What impact will the expiration of the rental eviction moratorium have on California home values?

  • Home values will fall. (41%, 153 Votes)
  • There will be no impact on home values. (32%, 120 Votes)
  • Home values will rise. (27%, 99 Votes)

Total Voters: 372

Throughout this pandemic, lives have been saved due to the social distancing measures made possible by the simple attitude: staying home saves lives. Without the eviction moratorium, this would be impossible for tenants who have lost their jobs during the recession. But the real estate trade association wants to see a quick end to this grace period.

At the end of 2020, the Georgia and Alabama Associations of Realtors, under the National Association of Realtors® (NAR) umbrella, filed an official complaint against the Centers for Disease Control (CDC) in an attempt to lift the federal eviction moratorium. Their argument? NAR claims the CDC didn’t follow the rules (specifically, the Administrative Procedures Act).

NAR claims that the eviction moratorium has cost landlords billions of dollars in lost rents. For over a year now, many renters who have lost income due to the COVID-19 pandemic have been able to avoid eviction due to the federal moratorium. For landlords, this has meant space occupied and a loss of revenue, a contradictory situation that persists in 2021.

And the fact that 38% of NAR’s membership consists of landlords gives NAR plenty of impetus to reinstate evictions.

Some landlords, particularly small mom and pop landlords have been unable to meet their own financial obligations as a result and have become delinquent on their mortgages. These small-time landlords make sympathetic characters in NAR’s story.

There is some merit to NAR’s complaints. Mom and pop investors without large portfolios to fall back on in times of economic distress are feeling the brunt of the moratorium. Roughly two-thirds of tenants who have been unable to pay rent during the ongoing recession have occupied one-to-four units, according to U.C. Berkeley’s Terner Center for Housing Innovation. These mom-and-pop investors are also less likely to qualify for federal protections that support businesses who have lost income due to COVID-19.

But how is the eviction moratorium really impacting landlords’ wallets?

Editor’s note — Even prior to 2020, it had become increasingly difficult to be a profitable mom-and-pop landlord in California. As costs rise and margins shrink, the majority of multi-family homes cannot be rented out for a profit except by large, efficient rental companies. This is the result of the strict zoning codes that prohibit multi-family dwellings across much of California’s major metro areas.

Landlords need help, not permission

In fact, only 1.8% of multi-family mortgages were delinquent in April 2021, according to the Mortgage Bankers Association (MBA). Despite the eviction moratorium, the share of delinquent multi-family mortgages has remained low and mostly level throughout the pandemic, indicating most landlords are still able to cover costs.

And yet, this small share of landlords still represents a segment of the rental market in distress. But to help these landlords, there is a better way than simply reinstating evictions, which would hinder the pandemic recovery.

Here’s how an end to the eviction moratorium will harm landlords: The moment evictions are allowed to recommence, vacancy rates will rise. Eager to fill vacant units, landlords will drop rents and offer other concessions. At the same time, landlords will attempt to sue tenants for non-payment of rent, pursuing them through costly and mostly fruitless avenues in small claims court.

Instead of complaining to the government for permission to kick tenants out on the streets during a pandemic, NAR® would be better off asking the government for renter and landlord assistance during this time. (After all, NAR® is the third-highest spender when it comes to any type of organization lobbying the federal government).

Here in California, SB 91 was passed earlier in 2021 to provide a solution that seeks to protect both landlords and tenants. The new law uses federal funds to cover 80% of the back-rent accumulated by qualified tenants from April 1, 2020 through March 31, 2021. In return for accepting the federal funds, the landlord is required to then forgive the remaining 20% of rent owed during that time.

To qualify, tenants need to have earned less than 80% of their area’s median income in 2020. Thus, these funds will not be limited to landlords of low-income properties. Rather, any Californian who lost their job and was unable to pay rent during 2020 will likely be able to qualify due to their diminished incomes.

True, to take advantage of SB 91’s funding, landlords will need to forgive 20% of their tenant’s unpaid rents. But when compared to the alternative — a long and uncertain small claims court battle along with vacant property and reduced rents — this small sacrifice is the better deal.

The eviction moratorium is currently scheduled to expire at the end of June 2021. However, this date has been pushed back numerous times already, so be sure to stay tuned to firsttuesday for updates.

Related article:

Moratorium Watch 2021