiving unemployment insurance have lost the additional $600 a week federally enhanced benefit which is likely to cause a surge of defaults resulting in a double-dip recession. In West Virginia, it is estimated that between 32% - 48% of all households, or between 65,000 - 78,000 households, are at risk of eviction. In Ohio, the numbers are between 535,000 to 689,000 households are at risk of eviction, which is about 33% - 46% of all households.
The COVID-19 pandemic has meant a significant loss of rental income which in turn creates financial peril and hardship for renters, small property owners, and communities. Without rental income, many landlords will struggle to pay mortgages and risk foreclosure, and even bankruptcy. The National Consumer Law Center predicts that three million homeowners, or roughly five percent, will have significantly delinquent mortgages by early 2021. Currently, 44% of single-family rentals have a mortgage, or some similar debt. Sixty-five percent of properties with two to four units and 61% of properties with five to 19 units have a mortgage. Foreclosure can lead to lack of maintenance, urban blight, reduced property values for neighboring properties, and erosion of neighborhood safety and stability. Without rental income to pay property taxes communities are without the resources to pay for public services, schools, and infrastructure. On the other hand, significant community resources must be invested to manage or dispose of properties acquired through tax foreclosure.
Although the crisis may have a devastating impact on local communities, the Wall Street Journal recently reported that investors are “preparing for what they believe could be a once-in-a generation opportunity to buy distressed real-estate assets at bargain prices.” We have seen this before. During the 2008 financial crisis homeowners who were targeted with predatory mortgages lost their homes to foreclosure. Benefiting from the crisis were corporations that purchased foreclosed properties at bargain basement prices, converting the homes into rentals. In many cases, this resulted in increased rents, neglected maintenance requests, and a zealous imposition of fines, fees and eviction notices. Too often, foreclosed homes were left vacant resulting in deficits in the housing stock.
Mr. Desmond places the blame for Mr. Loaiza’s circumstances squarely on Congress. He writes that we need a nationwide eviction stoppage and bold assistance to renters, which some experts estimate requires between $7 and $12 billion a month to help workers who rent to remain safe and secure in their homes. However, Congress, specifically the Senate, has not acted to enact a relief bill is summer, despite the House having passed legislation over two months ago. Much of the blame can be placed at the feet of Senator Mitch McConnell, the Senate majority leader, who recessed the Senate until after Labor Day.
Many of the devastating consequences of the pandemic are preventable if the federal government and the states enacted needed policy interventions such as, first and foremost, the reinstatement of the nationwide moratorium on evictions. President Trump recently signed an executive memorandum that purported to extend the eviction moratorium contained in the CARES Act. But instead of extending the federal eviction moratorium, the president's action simply calls 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.
However, a moratorium is necessary to halt evictions until financial aid can be distributed to those in need. The moratorium will also assist landlords since about 47% of rental units are owned by individual investors, who also have debts. Along with an eviction moratorium Congress should also consider an infusion of at least $100 billion in emergency rental assistance and a prohibition on fees and penalties for those who need extra time to pay their rent.
These steps, along with an extension of federally enhanced unemployment benefits would significantly decrease the number of potential evictions and foreclosures while also significantly reducing the public and private costs of mass evictions.
While states may not be financially capable of providing emergency financial assistance to renters or those on the verge of foreclosure, states can act to restrict evictions and prohibit fee and penalties for late payments.
Recently, Governor Jim Justice urged landlords and banks to be patient with those who may not be able to pay rent and are facing the possibility of being evicted during a pandemic. The Governor recognizes the impact on families and the economy itself that a rash of evictions and foreclosures would cause, but he has so far failed to offer any solutions other than a plea that “landlords, and our banks, please give these people a pass for right now. They really, really need it.” To avert this catastrophe, the Governor could call the legislature into special session to enact legislation curbing evictions and foreclosures, or in the alternative, issue his own executive order creating a state moratorium on evictions, fees and penalties.
Predatory companies should be prohibited from destabilizing communities and profiting off the displacement of families. Congress can act to create restrictions on the sale of delinquent mortgages and to private equity firms, and make sure that communities and homeowners are put ahead of private investors. States can also act to prohibit the bulk sale of auctioned foreclosed properties, give occupants and nonprofits the right of first refusal to buy foreclosed homes, and raise penalties for vacant properties.
Creating a right to counsel in eviction cases would help both tenants and landlords. Landlords are almost always represented by legal counsel, while tenants rarely have legal assistance which significantly tilts outcomes toward landlords. A study of eviction cases from 2006 to 2016 in Kansas City found that tenants in just 161 out of 77,000 cases in that time.
However, tenants who have legal counsel experience improved housing stability, such as being able to remain in their home or obtaining additional time to relocate, avoiding a formal eviction on their record, and accessing emergency rental assistance or subsidized housing. Furthermore, legal representation often leads to lower default rates and more fairly negotiated resolutions with landlords that limit disruption from displacement and ensure the rights of all parties are exercised. For example, in 2017, New York City began a program to provide assistance to low-income tenants facing eviction. The early evidence suggests that it makes a difference. Unlike the results of the Kansas City study, in the first year, of tenants receiving legal representation avoided eviction.
States should also consider other policies, such as eviction record sealing and restrictions that preclude property owners from basing tenant eligibility on eviction records. These policies could prevent the longer-term harm that comes from eviction.
This is not a crisis that can be addressed retroactively. Instead, action must be taken now since the cost of inaction is immense, in both lives and money. Too many Americans have already lost their lives and jobs, and many more are on the way to needlessly losing their homes too. The cost of evictions to renters, landlords, and communities is high and it is necessary that both the federal government and the states act to ensure everyone has access to affordable housing, but also to preserve families and communities during this unprecedented public health crisis.
Brian Skinner is the former counsel to the West Virginia House of Delegate Committee on the Judiciary and counsel to the West Virginia Senate Minority Caucus. He has over a decade of experience as an adviser to legislators on legal and political issues related to pending legislation; providing research and legal analysis services to legislative committees; and preparing bills, resolutions, amendments, and other documents for the West Virginia Legislature.