April 30, 2020

Temporary Eviction Moratoria Protect Tenants for Now – But What’s Next?


Nearly half of U.S. renters entered the Covid-19 pandemic already burdened by housing costs. And the pandemic continues to hurt families’ economic stability, straining their abilities to afford basic needs, including rent, food and health care. Between early March and late April, over 30 million Americans filed claims for unemployment benefits. As more workers lose their jobs or face reduced work hours due to Covid-19’s economic fallout, even more families will be at risk of housing instability.

The federal government has offered some renters a range of temporary eviction protections, including a 120-day eviction moratorium instituted by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), legislation that was signed into law by President Trump on March 27, 2020. Further, some state and local governments have enacted a range of eviction protections for at-risk renters that vary in strength and duration. While these protections are vital to offering renter households short-term relief, additional broad assistance is needed to mitigate a wave of evictions that could occur when the temporary eviction moratoria expire. 

Defying predictions, a recent analysis on April rent payments shows that more than 90 percent of tenants living in professionally managed multifamily buildings across the country made a full or partial rent payment by April 26. However, this analysis is limited in scope as it only captures 11.5 million rentals across the country and does not include subsidized affordable housing or multifamily housing that is not professionally managed. We have yet to see a national analysis that captures the full story. 

Severely cost-burdened and cost-burdened renters who already spend between 30 and 50 percent of their income on housing are less likely to have sufficient emergency savings to afford rent amid job or income loss. In addition, renters who were able to tap into their savings to pay their rent in March and/or April are unlikely to be able to continue using their savings to pay their rent moving forward, making this an unsustainable solution for families who could face financial hardships for an extended period of time.  

Moving forward, it is essential to identify and implement federal, state and local strategies that incorporate the private sector to mitigate Covid-19’s long-term impacts on renter households’ housing stability. Potential strategies include: 

  • Offering Broad, Extended Relief to Impacted Renters 

    To avoid an eviction wave later in the summer and a potential crisis in the U.S. housing finance system, all impacted renters must receive assistance with making their rent payments until they are able to overcome Covid-19’s economic fallout. Multifamily property owners are required to pay their monthly mortgage payments (if the property has a mortgage), property tax, operating expenses like utilities for common areas and garbage collection, and payroll for maintenance and administrative staff, regardless of whether rent is paid. And landlords who receive temporary foreclosure forbearance will eventually have to pay back mortgage payments. Further, investors of mortgage-backed securities will expect their share of loans’ interest and principal payments, regardless of whether servicers receive mortgage payments. 

    Mitigating disinvestment in mortgage-backed securities is essential to avoid any potential liquidity pressures in the mortgage market. These challenges can be mitigated by offering rental relief to help all involved stakeholders until the pandemic’s economic fallout is eased. One proven mechanism is authorizing additional funding to HUD’s HOME Investment Partnerships program to offer aid to property owners on behalf of impacted renters.

  • Offering a Range of Rent Payment Plans to Impacted Renters 

    The economic fallout brought on by the pandemic is expected to last for an extended period. It would be unreasonable to expect that renters who have lost their jobs or work hours will be able to pay back rent in a lump sum payment once the current eviction protections expire. 

    Millions of individuals are seeking federal and state unemployment benefits and they might not be able to access those benefits for weeks or months due to significant pressures on states' unemployment eligibility and processing systems. Therefore, waiving late fees and offering impacted renters flexibility in paying their missed rent payments are essential to avoid straining their limited financial resources. Rent payment plans could include:

    • Deferred payment plans: Deferral would enable an impacted tenant to pay their missed rent or the missing portion at a later date. The landlord could allow the impacted tenant to make up for those missed rent payments by increasing the rest of the lease’s monthly payments by a specific percentage or requiring a lump sum payment at the end of the lease term. If the tenant prefers the former option and needs more time to fully pay their missed rent payments, a lease extension could be requested to ease the tenant’s financial hardship by dividing the missed payments over an extended period of time. 
    • Flexible payment plans: Offering flexibility, the landlord could split monthly rent into multiple payments, typically two payments per month. This option is likely more suitable for impacted tenants who are expecting or receiving weekly/bi-weekly payments, such as weekly unemployment insurance benefits or weekly/biweekly paychecks.  
    • Security deposit conversions payment plans: Impacted tenants could pay part of their missed rent payments by converting their security deposit into a rent payment(s), depending on the amount of the paid security deposit, which is typically the equivalent to one month’s rent. This option would offer impacted tenant some form of short-term relief.   
    • Discounted payment plans: Landlords could look into offering a discounted payment plan to help their tenants stay in their homes. This arrangement would be based on any identified financially feasible options, such as reducing charged fees on operating expenses or amenities. The landlord could also reduce the monthly rent in exchange for extending the lease term to avoid potential vacancy in their rental property. 

It has never been clearer that cost-burdened renters are vulnerable to economic shocks. Covid-19’s economic fallout emphasizes that relief at all levels of governments and in partnership with the private sector is essential to mitigate the pandemic’s impact on renter households’ economic and housing stability.

Enterprise urges Congress to work with the administration to offer much needed rental assistance. We also encourage state and local governments to work with property owners on ensuring flexibility and assistance for impacted renters in paying their back rent.  

Subscribe to our daily Today In Housing newsletter and visit the Enterprise Blog for more information on housing impacts and policy responses from Covid-19.

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