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Game Changers in the Real Estate Market – Pending Evictions

COVID-19 has taken the United States by storm, impacting every aspect of the American people’s lives: Businesses have been forced to close their doors; millions of individuals have lost their jobs; and over 100,000 Americans have lost their lives to the virus. Government aid, in the form of federal unemployment and moratoriums on eviction, has been a much-needed lifeline to many who have been hit the hardest. However, it is now August 2020, and as the first federal aid package runs out with no agreed-upon plan for an extension in place, fear is growing in many American homes. As of July 31, 2020, the additional federal unemployment expired, and so far, congressional republicans and democrats cannot agree on what an extension of the aid might consist of. President Donald Trump has signed an executive order providing an additional $400 per week of federal unemployment (previously $600 per week) – However, there is a major stipulation that is preventing many politicians from getting on board: states are expected to pay one quarter of the $400, or $100 for each unemployed resident. For California, that adds up to an additional $700 million per week. As most states are not in the financial position to uphold the terms of the executive order, there is now a standstill on how the government will aid in the ongoing unemployment crisis.

 

Simultaneously, many Americans are facing another pressing problem: Potential eviction.  As millions struggle to find financial means to keep their lives afloat, many have resorted to stopping payment on their rent. In March 2020, the CARES Act was signed, which provided eviction relief for those who were directly impacted by the pandemic; however, that moratorium has expired, and states are beginning to witness an influx in eviction cases. In North Carolina, 9,000 cases are pending and set to resume; in Michigan, it is estimated that 75,000 evictions will be filed, and in New York City, 50,000. Each state has a different timeline, but the COVID-19 Eviction Defense Project predicts that by October, up to one in five U.S. households who rent their homes could face eviction, or between 19 million and 23 million families. These evictions would be in addition to the illegal evictions that have occurred and the already thousands of pending evictions for which states have resumed court hearings.

 

In California, it is estimated that one in seven tenants did not pay rent on time in July, and an estimated one in six were late to pay rent in August, if they paid at all. The challenge in finding a solution is to find an option that accommodates both landlords and tenants fairly. Landlords have still been responsible for mortgage payments and taxes on their properties during the pandemic, and many live off the income generated by their rental units. On the other hand, tenants are facing massive unemployment rates and high rents. The valid concerns of both parties make it difficult to resolve the situation – What is the answer to help both sides during such a trying time?

 

 

Proposed Solutions to the Eviction Surge

 

Various politicians in California have proposed different bills in hopes of finding the answer before the courts resume eviction hearings, which could happen as soon as this month.

 

Assemblyman David Chiu, D-San Francisco, has proposed AB1436, which would prohibit landlords from evicting tenants who cannot pay because of the pandemic, and it would give tenants a year to make up the rent. Meanwhile, landlords could seek forbearance for up to twelve months for a residential mortgage if they were facing financial hardship.

 

However, the California Apartment Association (CAA) has pushed back against AB1436, stating, “The bill does not provide for – nor is it tied to – any funding to help tenants and landlords with the unpaid rent. There is no way many rental property owners will be able to keep their buildings from foreclosure if AB 1436 were to become law… AB 1436 transfers the COVID-19 burdens of tenants to rental housing providers and represents just the sort of action the taking clause was intended to prevent.”

 

Another proposed solution was introduced by Senator Anna Caballero, D-Salinas, and Senator Steven Bradford, D-Gardena, who introduced SB1410, a bill which proposes that landlords would receive tax credits to forgive rent for tenants who cannot pay rent. According to the bill, landlords would use the credits starting in 2024, and tenants would be responsible for paying rent back to the state, interest free, over a period of ten years starting in 2024.

 

The decisions of the coming weeks will be of monumental importance in determining the near future for millions of Americans. As of now, the Judicial Court of California voted to end its moratorium on evictions and foreclosure filing on September 1st, providing a few additional weeks for legislative leaders to identify a solution.

 

 

Consequences of Evictions

 

If judges in the pending eviction cases rule in favor of landlords, millions of tenants could become homeless. They would then need to turn to friends and family, shelters, or resort to living on the streets. The biggest fear of this pending event lies with the issue that began the rollercoaster of events – The spread of COVID-19. If families are forced to relocate and share smaller quarters while being prompted to return to work as well, public health and housing experts predict that the displacement of renters could lead to a second-wave public health crisis. According to a study released by the Federal Reserve Bank of Cleveland, evicted tenants are “at greater risk of contracting, spreading and suffering complications from COVID-19” because they are often unable to shelter in place and are forced to use the emergency room for primary medical care.

 

The goal of social policies is to prevent the spread of COVID-19, but the pending surge in eviction cases would only make social distancing all the more challenging. We will watch over the next few weeks to see how the decisions of states and the federal government will aid in the problem – Will unemployment be extended? Will there be an extension on the eviction moratorium? All of these concerns are understandably pressing for the American people.

 

 

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