The Biden administration just extended the moratorium on evictions until October (first implemented by the Trump administration). And yet when I look at the economic data, it’s hard for me to understand the motivation for this policy. What emergency requires such an extreme infringement on property right?
Personal incomes have been pretty high throughout the pandemic, so that doesn’t seem to be the issue. There really was a severe unemployment problem last year, but now the unemployment rate is down to 5.4%, which is below average for the past 50 years:
Yes, 5.4% is far from ideal (3.5% would be better), but since when is below average unemployment the criterion for emergency legislation that disrupts the normal functioning of the rental market? It’s not like 2009, when jobs were extremely difficult to find.
Indeed we see lots of other government programs that might have made sense in 2020 but make no sense at all today, such as the supplemental unemployment insurance program. The child tax credit might make sense as a permanent program (there are good arguments both ways), but I fail to see any argument for it as a temporary program. What’s the purpose?
It might be argued that the eviction moratorium is aimed at slowing the spread of Covid. But how would it do this? It’s not as if the people who avoid eviction are self-quarantining at home.
Many of the Covid restrictions that might have made sense before the vaccine was widely available no longer make any sense at all. If we aren’t going to get back to normal now, when will we ever be ready to do so? It’s not like there won’t always be people losing jobs. It’s not as if Covid will magically go away.
Full disclosure: I used to be a landlord (one of the worst decisions I ever made.) In my case, my tenants were often as well off as I was.
READER COMMENTS
MarkLouis
Aug 6 2021 at 3:19pm
I partially blame economists for obsessing over small inflation undershoots over the last decade. They’ve convinced DC inflation is basically impossible to generate and therefore there is unlimited money for favored causes. “Eviction mortarium” is a signal that “we care about the poor” (regardless of who actually benefits).
Everett
Aug 6 2021 at 4:04pm
A question for you Scott: There appear to be somewhere between 5 and 6 million households behind on rent (an estimated 11 million adults, give or take). How does this compare to typical years? When evictions start up again what is the likely eviction rate? Can society absorb this eviction rate over the span of time it takes to evict the 5 – 6 million arrears households? And what happens post-hoc in terms of housing situations?
“Emergencies” aren’t just present tense. Good emergency planning means taking the steps to forgo future emergencies. Now it can be argued that eviction moratoriums are also causing emergencies – I do not disagree. But is the Emergency avoidance emergency better or worse than the at least partially ameliorated emergency? I honestly don’t know, except people are going to be hurt regardless, and that one choice guarantees an increase in homelessness and the consequent societal ills, while the other choice does not (provided landlords also get forbearance on their home debts).
robc
Aug 6 2021 at 5:40pm
https://evictionlab.org/national-estimates/
The typical pre-covid rate was between 2-3% annually, peaking at 3.13% in 2006 (for post-2000 time period). That is about 2MM filings per year and 900k evictions per year.
Instead of a moratorium, how about a cap? Maybe allow a 4% eviction rate for a few years, with the courts ranking by worse case scenarios (create a metric that is some combination of months behind and dollars behind) leaning towards those who aren’t trying to pay and those who are in expensive rentals.
It allows evictions to go forward while providing temporary protection for those who are just a bit behind. It looks like it would take 2-3 years to clear the backlog using that method.
Tom D
Aug 6 2021 at 7:55pm
“There appear to be somewhere between 5 and 6 million households behind on rent (an estimated 11 million adults, give or take). ”
That’s because paying rent is now voluntary. Given the eviction moratorium, I’m surprised that number isn’t several times higher.
My personal experience is that the impoverished tenants can take a small portion of the rent arrearage and put down a deposit on a new apartment. Given the recent massive increase in incomes, I’ll be surprised if there are masses of people who have not paid rent in 12-18 months and subsequently have no recourse but to live on the street.
As far as the rationale goes, the politicians can give out benefits without passing a single appropriation. The fact that the donors are perceived to be robber barons is just an added bonus. Socialism is an easy sell and is easily the fastest growing political ideology held by Americans today.
Mikhail
Aug 10 2021 at 7:40pm
Paying rent is not “voluntary”: “The existing stay on evictions may prevent law enforcement from removing renters from homes, but it doesn’t stop landlords from filing eviction requests, according to attorney Mark Fessler, head of the housing unit at South Carolina Legal Services, a non-profit law firm specializing in civil law cases for low-income communities. […] Even if renters can’t be removed, eviction court filings can stain a person’s financial history for years.“
Everett
Aug 7 2021 at 3:31am
Thanks robc and Tom D.
Scott Sumner
Aug 7 2021 at 1:05pm
Given that the economy is doing fairly well, I can’t imagine the problems being worse than during most other years. Why would it be a problem?
MarkW
Aug 6 2021 at 4:24pm
The decision is something like 99.9% politics and 0.1% economics. The eviction moratorium plays very well with the Democratic base. For them, tenants are always the sympathetic, oppressed, salt-of-the-earth while landlords are either big corporations (and therefore naturally evil and rich enough to pay whatever) or small-time ripoff artists (like Scott was, of course) who probably deserve to go bankrupt.
The political shrewdness is kind of obvious — force the Supreme Court be the the bad guys in putting an end to this (probably on a 5-4 ‘party-line ‘ vote) which will then set off a fresh frenzy of Supreme Court bashing (something that’s perhaps even more popular with the Democratic base) and generate more momentum for Supreme Court ‘reform’.
Jerry Brown
Aug 6 2021 at 6:00pm
I have to admit that being a landlord is not such a bad job as long as you don’t expect to make much money. In the short term at least.
The rationale for the health part of the eviction moratorium was that evicted families would crowd in with friends or relatives if they were lucky enough to have such. And that more crowded living arrangements would increase the likelihood of infections. At least that is my understanding of it.
It made sense to me and it still does to a certain extent. Even though it puts a burden on me as the landlord to cover expenses out of my own pocket. Which sucks to a degree. But everything about this pandemic just sucks. In all fairness, the property owner is probably in a better position to negotiate (or just not pay short term) many of the expenses that are part of owning the property than the tenant is.
But, like Everett above, I am wondering what will happen when this moratorium is lifted and if millions of people face eviction in a short time and what that will do to all kinds of things like apartment rent prices, and property values, and social services and many more.
MarkW
Aug 6 2021 at 7:42pm
It made sense to me and it still does to a certain extent.
Rental relief might make sense as a temporary government benefit for the truly needy. But remember — we’ve already had enhanced unemployment throughout the pandemic, so even if unemployed, why would renters have been unable to pay? And employers are unable to fill positions, so jobs are certainly available for those who might be having difficulty with rent.
Even though it puts a burden on me as the landlord to cover expenses out of my own pocket.
But why on earth would you accept that!? Why would you think it OK for the government to create a new safety net program by decree using money from your bank account just because it’s somehow handier than funding it themselves? The government has been borrowing and spending an truly unprecedented flood of money, but you somehow get to fund their ‘free’ rent relieve program? WTH?
Jerry Brown
Aug 6 2021 at 10:08pm
Obviously I don’t think it is an ideal solution Mark. Kind of why I’m asking questions about it. And whatever- I live in a society that was going through a bit of a crisis. I depend on that society to enforce my property rights and believe it will in the long term. That the government suspended some options that I probably would not have used during this pandemic anyways does not trouble me all that much.
It was and is a difficult situation and I am just expressing my personal experience and opinion. And asking what an economist thinks about what might happen when that moratorium is lifted.
zeke5123
Aug 6 2021 at 8:17pm
You might have made a case that there is a public benefit to prevent evictions. But when there is a taking of private property for a public use, the owner of the property needs to be compensated. That is, if there is a public benefit the cost should be borne not by the property owner but by the public that is benefiting.
So, if the government believes there is a public benefit here, then the government should pay for it.
Jerry Brown
Aug 6 2021 at 10:15pm
I agree with your argument Zeke.
Scott Sumner
Aug 7 2021 at 1:00pm
You said:
“But, like Everett above, I am wondering what will happen when this moratorium is lifted and if millions of people face eviction in a short time and what that will do to all kinds of things like apartment rent prices, and property values, and social services and many more.”
We are very likely to find out in the near future, as the courts will throw this out. (I suspect the consequences will be far less bad that some people warn.)
Jerry Brown
Aug 7 2021 at 8:05pm
Yes I think you are right we will find out in the near future. My guess is that more people will get evicted (yes that guess should be followed by ‘duh’).
People who have been evicted by their previous landlord are very low on the list of who I would rent to. I think that is fairly common among people who rent out apartments. But they are going to go somewhere somehow. And the place they previously occupied will be back on the market after quite a few repairs I assume.
Maybe it would be a good time to be a paint manufacturer.
But I don’t know how effective it is to say ‘follow my advice and we will find out what happens soon’. I mean I wouldn’t pay for that advice from an economist, or anyone really. I’m capable of generating that kind of advice on my own 🙂
Mark Z
Aug 7 2021 at 1:09pm
I’m doubtful this policy ever made sense even for public health purposes. I’d be surprised if it didn’t reduce the total number of rental units available and prevent people currently living in crowded units from finding their own places as often as it kept current tenants from having to move into other units already crowded with friends or family.
Mark Brophy
Aug 8 2021 at 11:48pm
A bad job is one where you don’t make money. Leisure time is desirable even though you don’t earn money.
Jerry Brown
Aug 9 2021 at 11:32am
Yes, a bad job is often one that you don’t make much money from. But my hope at least is that over time I would be building up equity in an asset that remains valuable or maybe increases in value. Anyways, it is certainly usually easier work being a landlord than doing my normal job as a construction contractor. Physically at least. Actually it is pretty simple except when something breaks or otherwise goes wrong. And it pays better than being an amateur economist 🙂
It didn’t seem to work out for Scott, but I’m hoping my skill set more aligns with what is needed to maintain buildings and property. If not- well I guess I’m screwed. As Scott says, we will find out eventually.
john hare
Aug 6 2021 at 6:12pm
What I think is going to happen is that even more people decide not to buy rental property. Rents will increase due to lower supply. Expect a lot of sales by disgruntled landlords when the opportunity arises.
Which is a worse shame than even the normal landlord problems as owning a few rentals should be a nice retirement income.
Scott Sumner
Aug 7 2021 at 1:02pm
Yes, in the long run, these rules are bad for tenants. Just as laws on lead paint are bad for families trying to rent.
Peter
Aug 6 2021 at 7:41pm
@Scott
A comment on your PS of “I used to be a landlord … my tenants were often as well off as I was.” but this comment (I’ve heard the narrative before) always confuses me. First off it’s plays into the weird false narrative most people buy and those that can’t, are simply poor. The fact is at the business level most organizations rent (lease) and as well as many (most?) wealthy people as well as all the way down the totem pole. TBH high ownership is a bad sign as it implies low labor mobility as people with property are often stuck. For example I make double the US median income and have since I was in my early twenties yet here I am thirty years later and never owned and TBH I probably have a higher income and raw wealth than most of my landlords even if they sold the property. Also let’s be fair here, most people who are landlords shouldn’t be .. they treat it as a hobby or supplemental income instead of a job and that is to the detriment of the tenants.
Basically your PS confuses me. Sounds like you were in that camp of “I shouldn’t have been a landlord but didn’t mind screwing my tenants over so was a easy cash grab and I lost on my amateur gamble”.
Scott Sumner
Aug 7 2021 at 1:03pm
Actually, I was making the same point as you. Don’t assume that landlords are richer than tenants.
Mark Z
Aug 7 2021 at 1:12pm
I don’t think it’s excessively cynical to postulate that many supporters of this policy like the idea of enacting this as a permanent policy and want to keep it going as long as possible until it’s sufficiently normalized in the public consciousness that it would be hard to roll back.
bill
Aug 7 2021 at 5:23pm
I’m flabbergasted at the continuance of this moratorium.
This post and some of the comments got me thinking about the impact of the moratorium on rental rates. Normally, some people are evicted. Many of those find temporary accommodations by squeezing in with friends and family. Others downsize or find other cheaper accommodations. This frees up units for new entrants to the market. This process has been hindered and reduced by the moratorium. I think it’s like moving the short run supply curve (which is close to vertical) to the left. This raises prices/rents. By how much? I don’t know. Soon, thankfully, the moratorium will get lifted. Thankfully too that it will be lifted before those price increases necessitated any tightening by the Fed. That would have really been terrible and probably counterproductive.
Mark Brophy
Aug 8 2021 at 11:53pm
I’m not flabbergasted because I assume that the purpose of government is to steal from one group for the benefit of another. I’m unhappy with the results of most elections because it doesn’t install legislations who will scale back government.
Keenan
Aug 8 2021 at 11:38am
The answer to all these questions, and all these blogs is that non-thoughtful people favor self-favoring policies and you are thinking about this more than 99.99% of the population.
Michael Sandifer
Aug 9 2021 at 5:51am
It’s a really dumb policy. Just give money to the people who need it and their rent can be paid.
Michael Rulle
Aug 9 2021 at 10:15am
As I say often in my comments, as you are an economist we expect to hear your economic opinion even when the policy (e.g. MMT) is self evidently ridiculous. So I am always glad to see you write these essays.
But the reality is the decision by this administration has nothing to do with economics. But you know that—-so what is the political advantage of the continued moratorium? To push the perception that renters are victims of sleazy greedy property owners. And also—-there are many who benefit greatly from this as you and several others point out regardless of the renters economic conditions. Plus there are more renters than landlords.
At least that is the narrative they are trying to put forth. All anti-free market ideas start and end with these kinds of ideas.
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