Once upon a time, my family were landlords on a small scale. I owned a townhouse in Virginia and a single family home in Florida. My wife owned the home where she had lived before our marriage. We rented the properties and endured the headaches that a landlord expects: deadbeat tenants, damage to the structures, in one instance a property manager whose rent collector embezzled tenants’ checks. Luckily, we are no longer in that business. I sold my real estate empire before Covid, and my wife got rid of hers last year.
American law has long disfavored landlords, which is no surprise. Lessees are a much bigger voting block than lessors, and voters who aren’t one or the other mostly have an image of the rental market in which corporations and millionaires are on one side and working class families on the other.
In fact, a very large proportion of rental housing stock is owned by people like me and my wife, those who have one or a few properties and aren’t especially wealthy. While they may not depend on their rental income, its absence is a hardship. Maintenance and taxes have to be paid whether or not tenants are paying rent.
The rent moratorium that the Trump Administration enacted and the Biden Administration tried to extend by executive fiat, despite President Biden’s acknowledgment it had no chance of surviving a Supreme Court challenge, was rough on small-time landlords, a situation aggravated by the inability of the federal government to distribute subventions that were supposed to ease the burden. (It tells you something about bureaucratic sclerosis when the government is incapable of spending money.)
The federal moratorium is now dead, and similar state moratoriums may expire as the panicdemic fades (assuming that it’s ever allowed to fade), but the rental market has already been damaged, probably for years to come.
At a time when rental housing, particularly for the less affluent, is in short supply, landlords who lost, or feared losing, money during the moratoriums now have strong motives to divest their properties. Some need the sales proceeds to rebuild their net worth. Others see the business as presenting too much risk for too little reward. Since residential real estate prices are currently high (some would say bubble-ish), selling is particularly attractive. The buyers aren’t likely to go into the rental business, for the same reasons that the previous owners are getting out of it. The predictable consequence is a further reduction of available rental properties and consequent increase in rents.
A probably more significant detriment to the rental market is the realization that, when the next major epidemic grips the country – and that is an inevitable event – rent moratoriums will be an accepted part of the arsenal for coping with it, along with lockdowns, “social distancing” and mask theater. The federal moratorium this time was struck down by the Supreme Court, but only after it was allowed to continue for a long, painful interval and only because Congress didn’t enact it. It was a frolic and detour of the Centers for Disease Control, an unelected body with authoritarian instincts. There’s no assurance that the next moratorium won’t be written into law by the legislature and thus be far less vulnerable to judicial overthrow.
There are, I believe, strong Constitutional arguments against moratoriums imposed by either the federal government (the Fifth Amendment’s prohibition against taking private property without just compensation) or the states (the prohibition against state laws that impair the obligation of contract), but it’s conceivable that landlords won’t confidently venture their own money in reliance on a pension lawyer’s authority as an interpreter of the Constitution. What they will do is reduce their risks by scrutinizing potential tenants more closely. Many who were acceptable in the past will be judged too hazardous in the future, owing to mediocre credit reports, spotty employment history, past troubles with other landlords, and so on. Particularly hard hit will be applicants with criminal records of any kind and members of groups that are stereotypically viewed as irresponsible. The latter biases may be illegal, but laws won’t suppress them very effectively.
Overall, it is highly foreseeable that the hardship inflicted on landlords today will rebound on the tenants of tomorrow. Progressives will, needless to say, blame greedy rent gougers rather than their own policies that brought the hardship about.
Further Reading: Ryan Mills, “Landlords Crushed by Eviction Bans Rush to Sell Properties, Stifling Rental Market”:
A National Rental Home Council survey conducted earlier this year of single-family rental home owners across the United States found that half had tenants who missed at least one rent payment since the beginning of the pandemic, and more than a third had to dip into their personal savings to cover shortfalls. Eleven percent of the respondents said they would be forced to sell at least one property, and 12 percent were liquidating all of their properties.
A recent survey of over 2,500 rental property owners in ten cities conducted by Harvard University’s Joint Center for Housing Studies found that 10 percent of all landlords collected less than half their yearly rent in 2020, with smaller landlords being the hardest hit.
The survey also found a 10 percent increase in the proportion of landlords who listed a property for sale in 2020. In Albany, NY, 22.5 percent of landlords listed a property for sale in 2020, up from 3.9 percent the year before. In Philadelphia, 20.9 percent of landlords listed a property for sale last year, up from 3.5 percent in 2019, according to the Harvard paper.
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