The Biden administration just extended a lifeline to struggling renters, but without more federal action the nation’s rental housing market could face serious pressure in the months to come.
On Aug. 3, the U.S. Centers for Disease Control and Prevention issued a new eviction moratorium to replace the ban that expired at the end of July. Unlike the previous moratorium, which was first enacted last September under the Trump administration, the new federal moratorium was targeted, applying only in areas of the country with high rates of transmission of the virus that causes COVID-19.
The new moratorium is currently set to expire on Oct. 3, but the actual end date could come sooner. The prior moratorium faced significant legal challenges from landlords and Realtors groups. In June, the Supreme Court rejected a challenge to the moratorium on the basis that the moratorium was set to expire soon, but conservative justices on the court signaled that they considered the ban to be unconstitutional. Already, federal judges have indicated they will re-examine these cases in light of the newly announced moratorium.
Whenever that day comes, the end of the eviction moratorium could be just the beginning of renters’ troubles, as the nation’s ongoing eviction crisis is set to have large ripple effects across the broader housing market.
“Based on what we are seeing with single-family rental homes, the various eviction moratoria over the past year have likely contributed to the supply challenges in the market,” said David Howard, executive director of the National Rental Home Council, a trade group that represents landlords who own single-family homes.
Millions of Americans face the risk of eviction
The economic recovery has not put all renters back in good standing in terms of their rental payments. Over 7.4 million households are behind on rent, according to survey data from the U.S. Census Bureau — and that figure has risen since June. Of these, around 3 million households say they are at risk of eviction.
Determining how many of these households would lose their homes in an eviction once the moratorium’s protections cease is not straightforward, according to economists. “There is significant uncertainty around what the number of eventual evictions will be because we are in such unprecedented circumstances,” said Chris Glynn, senior managing economist at Zillow
Much will depend on how quickly emergency rental assistance is distributed to the tenants and landlords who need it. Congress appropriated billions of dollars in aid for struggling renters, but as of the end of July most of that money had yet to make its way to the people who need it. The Biden administration reissued the eviction moratorium to offer these Americans a better shot at getting that assistance.
‘There is significant uncertainty around what the number of eventual evictions will be because we are in such unprecedented circumstances.’
— Chris Glynn, senior managing economist at Zillow
“The actual number of evictions depends on the speed of relief distribution, pace of economic recovery and decision-making by landlords, so it is extremely important that this assistance gets to renters in need to ensure people can stay in their homes,” Glynn said.
But not every landlord will opt to pursue evictions with struggling tenants, because an eviction comes at a significant cost for property owners, too. Many landlords will instead go the route of working out a repayment plan with their renters rather than putting them out on the street. Another unknown is how many renters will proactively leave their homes before facing eviction, even if that means they end up relocating with family, couch surfing or living in a shelter.
Currently, Zillow estimates there will be about 480,000 eviction filings once the moratorium ends, but only around 260,000 of those households are likely to be evicted.
Will landlords be able to stick it out?
The financial challenges created by the pandemic have hit landlords hard, and many have not been able to stick it out. Survey data from the National Rental Home Council shows that 23% of individual single-family rental home owners planned to sell at least one property as a result of the various eviction moratoria.
“The degree of difficulty in being a property owner during this time has increased exponentially,” Howard said.
Nearly one in four mom-and-pop landlords expected to sell at least one rental property because of the eviction moratoria.
Meanwhile, rising home prices have created even more incentive for landlords to get out of dodge.
“With rents and home prices both at all-time highs and rising, many landlords have an incentive to explore their options,” said Danielle Hale, chief economist at Realtor.com. “Of course, the red-hot demand that has helped fuel rising home prices and rents could shift in the wake of the eviction moratorium.”
The supply of rental housing is dwindling
The resulting sales of properties that once were occupied by evicted tenants could create a prime opportunity for home buyers, especially first-time buyers. The lack of housing inventory nationwide has created more competition among buyers and driven prices to record highs across much of the country.
Inevitably, many of the homes vacated by evicted tenants, if sold, could end up being bought by people who plan to live in the house themselves, rather than rent it out. This could create an even larger crisis for low-income renters.
While the U.S. added millions of homes for owner-occupants over the past five years, the number of rental units has actually decreased over that span of time.
“This just isn’t sustainable, Howard said, adding that the Biden administration will need to seriously consider ways it can promote the construction of additional housing to avoid a full-blown crisis on both sides of the nation’s housing market.
“What really moves the needle in terms of housing is supply,” he said. “Regardless of the political back-and-forth around eviction moratoria, the past year has revealed the extent to which the United States is truly ‘underhoused.’”