Looking back, it seemed to happen overnight. One day, it was business as usual in America. The next day, the country was in lockdown, with businesses shutting their doors and millions of Americans out of work. Panic set in: how would tenants pay their rent? How would landlords and homeowners pay their mortgages? Enter the eviction moratorium, forbearance, and financial assistance for housing: an economic life raft designed to keep everything flowing freely.
However, nearly a year and a half after establishing these protections, landlords are feeling the strain. An inability to evict tenants has placed property owners in an impossible situation. The eviction moratorium initially set to expire on July 31 has been renewed yet again.
But nothing lasts forever. Regardless of our personal opinions on the pandemic and its fallout, we find ourselves in a difficult situation, with no clear answer. We’re now dealing with the social and economic consequences of a year and a half of upheaval. What happens when evictions and foreclosures begin again?
The Eviction Moratorium and Mortgage Forbearance Amid the COVID-19 Pandemic
On March 27, 2020, the CARES Act (Coronavirus Aid, Relief, and Economic Security) was signed into law. Part of this relief package included provisions to protect renters and homeowners from financial ruin due to pandemic-caused job loss or economic hardship.
Additionally, homeowners with government-backed loans were allowed to apply for mortgage forbearance. This program helped borrowers postpone payments or make partial payments due to unemployment, illness, or other COVID-related hardship. An estimated 7 million Americans enrolled in the forbearance program at the onset. Thankfully, as the nation largely reopened and employment increased, many homeowners returned to regularly scheduled payments. As of July 11, though, some 1.7 million homeowners are still enrolled in the mortgage forbearance program, including many landlords whose tenants owe months of back rent.
Initially, the eviction moratorium – and the subsequent foreclosure moratorium and mortgage forbearance programs – were intended as short-term solutions. But as the pandemic continued to rage through the United States and around the globe, unemployment numbers rose. Weeks turned into months. Months have now turned into over a year, and landlords are feeling the strain.
Eviction Moratorium Extended, Forbearance Expiring
On August 2, the Centers for Disease Control (CDC) issued a 60-day ban on evictions from residential properties in areas with high COVID transmission. As the Delta variant of the disease continues to spread in many regions of the country, “areas of high transmission” now cover about 90% of the population. That is, about 90% of the nation’s cities now face an extended eviction moratorium.
According to the ban, nearly 7 million Americans are behind on rent. The initial eviction moratorium ended on July 31, leaving these renters susceptible to eviction and, in some cases, homelessness. But it’s a complicated issue. While 7 million Americans could struggle to find new homes, the landlords who own these properties are also behind in payments. One study estimated that landlords are owed as much as $20 billion in back payments. The eviction moratorium doesn’t just prevent evictions – it also prevents landlords from receiving payment.
Landlords Facing Financial Crisis
While protections have been extended to renters around the country, foreclosure moratoriums have lapsed, and mortgage forbearance programs are also about to run out. That means an estimated 22.1 million Americans who own one or two rental properties are nearly out of options. For over a year, many landlords have shouldered the financial burden of the pandemic. They have covered mortgage payments, rent, and upkeep expenses while little or no rent was coming in.
Now, these landlords face their own crisis without the safety net of foreclosure moratoriums and forbearance protections. Some may even face foreclosure on these rental properties, which will have a snowball effect on the entire rental market.
What Can Renters and Landlords Do?
With the eviction moratorium extension in many areas of the U.S., landlords are once again left with few options. But there is no reason to lose hope. There are still ways to protect real estate investments, even in the face of difficulty.
First, there are still millions of dollars available in all states for both renters and landlords alike. Under the CARES Act and subsequent bills passed over the past year, renters and landlords qualify for financial assistance. It’s not too late to apply for this aid. You can learn more about federal financial assistance programs here.
Property owners and landlords might also consider refinancing their current mortgage. With interest rates at near all-time lows, refinancing could save you hundreds of dollars a month. You might even be able to tap into some of the equity in your property, giving you some financial breathing room.
Finally, there’s always the option to sell your property. While selling a home currently housing tenants can get a bit tricky, it is an option for many homeowners. If you want to know more about selling your property, contact a trusted real estate agent in your area.
What Will Evictions and Foreclosures Do to the Housing Market?
If you think back to the beginning of the pandemic, many real estate professionals held their collective breaths. Would this worldwide crisis spell disaster for the economy and the housing market? But then, after a few months of stalling, housing demand went through the roof. Now, heading into the second half of 2021, housing prices are at an all-time high. Inventory remains incredibly low. Real estate agents are seeing some of the highest earnings they’ve experienced in years as homes sell for far above the asking price, often in a matter of days.
The new eviction moratorium put in place by the CDC will expire on October 3. While it already faces legal challenges, many expect that the new eviction moratorium will stand. However, lawmakers are nearly out of options, and evictions will likely start in earnest in October.
What does that mean for the housing market? It’s too early to say for sure. There will undoubtedly be negative impacts, like the potentially millions of Americans looking for affordable housing options. We may also see a rise in foreclosures as mortgage forbearances end and foreclosures move ahead. The affordable housing crisis will get much worse before it gets better.
However, foreclosures may have a small silver lining for the housing market as a whole. As these homes hit the market, inventory will finally start to catch up with demand. This rise in inventory – no matter how slight – could mean prices will start to level out. We may even see an increase in first-time homeownership, which has decreased over the past year due to the competitive real estate market.
One thing we likely won’t see, according to economists, is a financial crash. The real estate market is still booming and will probably remain strong even after evictions start again.
No Easy Solution
There is no one-size-fits-all solution to the eviction moratorium problem. For renters, the eviction moratorium is the only thing between them and homelessness. Understandably, these renters are frustrated and afraid. Affordable housing is increasingly sparse in cities across the country, leaving millions wondering what the future holds for them and their families.
On the other hand, landlords and property owners continue to struggle. Federal and state programs designed to help owners have either not worked as intended or have run dry. As a result, many landlords are unable to pay their mortgages. Without the ability to evict tenants, these landlords could lose their properties and their financial security with it.
In the midst of it all, the real estate market remains strong in most areas of the country. Even with the threat of evictions and potential foreclosures, many experts do not predict a housing crash, which is good news for the economy overall.
Are you a renter or landlord? We want to hear about your experience during the eviction moratorium. Leave us a comment below and let us know your opinion.