As many know there are eviction moratoriums across the country. For those which can’t or don’t want to pay their rent it’s a blessing... but is it really? The free-market seems to work pretty well in rewarding and correcting those individuals which do and those which don’t take financially responsibility and preparation for their situation; moratoriums however take that from the free-market and allows govt. to temporarily dictate evictions. Not only are moratoriums going to hurt the very same Tenants that they are ‘intended’ to help but they are going to have consequences long after they are done... simply because investors, LL’s and the free-market move and adjust much faster than govt. possibly ever could.
Eviction moratoriums will likely hurt Tenants. Why?
1 – Moratoriums only delay the inevitable – lets be honest the reason for evictions is because a Tenant is either: not paying rent, destroying a rental unit, not abiding by the lease terms originally agreed on or all of the above... because of this LL’s end-lease and typically seek evictions. A moratorium is after all a temporary delay in evictions... Instead of allowing tenant and landlord to work it out before it damages a Tenant’s record i.e. court date is set, tenant understands there's consequences, an agreement is reached, eviction is avoided… however a moratorium changes this dynamic... now we will still file a notice of eviction while attempting to work out a payment plan with the Tenant however, the difference now… is that a new agreement has been reached and if for some reason the Tenant is unable to fulfill the new much more forgiving agreement and then still refuses to downsize... evictions, credit filings and garnishments are imminent and will surely ensue immediately after the moratorium.
2 – It’s already started most Tenants just don’t know it yet – What happens to vacant units when there’s moratorium in place?.... yep, most investors/LL's will just simply adjust and not rent the unit until the moratorium has passed. Not only will that decrease the available rentals but, for those investors that do decide to still proceed to list units, the new shortage will increase rents during that time. Here's an example: We just currently closed on a SFH rental two weeks ago and we will be closing on another in about a week... have we and will we offer it for rent to help place tenants that need it?... nope... why would we? Our township desperately needs housing (but like all townships stop short of providing it) ... a moratorium however, has put that burden squarely on their shoulders by temporarily delaying any protection investors may have had in order to provide such... which results in us as LL's definitely not allowing any applications/Tenants to move-in to vacant units ** unless certain new criteria such as below are met, in the middle of an eviction moratorium. A vacant unit is better than a unit with a non-paying tenant.
3 – Move-in costs will increase out of some Tenant’s league – So what’s the plan when eventually some moratoriums across the country are lifted and yet others remain or when there is a projected moratorium end-date?... we may start renting our vacant units again… but because of the now increased risk guess what will happen to the move-in requirements... yeah they’ll increase too… we’re talking about full allowable security deposits, two first full months of rent due instead of the previous first full month and even possible ACH pre-authorizations and credit card authorization information as a backup. Additionally, aside from renter’s insurance investors/LL’s may seek insurance for eviction protection and missed rents due to non-payment and may very well pass this cost onto tenants (hint) as a move in requirement as well... increased risk = increased costs... after all.
4 – Mortgage payments may be delayed but are definitely not forgiven – So if some mortgages, for those that qualify, receive forbearance (delayed) shouldn’t that also allow a Tenant to not pay rent?.... nope. First I’ll say as I’ve said on a previous post; What do options available to landlords have ANYTHING to do with whether or not a Tenant makes their rent payment? Second, there is NO rent forbearance by Uncle Sam... why? because taxes, insurance, interest and maintenance on properties are still due and third... mortgage payments are still due after the forbearance period which means those living expenses accrued by the Tenant don’t just evaporate into thin air.
We’ll continue to work closely with our Tenants requiring them to provide proof of unemployment in connection to COVID-19 and will keep offering them Credit Card payment options, other options and ensure they have applied for unemployment and once those... all of those options have been exhausted we will then attempt to work out some type of deferred payment plan for those that have been great tenants.... but let’s be honest... it’ll be much easier for a Tenant to simply walk away and end-lease after the moratorium to avoid bringing their end of the bargain and balance to zero... which is why most LL’s will be wise to it and will deny and avoid future tenants which ‘can’t’ or don’t want to provide their ‘real’ previous landlord’s contact information which will be a barrier to entry for some Tenants moving forward. In the end... moratoriums will open up a whole new world of establishing more stringent tenant criteria and move-in requirements such as ACH pre-authorizations, etc. etc. which will only elevate a LL's security but will unfortunately result in a tenant vs. tenant situation soon afterwards for a long time to come.
