She was an incredibly successful realtor, a member of the Million Dollar Sales Club for more years than she would appreciate me calling out. In the twilight of a stellar career in residential brokerage, our friend was starting to shrink her own real estate portfolio as she considered retirement, downsizing and potentially a life at her beach house — one of three properties she owned and rented out, in addition to her very elegant and well-appointed home. Our friend sold her own home during the hot seller’s market, receiving an offer well above the asking price, during the spring of 2020.
Soon after, during the beginnings of a declared national emergency, the CDC put in place a moratorium against evictions and foreclosures, if nonpayment of rent or mortgage was due to job loss or reduced income caused by the pandemic.
Months passed and no rent checks came from the beach house, the townhome or the third residence our experienced realtor owned. Meanwhile, all of her expenses on those properties continued — mortgage payments, insurance, property taxes and maintenance costs. She soon found that none of the tenants were putting much effort into finding or replacing that lost income and at least in one case, a sub-tenant may have actually moved into her property paying rent to her non-paying tenant.
The U.S. Supreme Court recently struck down the CDC’s latest attempt to extend the moratorium until October of this year. DeKalb County, Georgia, and several other states have also put in place their own eviction moratorium extensions lasting until the end of the year. A moratorium on evictions or foreclosures by the way is not a solution, it is simply a stall. Unless the tenant or mortgage holder pays up in full, their credit will be significantly damaged and relocating to another rental property, or buying that next home will be particularly problematic. And yet, not only are we likely to see a record number of evictions and potentially foreclosures, but those simultaneous downward credit strikes will make it nearly impossible to secure housing in the tightest area of most every market — entry-level and affordable housing. And still, at the federal, state and local levels, there is no plan.
In Texas, the state decided to cut through the clutter, complicated forms and asks for details and documentation that many lower-income tenants simply could not produce, by making payments directly to the landlords and lenders, with sign-off/certification by the tenant or mortgage holder on the amount in delinquency and arrears. Landlords typically have bookkeeping or accounting staff, and are much more accustomed to credit applications and government forms, as are lenders.
Current CARES Act and related housing aid funding ($46.6 billion), will start reverting, if unspent, back to the federal government in late September. President Biden and the U.S. House would do well to strongly examine the Texas model, if the objective remains keeping folks housed. Though overseen by the U.S. Department of the Treasury, instead of the U.S. Department of Housing and Urban Development (HUD), the current failing efforts rely on a patchwork of more than 450 state, county, municipal and charitable organizations, lacking uniformity or simplicity, to hand out the rent/mortgage relief funding.
HUD could fund or partner with local housing authorities and nonprofits on a number of pilot initiatives to absorb thousands of those about to re-enter the entry level market, with bad credit and limited budgets. Tiny houses, converted rail cars, 3D printed homes, trailers and alternative dwelling units (ADUs) — better known as garage and basement apartments or converted she sheds — could all quickly come into play here.
And as the pandemic does continue, the same CDC and state governments with extended emergency powers could also suspend for a period of months, local area building codes, which often limit things like boarding houses or shared housing, sub-tenant rentals and even building smaller dwellings as most communities now prohibit the construction and code approval of any residence of less than 1,000 square feet.
If our realtor friend only could plunk her head down right now in a tiny house that she owned, while still paying for the three others which she cannot access, and until very recently could not remove her non-paying tenants. Purchasing a truck during this same pandemic, I had promised myself I would find a way to decline from helping too many folks ‘move,’ but the offer has already been made to our dear friend, to be able to assist her deadbeat tenants in moving out.