NAA Fighting the CDC Eviction Moratorium
The Corona Virus workplace shutdowns have brought an unprecedented challenge for the real estate market. These hurdles are growing instead of easing for small to medium-sized landlord businesses.
Millions of apartment tenants face a wave of evictions due to the government shutdown decision. Such evictions are something no one wants, but tens of thousands of small mom and pop landlords are themselves facing possible eviction and business losses.
They’re left to continue managing their rental properties on personal government aid and loan forbearance programs.
The recent CDC order to stop evictions was a clever move by the President to compensate for his battle with the Democrats’ stall tactic on a Corona Virus aid package. Unfortunately, it has created extended financial and business problems for landlords.
NAA and Civil Liberties Alliance Take Action
With the aid package looking doubtful, the situation is perhaps more threatening with the election ahead and a Covid 19 surge this fall. To respond to the unfairness of the CDC moratorium, the NAA and the New Civil Liberties Alliance have launched a lawsuit against the CDC. Their charge is that the CDC eviction moratorium order was unlawful.
They claim that federal agencies do not have powers to waive state laws and that the CDC has encroached on private property rights with no legal authority. We highlight below what these two associations are doing to encourage rent payment from tenants, along with their attempt to end the CDC eviction moratorium.
Rental Property Owners Not Saved
While many large US businesses and corporations across many industries were saved from bankruptcy last summer, some landlords and property investors were not. Instead, the government put a huge burden on them to forego renter payments while leaving them to pay their own bills and continue providing property management services.
About 12% of landlords surveyed are already into mortgage forbearance programs. And late payments and forbearance cases are making it tougher for others to acquire mortgages. This reduces rental property availability and worsens the rent affordability crisis for so many cities.
The mortgage credit availability index fell to 118.6, the lowest it’s been since 2013. These situations put a damper on both new rental property construction and the quality of property management services.
Some counties and states are offering assistance that works out to be coercion to forfeit their tenant rental accounts receivables.
Many of these individual tenants are accumulating mounting rent debt, which is significant and it’s unclear whether they will be able to repay.
“Either the landlord gets a judgment against the individual and likely won’t be able to collect or the tenant will declare bankruptcy.” said NAA President and CEO Bob Pinnegar in Globst interview.
Mom and Pop Landlords Left Holding the Bill
NAA asserts that small mom and pop apartment landlords are having to borrow to cover property operating costs, and that many are collecting much less rent as time passes. NAA added that even Class A and Class B property renters are now showing signs of financial strain. A survey by Avail found that a third of renters were unable to pay their rent in August. The situation in San Francisco and Manhattan is likely worse.
“Our data show that 42% of renters and 35% of landlords are digging into their emergency funds and savings to cover everyday expenses,” said Ryan Coon, CEO of Avail.
The eviction crisis keeps getting booted down the road, but landlords are likely aware that recovering accumulating lost rent will be nearly impossible.
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Confusing Legal Landscape
What’s happened in the property rental sector, is both commercial and residential landlords are in dire financial straights, while trying to navigate a legal quagmire of city, state and Federal rent payment and eviction regulations (landlords in the UK and Australia are fighting similar battles). Landlords must follow rigorous documentation requirements to prove their case.
Tenants and landlords too, must study the patchwork of regulations to find out if eviction would happen. And many attorneys give up on eviction processes if tenants even fill out declarations.
Was the CDC Executive Order a Knee Jerk Reaction?
When President Trump was forced to make an expedient change to save about 40 million tenants, the normal channels were not available to him (because of the impasse with the Democrats). To extend eviction protection, he used the CDC’s powers to declare the rent and eviction crisis as a national health emergency. It was quick thinking to get the order in effect, however it has left landlords further in the lurch.
While many tenants are conscientious and responsible, some are not. Landlords need to evoke eviction proceedings to reclaim their rental property and pay their own mounting bills. Right now, landlords have little control over their finances and could see their own property taken from them.
That is obviously not fair that non paying renters can squat in the units and refuse to pay any rent.
To avoid eviction, tenants must:
- attest to a substantial loss of household income
- an inability to pay full rent and make a good effort to pay partial rent
- substantiate that eviction will leave them homeless or force them to live with others at close quarters
The fear is that so many evictions would create a homelessness crisis and lead to a Covid 19 surge. While that fear is justified, the government is doing enough for landlords and property owners.
So far, landlords have been more than understanding about the national emergency, but there are increasing calls for action to end the broad CDC eviction moratorium.
With no government stimulus aid package likely till February, the burden on landlords is extreme. Small landlord owners in particular need the rent funds to pay their own rent. Many are using money out of their own savings to pay their rental property mortgages.
The $2 trillion CARES Act that Congress signed into law on March 27 covered about 1/3rd of all properties, but the CDC declaration covers all US properties. It was a sweeping order.
Without playing partisan politics, there needs to be a solution helpful to landlords.
The National Apartment Association
NAA is voicing their concern over the outstanding issues related to the federal eviction restrictions. They have requested specific supplemental guidance to help housing providers deal with confusing/conflicting order mandates.
It could be both the government and tenants are hiding behind confusing or unknown regulations. NAA actually points out specific CDC order items to shine light on including:
- it is not intended to terminate operations of local and state courts
- it is not intended to prevent rental housing providers to start eviction proceedings to be carried out later
- it does stop the rental housing provider from challenging the truthfulness of tenants declaration in court
- it is not the landlords responsibility to educate or make tenants aware of the order’s details
- each tenant listed on the lease must complete and sign a declaration
- covered tenants still owe back rent to their landlord
- tenants must still pay rent on time and other lease provisions
- tenants must do their best to pay partial rent
- false claims of CDC order coverage are subject to DOJ prosecution
Eviction moratoria are not the answer and will do nothing to solve renters’ housing insecurity. The NAA lawsuit against the CDC is ongoing.
Read more about the NAA legal action on their website.
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