In March 2020, President Trump signed the CARES Act, one of the pieces of legislation that, for better or worse (likely the latter), will impact his legacy the most. The bill included a number of sweeping economic measures to deal with the COVID-19 pandemic including the first direct stimulus payments to American citizens as well as expanded unemployment benefits and the Paycheck Protection Program.
As uncertainty over the global crisis reigned, there was broad bipartisan agreement that this swift come-together piece of legislation was necessary until order could be restored. The only objections in Congress came from hard-line budget hawks like Representative Thomas Massie (R-Ky.), who objected not only to the exorbitant spending and the gigantic size of the bill itself (that precluded any member from reviewing the full text in a timely manner), but the fact that no member could be held accountable for a “yes” vote because the bill was approved by voice vote in the House.
Besides the profligate spending that has marked these programs, as well as the fraud that has drained funds from them, the CARES Act included one other clause with devastating delayed consequences that are about to be felt now: The eviction and mortgage moratorium.
This populist measure froze the rental and mortgage payments for tens of millions of Americans, but it also created a massive hourglass for the duration of the measure. And now Joe Biden has announced the White House will not extend the moratorium without congressional approval. As a result, more than 15 million people may be at risk of eviction as of July 31. Some states like Illinois and New York have their own moratoriums that will extend beyond July 31, but there is no decision yet on whether all of those will be extended.
More Sorrow in Less Space
While this figure does not automatically translate into persons who will be evicted, it deserves attention as many of those people including children and dependents in tenant households could be rendered homeless. What would just a fraction of the total—let’s say 5 percent, or 750,000 people—mean?
The 2020 Annual Homeless Assessment Report released in March found that 580,466 people “experienced homelessness in the United States on a single night in 2020.” This means that the effects of the end of the moratorium conceivably could more than double that population at least in the short term.
Whatever the numerical scale of the crisis, it is clear that local communities have been either incapable or unwilling to address the needs of either the homeless themselves or the local residents that have to contend with the influx of destitute new residents.
- In 2017, California’s housing situation was already a full-blown crisis with a massive tent city building up in Anaheim near Angels Stadium, causing the city to declare a state of emergency.
- Recently, the New York Times highlighted a similar situation in the iconic community of Venice Beach, California.
- New York City recently excluded homeless applicants from federal rent assistance, a move that critics hold to be mental health disability discrimination. Mayor Bill de Blasio is currently being blasted for moving the homeless out of hotels where they have been since COVID-19 emergency measures started and back into overcrowded shelters. In 2018, de Blasio was famously confronted by an elderly homeless woman over his broken promises to build units for homeless New Yorkers.
- Recently, the spray park in Seattle’s Ballard Commons Park was closed because the number of homeless living in the space had mushroomed during COVID-19 and other residents could no longer safely enjoy it with their children.
These are just three U.S. metro areas that are already overwhelmed by the homeless crisis, and urban flight. Seattle was estimated through one postal address survey to have lost 26,000 residential households (or 7 percent of the total) in 2020 alone. In addition, thousands of businesses in the city have closed permanently, including 140 street-level storefronts downtown. The city’s taxpaying base gradually is being replaced by dispossessed vagrants.
Compassion vs. Judgment
The controversy over how to deal with the current homeless may be different from those who will suffer from the problem in the near future.
The Manhattan Institute’s City Journal points out that while some of the homeless at Venice Beach may indeed be dispossessed local victims of an overpriced housing market with nowhere else to go, among those highlighted in the Times story were a deadbeat dad, a chronic alcoholic who has lived on the streets far earlier than any recent crisis, and a woman with a criminal history who has refused housing elsewhere.
Should there be a new deluge of homeless Americans however, they would most certainly be able to cite federal and state policies as being a factor in their homelessness. Nevada Governor Steve Sisolak has already called for tenants to reach out to use other rental assistance programs pending the expiration of his state’s moratorium. Here are some statistics that show why eviction rates may not just be an issue of tenant delinquency:
Year-over-year rent change in New York state has increased by 2.94 percent, while it has decreased by 12.18 percent in New York City. In California, rental prices have increased by 2.62 percent, but in Los Angeles rent has plummeted by 5.06 percent, Meanwhile, rents have jumped in nearby Anaheim (7.84 percent) and Irvine (23.29 percent). Las Vegas has specifically seen an eye-popping 42.1 percent increase in rental prices. Cleveland, Ohio has experienced a 12 percent rise in rental prices. This suggests a mass migration of tenant residents from large metropolitan municipalities to the suburbs as well as from higher to lower taxed states, and many of the destination states do not have extended moratoriums.
Wage stagnation. In every case where there has been a rise in rental prices, the moratorium’s end could be devastating for those who have had stagnant wages and are ineligible for unemployment. But for wage earners the picture has not improved as overall earnings have declined for middle earners by 2 percent. This means that the lower-middle income level, the group most likely to be squeezed by rent hikes, could fall within the cracks of the moratorium’s end and find themselves at least temporarily homeless.
Inflation. In the one-year period ending May 2021, the U.S. Consumer Price Index (CPI) ballooned by 5 percent, the largest such change over the same period since the 2008 financial crisis. Democrats have been ringing the alarms over this, claiming that it could “wreck the party for a generation” should the rates exceed 20 percent.
But the political price is not what’s important. Hyperinflation by definition affects prices for rentals, but it also makes poor and middle class tenants choose between paying their rent or paying for staples such as food, clothing, and healthcare. When this and stagnant wages occur simultaneously, it’s called “stagflation.”
Dodging the Train?
All of these factors are coming together in a perfect storm that coincides with the end of the eviction moratorium. The obvious question is, “Can the crisis be at least partially averted by extending the moratorium?” By itself this could cost the United States a hefty price, as landlord associations are currently suing the federal government for back rent lost during the current moratorium.
Recently, the Supreme Court ruled in a 5-4 decision to uphold it for the remaining time, but Justice Brett Kavanaugh, acting as the swing vote in that case, stated that his position was conditional on any further extensions being put in place by Congress. Should the evictions go ahead, however, there could be a new round of rioting by impoverished evicted tenants enraged about how the post-COVID “recovery” is leaving them out in the cold.
But let’s assume that it is extended with congressional approval. If the landlords were to win their case, the American people effectively would be bailing them out for the rent of millions of non-paying tenants. So long as the moratorium were to be extended, the American people would be paying the landlords for the steadily accruing back rent. Another lawsuit brought in New York state and potentially soon to be heard by the U.S. Supreme Court could overturn its own state-wide moratorium given that it’s “disaster emergency” was recently declared over by Governor Andrew Cuomo.
Should the landlords receive no relief there could be a new wave of the building abandonment that plagued New York City in the mid-to-late-1970s. And while this may not cause mass unrest of the type that the end of the moratorium might elicit, the preponderance of derelict buildings would likely only escalate the crime waves that have plagued major urban centers already. Thanks to a bipartisan and short-sighted political class eager to appear caring but not making long-term sense, this is the lose-lose situation that could be just around the corner.