Will California's rental eviction moratorium help or hinder real estate sales volume?

  • Hinder. (55%, 16 Votes)
  • Help. (31%, 9 Votes)
  • It won't make a difference. (14%, 4 Votes)

Total Voters: 29

Residential evictions are effectively prohibited through the end of 2020. This occurred at the national level after orders from the Centers for Disease Control (CDC) and the U.S. Department of Housing and Urban Development (HUD). The HUD moratorium covers homeowners of single family residences (SFRs) and their renters, staving off foreclosure for those unable to pay.

Here in California, evictions have been halted for tenants unable to pay rent specifically due to COVID-19 restrictions through January 31, 2020.

While necessary for the sake of public health, these eviction moratoriums have deep implications for the real estate market and broader economy. As the moratoriums apply to millions of tenants across the country, the landlords unable to collect rents are quickly feeling the losses.

The Mortgage Bankers Association (MBA) released a statement warning against the widening impacts the moratoriums will have, particularly on multi-family property owners. They caution against a “cascading action” of losses as tenants who are unable to pay will lead to landlords unable to cover their own expenses and mortgage payments, pay their employees or pay their property taxes.

The MBA implores policymakers to pass another relief package that provides rental assistance to tenants and their landlords. At stake is the stability of the multi-family industry and finance market, which relies heavily on multi-family investment.

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Until jobs return

While the eviction moratorium is necessary for the sake of tenants’ health and safety — not to mention local governments’ infrastructure, which is ill equipped to handle a surge of homelessness — it is a band-aid solution to the bigger problem.

Tenants in need of assistance are those who have lost jobs due to the 2020 recession and pandemic. There are 1.6 million fewer jobs held in California than a year earlier, as of August 2020. This amounts to a 9% annual decrease in jobs. An unequal balance of these lost jobs are low-paying jobs, which disproportionately effect renters.

Jobs are the key that keeps the economy — and real estate market — moving.

A decline in the number of local jobs reduces the need for all types of real estate, residential and commercial alike. Normally, decreased demand leads to vacancies, which means lower rents paid by tenants and lower prices paid by buyers.

However, landlords are left without remedies when tenants are able to continue occupying rentals without compensating them. They are unable to fill vacancies by decreasing asking rent on the impacted units since these nonpaying units remain occupied.

To keep landlords from defaulting on their obligations and laying off staff — creating more job losses — the tenant eviction moratorium needs to be paired with assistance for landlords while the economy gradually recovers the many jobs lost in 2020.

In the meantime, job creation is imperative. Government stimulus is needed to help private businesses create more jobs as well as federal initiatives to hire more infrastructure workers. Otherwise, the jobs recovery will be slow and long, reminiscent of the last decade of recovery from the Great Recession.

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