When queried last week about the CDC’s controversial eviction ban, President Biden seemed intransigent concerning ending the moratorium protecting the nation’s renters. Even though, as he admitted, “The bulk of the constitutional scholarship says that it’s not likely to pass constitutional muster,” the administration was going to leave the onerous regulations in place, since, as the president put it, “By the time it gets litigated, it will probably give some additional time while we’re getting that $45 billion out to people who are, in fact, behind in the rent and don’t have the money.”
At issue is a moratorium on evictions put into place in 2020 by The Centers for Disease Control and Prevention (CDC), under Section 361 of the Public Health Service Act, with the intention of limiting the spread of COVID-19 by helping renters stay in their homes. Although the CDC’s order contended that “The ability of these settings to adhere to best practices, such as social distancing and other infection control measures, decreases as populations increase,” critics of the order—including the Supreme Court—have contended that the CDC lacked the authority to impose regulations affecting intra-state relationships between landlords and tenants—commerce overseen by states, not the federal government, and that the order was not only an overreach by the CDC but was unconstitutional as well by violating Fifth Amendment protections. By compelling owners of private property to forgo the collection of rents and lawful evictions, the CDC, as an agent of the government, was implementing what is deemed to be an unlawful “taking.”
The Takings Clause of the Fifth Amendment specifically states that “private property [shall not] be taken for public use, without just compensation,” and while takings are generally of the type when the government takes physical possession of the property (for instance, through eminent domain for a public works project), unconstitutional takings also apply to regulatory takings, as well. In these cases, even though the government does not take physical possession of a private property, the property owner is denied his legal rights of ownership, even if the taking is temporary—as in the case of the eviction moratorium here.
Supreme Court Justice Kavanaugh seems to have acknowledged that the moratorium should not, and will not, prevail after legal challenges when he wrote in his decision that, while the moratorium could be extended long enough for all stakeholders to get their affairs in order prior to its expiration, any further regulation had to come from Congress and from individuals states, not from a federal agency like the CDC without authority for such broad national policies affecting landlords and renters nationwide. “In my view,” Kavanaugh wrote in June, “clear and specific congressional authorization (via new legislation) would be necessary for the CDC to extend the moratorium past July 31.”
Regardless of whether it is Congress or some other agency that extends an eviction moratorium in light of the unrelenting pandemic that still affects people’s ability to re-enter the workforce and earn wages to cover rent expenses, the moratorium itself is another example of a misguided policy that, despite its good intentions, interfered with the national housing market in an economically destructive, onerous, and unconstitutional manner—similar to the wrong-headed policy decisions that were responsible for rent control programs in cities across America.
In both instances, it was tenants who were subsidized and protected from market rents and property owners who were made to bear the financial burden of maintaining living units for tenants unable, or unwilling, to find alternate, affordable housing. Long positioned by its advocates as a government-sponsored housing program, rent control is, in fact, paid for exclusively by private owners of rental property. Its policies determine what rents may be charged, when and by how much rents can be raised, what actions an owner may take to evict or replace a tenant, whether and when an owner may occupy his own property and at what price, if at all, a property may be sold or transferred, or even if it can be demolished.
The eviction moratorium, similarly, took from property owners the principal right of a landlord, namely, being paid rent under the terms of a lease and being told that he or she could not evict a tenant who was not paying rent. In both cases, state regulations are tantamount to a “taking” of private property—regulations that deprived private owners of their legal rights and benefits of property ownership all in the name of some public good—either housing affordability or pandemic mitigation.
But because owners are not compensated, made whole, in both cases, the state’s actions by virtue of regulation are unconstitutional, violating property owners’ rights and violative of Fifth Amendment protections, even though some public purpose is behind the regulatory takings. “The Fifth Amendment’s guarantee that private property shall not be taken for a public use without just compensation,” Supreme Court Justice Hugo Black wrote in the 1960 case Armstrong v. United States, “was designed to bar Government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole.”
Long positioned by its advocates as a government-sponsored housing program, rent control is, in fact, paid for exclusively by private owners of rental property. Its policies determine what rents may be charged, when and by how much rents can be raised, what actions an owner may take to evict or replace a tenant, whether and when an owner may occupy his own property and at what price, if at all, a property may be sold or transferred, or even if it can be demolished.
Rent control regulations differ from the eviction moratorium, of course, in that the moratorium presumably is a temporary solution to a purported public health problem but both affect an owner’s ability to extract a market-rate rent from tenants who have voluntarily entered into contractual relationships with landlords when they choose where to live. Under rent control, an owner loses the ability to set rents according to what the open market will support; instead, the local rent control board sets rents based on their own affordability scale—reliably far below what units would rent for in unregulated markets.
Renters protected from eviction under the current moratorium do have to describe their alleged need for protection from eviction by completing an eligibility declaration, but the criteria are so loose and generous, and clearly carelessly reviewed, that any tenant other than the very wealthy could make a claim for rent exemption. Landlords, who must pay all the carrying costs for their units even while collecting no rents, have the promise of receiving deferred rents from federal funds for that purpose, but both the tenant and landlord have to apply for that compensation, and tenants, who are not going to have to pay back rent from their own funds anyway, are not highly motivated to assist landlords to be made whole, particularly if the tenant intends on moving out of the unit or will be evicted when the moratorium is lifted.
And the numbers are staggering. The Aspen Institute, for example, has suggested that over “15 million people live in households that are currently behind on their rental payments (7.4 million adults, 6.5 million households), which places them at legal risk of eviction” and that experts have estimated that “these households collectively owe more than $20 billion to their landlords.”
Housing activists and progressive members of Congress such as Missouri’s Cori Bush like to pit landlords against tenants and position the housing debate as a conflict between wealthy property owners and needy tenants, with the expectation that owners are able to weather financial hard times and subsidize tenants during economic hard times. But the reality is quite different: huge, financially robust real estate firms are not ubiquitous and small real estate investors, “mom and pop” property owners actually comprise nearly half of all owners.
In fact, as data from a 2020 report by the U.S. Department of Housing and Urban Development (HUD) revealed, “Of the 48.2 million rental housing units, nearly 49 percent are located in rental properties of one to four units,” and of “these small rental properties, nearly 73 percent (14.1 million) are owned by individual investors and more than one-third (7.9 million) have a mortgage or similar debt.”
So while a tenant making as much as $90,000 annually (or, alternately, was receiving full unemployment benefits plus the additional $300 a week federal government’s supplemental unemployment benefits program payment) could actually be earning his or her entire salary, or more, and paying no rent for over a year while the property’s owner, perhaps living on the other side of a two-family house, was paying all carrying costs and completely subsidizing the tenant he could not evict for any financial cause. And being repaid at some point by federal or state funds was possible, but not assured—clearly a windfall for tenants either way and an unfair and egregious financial burden for property owners.
How bad is the situation? “Many landlords perceived that they have been unfairly burdened with the economic fallout of the pandemic; while the eviction moratorium remains in place, they have limited or no relief from ongoing expenses including property maintenance, taxes, and finance payments,” found a 2020 research report by the Housing Initiative at the University of Pennsylvania. “Landlords also reported being frustrated that there is no recourse against tenants whose incomes, to their knowledge, had not been impacted and appeared to be taking advantage of the moratorium—and who may be unlikely to pay back money owed.”
Rent control lasted for decades because the lie of a housing emergency was perpetrated and policymakers have difficulty in providing affordable housing outside of the public housing model, so it is appealing, and cost-efficient, to call on private owners to provide a public good, but at private expense not on the taxpayers’ dime. Rent-regulated buildings suffer a decrease in value, are often not maintained well because owners see no return on these additional investments, and also reduce property tax bases due to the decrease in the assessed and real value of regulated properties.
But owners have adapted to rent control over time and opt out of ownership in those municipalities where rents are still regulated. The eviction moratorium, however, though temporary, was suddenly imposed, and clearly with little thought about equity, practicality, or feasibility. The CDC was quick to put in place regulations to protect tenants from evictions—justified or otherwise—but gave little or no thought to the needs and rights of property owners.
Should there have been a simultaneous moratorium on mortgage payments by affected owners who were no longer receiving rents from their properties? Should municipalities where these properties are located have not required property tax payments during the moratorium timeframe? Where owners were paying utilities, should utility companies have suspended billing during the moratorium?
In the first place, would not it have been sensible to have a tenant, along with his landlord, apply immediately to qualify for the rent suspension to ensure that he or she actually either lacked income to make full rent payments, was likely to face financial hardship in the upcoming year, and had actual, legitimate reasons for now paying rent—not just the opportunity to enrich oneself at a landlord’s expense? So, if a tenant was, as a result of the pandemic, unemployed and not receiving either salary or unemployment benefits, he or she would qualify for the eviction suspension. But if the tenant was still working or, if he or she had been fired, was collecting unemployment benefits (and, possibly, the additional $300 weekly benefit) why would rent payments be suspended?
And if payments were not going to be made to the landlord, the funds might have been directed to be put into an escrow account until the moratorium ended. Tenants are notoriously clever at gaming the rental system, particularly when they are offered an opportunity to pay no rent and not have to face any legal consequences or the likelihood of being evicted for non-payment of rent. The moratorium was, then, a perverse incentive for renters to evade honest rent payments with the prospect of living rent-free for more than a year and end up being able to move and pay nothing for the prior year’s tenancy. One doesn’t have to be an economist or public policy expert to have seen that coming.
The notion was that renters would eventually owe all back rent not paid during the moratorium but the idea that a tenant who is so financially weak that they can barely make monthly rent payments will be able to save a year’s worth of rent and retroactively pay back the landlord is ludicrous on its face. In fact, a 2019 report by the Federal Reserve found that faced with a $400 emergency expense, 39% of Americans don’t have enough money on hand to cover such an eventuality, and “Another 12 percent of adults would be unable to pay their current month’s bills if they also had an unexpected $400 expense that they had to pay.”
Policymakers have introduced large numbers of well-intentioned programs to assist the poor, the marginalized, the under-served in society and generally use public resources, taxpayer funds, to finance those initiatives. But in the case of housing, when government has looked to the private sector, to owners, to subsidize and make affordable housing for those who cannot afford it, they have ventured into an area prohibited by the Constitution, depriving property owners of rights and justifying such actions with the noble intention of trying to house those with moderate means or facing temporary hardship.
The government cannot, and should not, overstep in that manner, regardless of good intentions.