Three Critical Weeks Followed by Impossibility

Looking solely at the federal moratorium on evictions (issued by the Centers for Disease Control – CDC), for those who have benefitted, it expires on December 31st. Nobody expects the Trump administration to extend the deadline, and while there is an expectation of a Biden reprieve, that cannot happen, until at the earliest, January 20th when Biden is sworn in. Tenants earning less than $99 thousand whose livelihoods have been slammed by the pandemic had been able to sign an affidavit to that effect and use that in court to stay a pending eviction. They were off the hook for back rent… until the moratorium expired. State and local governments are the only likely source for an interim extension for those critical approximately three weeks (or more).

We also know that the Trump administration, accompanied by the GOP-dominated Senate (so far), has stopped trying to work out an acceptable follow-up stimulus bill with Congressional Democrats. There are an estimated almost 6.5 million Americans depending on that rent moratorium right now. So, without stimulus money to pay rent, in those early weeks in January, there will be no federal program to prevent those evictions from proceeding. Nothing has prevented landlords from filing evictions in the courts (and many such actions have in fact been filed) – they just could not effect an eviction during the moratorium – but in that relatively short span of time in January, you can bet that a number of those evictions will be implemented. 

There is also a trickle-down of pain on the other side of the ledger. Landlords who are not receiving rent face foreclosure from banks that may hold mortgages against their rental properties. But if these impaired tenants cannot pay any current rent, how will they negotiate with their landlords to pay back rent, which they deferred but are still obligated to pay? And many landlords are not big, well-capitalized companies. Many are small property owners who themselves have relied on rent for their livelihoods. If they lose their rentals to banks in foreclosure because tenants could not pay rent, why do they wind up holding the bag?

To GOP purists, the notion of a government’s imposing a moratorium on evictions, no matter the justification, is completely unacceptable. It is their worst fear. Socialism. Especially if tenants are somehow relieved of an obligation to pay that back rent, by fiat or by subsidy. They believe that the free markets must be left to adjust, even as many Americans have no place else to go… in the middle of winter.

“[Not to mention that the moratorium] hasn’t worked perfectly. One problem is that many tenants still don’t know that it exists. ‘It doesn’t help if the tenant doesn’t know and can’t raise it,’ says Caitlin Cedfeldt, an attorney with Legal Aid of Nebraska. ‘And we see that happen a lot.’ In some areas, even when tenants have filed the declaration, they’re still getting evicted. ‘One of the issues with the moratorium is that your protections under it varied depending on what zip code you lived in, and what courthouse you appeared in. Housing courts in some jurisdictions honored the moratorium, and the moment a tenant triggered their rights by presenting a declaration, the judge dismissed the case or froze the case, at that spot,’ says [Emily Benfer, professor at Wake Forest University School of Law and chair of the American Bar Association’s COVID-19 Committee on Eviction]… ‘And in others, the courts didn’t even acknowledge the CDC authority over them. And so this meant that only some tenants were able to really leverage the rights.’

“Biden can learn from what didn’t work to design a better solution, Benfer says. One piece of the solution should be more direct financial support, since the moratorium doesn’t provide any rental assistance. Low-income workers, less likely to have savings, have also been disproportionately hit economically. ‘The renter population was among the hardest hit from the economic recession and job and wage loss,’ she says. ‘The moratorium itself, while critical, is delaying the rent due. So renters across the country have been accruing, in some cases, months of back rent, and it will be impossible for them to repay that debt to the property owner. And we can’t expect the property owners to shoulder the heavy weight of the economic recession by requiring that they cover the lost rent.’

“But though the moratorium is imperfect, the situation will be worse without it. The declaration that the CDC requires tenants sign spells out clearly how disastrous for cash-strapped renters the January deadline will be: ‘I further understand that at the end of this temporary halt on evictions on December 31, 2020, my housing provider may require payment in full for all payments not made prior to and during the temporary halt and failure to pay may make me subject to eviction pursuant to state and local laws.’” FastCompany.com, November 25th.

Even assuming a rapid deployment of a safe and effective vaccine to enough willing recipients to instill herd immunity and a return to non-COVID-dominated times, the economy does not jump instantly back to pre-pandemic numbers. Lots of jobs and many businesses have simply disappeared, permanently. For those who borrowed or deferred rent, even if they somehow instantly got their old livelihoods back, how do they service this incurred debt. And for those who do not resume full employment or a fully restored business, where do they turn? 

Since the inception of the Great Recession (2008), the federal government literally bailed out the American automotive industry, but are they willing to do that against for more businesses on a vastly bigger scale? “The U.S. government’s $80.7 billion bailout of the auto industry lasted between December 2008 and December 2014. The U.S. Department of the Treasury used funds from the Troubled Asset Relief Program. In the end, taxpayers lost $10.2 billion.

“The Big Three automakers asked Congress for help similar to the [too-big-to-fail] bank bailout. They warned that General Motors Company and Chrysler LLC faced bankruptcy and the loss of 1 million jobs. The Ford Motor Company didn't need the funds since it had already cut costs. But it asked to be included so it wouldn't suffer by competing with companies who already had government subsidies.” TheBalance.com, updated June 29th. 

But since this pandemic economic collapse more closely resembles the devastation of the Great Depression of the 1930s, the economy just might require a massive restoration program like FDR’s New Deal, which seemed to work. And if we cannot figure out how to re-prime the pump, whatever recovery does begin may well take more than a decade to take root. For those who had no issue incurring a massive deficit to fund a tax cut for the rich in 2017 (and following), they are screaming that no more deficits are possible, that our economy cannot tolerate that cost. But since we are tracking in a globally impaired world, even though we were considerably more inept in dealing with COVID-19, the dollar should easily withstand that relative cost. And just remember, stock prices no longer reflect the greater economic good… for most of us.

I’m Peter Dekom, but if the federal government is unwilling to step up to the plate to do what must be done, prepare for a very long and miserable recovery.