Saving Lives or Killing Landlords: The Eviction Moratorium (Update)

Two days ago President Trump signed a new $2.3 trillion stimulus bill after threatening to veto. The headline is that most people will receive a check from the government for $600. Ostensibly this payment is to help pay the bills and put food on the table.

A less-known part of the stimulus bill is an extension on the eviction moratorium. Remember that the moratorium we have now is the result of an executive order directing the Centers for Disease Control to issue an eviction moratorium if it felt that evictions would pose a threat to public health. With limited scientific backing, the moratorium went into effect September. For the details, see my previous post.

When does it take effect?

Now through January 31, 2021.

Who can’t be evicted?

Anyone who can’t (doesn’t) pay rent and meets certain criteria cannot be evicted for nonpayment of rent. Any other reason you may evict a tenant, such as threatening the safety of neighbors, is still allowed. The tenant has to demonstrate they can’t pay rent due to a COVID-related issue and that they have tried to obtain financial assistance.

What does the Eviction Moratorium mean for tenants?

Doubtless, some will think that they simply can’t be evicted, so they don’t have to follow the rules. Some will be evicted because they didn’t satisfy the rules of the moratorium. Late fees are still allowed. Back rent is still due. Tenants need to either keep their current employment or find any manner of rent assistance they can. If they don’t, they will face eviction when the moratorium ends.

What does the Eviction Moratorium mean for landlords?

Landlords need to make extra effort to find out what rental assistance is available in their area. They need to be ready to give this information to tenants and even help them sign up for assistance. I’ve had good success in helping tenants and they are very happy to hear when their rent is paid. This avoids any talk of eviction and everybody is happy.

Happy that is, until the money runs out. It will run out. At that time, landlords better be prepared to evict, assuming the moratorium is over. If not, landlords will have a difficult time paying the bills. The solution at that time will probably come from government-mandated mortgage forbearance.

What does the Eviction Moratorium mean for investors?

Investors looking to purchase multifamily properties need to be aware that the eviction moratorium might continue indefinitely. The Biden administration will take over January 20th, and will have 11 days to further extend the moratorium. We’ve seen how easy it is to issue an executive order for this thing, so we need to expect it.

Banks may start getting squeamish about lending to multifamily buyers, out of fear that mortgages won’t get paid. It’ll be harder to get loans. Property values will likely decrease due to uncertainty about getting rental income and higher interest rates which decrease the buyer pool. If you are thinking about investing in a multifamily property you need to have a talk with your banker right now. Hopefully you have a track record of getting tenants on assistance. You should be able to give documentation supporting this to your banker.

Now is the time to get your tenants help. The promise of a vaccine makes the future seem rosy, but it’s still a long way off. Plan for the long haul.

Dr. Equity

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