While homeowners have benefited from mortgage deferral payments, deferring paying the rent is a different proposition altogether. Their rising rent bills need to be dealt with or else.
As it stands, the month of July is a significant one on the path towards trying to recover from the ravages of our recent economic slowdown due to our COVID response, and especially the massive effects of the state-imposed shutdowns on business that we were dealt.
While the government has met this with a massive response, paying businesses to keep laid off people on the payroll, providing additional unemployment benefits and ones to workers that would not otherwise qualify such as gig workers, handing out stimulus checks to people, and states placing moratoriums on evictions, this is all winding down this month, at a time where it presumably was expected to be less needed, although this has not really come to pass.
Landlords in the commercial sector have stepped up to bear a lot of the losses that happened in the business sector, where the impact of this is being shared with their renters to one degree or another by way of individual negotiations. This is a good example of the market healing itself to some degree, but big commercial lessees and residential renters are two very different animals.
The market for leasing commercial space is much more confined market than the apartment rental business, and this comes down to the concept of size matters. If you are leasing millions of square feet of space, it’s not that you are such a big cash cow, it’s that it’s far more difficult to replace these clients if you put them out versus individual residential tenants, not that either are easy under current conditions.
While all commercial real estate owners can benefit from similar deferral arrangements with their lenders that residential mortgage holders can, we run into the same type of problem as bigger businesses being able to survive this mess better than smaller business owners, who do not have the same amount of leverage, means, and opportunity for forbearance as bigger businesses do, and are more likely to run out of cash flow and die when cash flow drops off as much as it has.
While there is the opportunity for flow through where landlords can use their ability to push this all forward, to have amounts of missed payments be capitalized and added to the principal amounts of their mortgage, paying it over a longer period of time to keep payments manageable, it’s a lot easier to convince homeowners to do this, because they have no choice.
Home renters, on the other hand, don’t have the same wherewithal as large corporate lessors such as big box stores, and may not have the means to bear any of the arrears themselves. Commercial agreements can be worked out, but the rent that people pay for places to live does not generally involve the luxury of being able to pay significantly higher rent to catch up as they are often up against the wall with normal rent payments.
The choice that residential landlords have is at least not as clear, as it’s easier for their tenants to relocate, and there is often no course of action available to them to landlords to recover this loss of income. Negotiation is therefore of very limited practical value in this case and any solutions will need to come by way of other means.
Right from the start, we told you that the issue of residential evictions was going to be a real problem, and it’s not that people didn’t recognize this generally, but this issue did not receive anywhere near the attention it deserved in the media, where they did not seem to realize just how big of a problem this was going to be once the moratorium against eviction goes away and renters have to face trying to pay back the big rent bills they owe to try to stay in their homes.
The media focused most of the attention on the fate of homeowners, which the market was able to solve all this itself, where this really didn’t have much of a material effect upon homeowners after all, but while this dog may have continued to wag its tail in the face of homeowners, it sure was growling pretty threateningly where renters are concerned.
It wasn’t hard to see this coming. If someone has a mortgage and loses their job for a few months, that’s a pretty easy fix. All you do is add these payments missed to the end of the mortgage, the person returns to work, and just resumes payments as if nothing has happened. It’s not that this has no effect, but its effect is pretty minimal, where the person either gets a little less when they sell or has to pay a few months extra payments at the end of the mortgage before being set free of these payments.
With renters, this bill is not pushed years down the road but becomes due immediately, and the arrears with rent that accumulate are always due immediately, we’ve just pushed the day of reckoning a little further down the road. That day is already here in some states, and is coming later this month in others, as a wave of arrears meet the prospects of eviction as the fence preventing this gets taken down.
Imagine not being able to pay your rent for months because you have been out of work. You may or may not have returned to work at the appointed time where you face eviction, but even if you are working again, you may be able to keep up with the rent payments from here, but managing the arrears, several months past due, is a much bigger challenge.
Many renters are not in a financial position to just borrow this money, and being so behind on your rent would in itself be a big obstacle to financing. Lenders do not like seeing pre-emptive expenses like rent or taxes, expenses that are prioritized over paying back what is owed to them, to rear their heads in such an ugly manner, and especially aren’t fond of helping people in over their heads, and many of these renters certainly are, the ones in trouble.
The Scope of Potential Evictions is Concerning, But Not as Much as Things Appear
Renters also tend to be of lower means and have limited capacity to make extra payments to catch up, and those who are well behind now have their situations attest for the validity of this concern, otherwise they would not have fallen so behind and may have been able to manage this better by cutting out other things besides their rent payments.
Many renters also have bad credit and those who did not prior to this may have fallen behind on their payments during this crisis, leaving their credit damaged beyond what all but the most predatory lenders would touch. If they could have borrowed out of this, they would have done so already.
On the landlord’s side of the table, these are not the sort of normal evictions that they usually face, where they can just boot out a family and another is waiting in the wings that is presumed to be more reliable.
The rental market has declined during recent times, not only from people fleeing inner cities to get away from the pandemic, but also to get away from all of the violent protests. The evictions that are already taking place with a lot more to come unless relief is provided will add even more to this exodus.
Many renters do not have the option just to pick up and leave town, as they are often in low paying jobs and rely on public transit to get to work, and but in spite of the market for rental units set to grow as a result, landlords may be reluctant to take them on with such a checkered past. This is especially a concern given that some places are starting to shut down again and the number of new unemployment claims this week is going down but is still over a million and still twice what used to be the all-time record for this until lately.
Landlords can evict people but a lot of these folks aren’t people you will likely to be able to sue successfully to try to get the money they owe to you back, so this often will come down to whether you will settle to collecting money going forward with them or someone else. This bird is at least in the hand and landlords may even have to settle for less from new renters as the vacancy rate rises from all these factors and puts downward pressure on rent prices.
At least in cases where the tenants are of modest means or less, it actually may not make much sense to evict them provided that they can at least start paying rent going forward. This won’t be all of them and those who cannot are the ones at the most risk here. If the only reason that they are staying is that you can’t evict them, if you can, they will indeed be evicted in favor of the opportunity to get paying customers.
Landlords will take a big hit here regardless, and financially speaking at least, are in even more need of protection than renters. However, their increased debt can be amortized, and their banks won’t be so eager to foreclose on residential rental properties and then try to dump them on the market in this economic client and in these dire circumstances, and this all especially becomes a worry if these properties were unloaded on a large scale.
We expect that, with things remaining the same, the amount of people that end up being evicted from this will be kept down from these practical considerations, although there will still be many whose financial situation remains in turmoil that will be put out on the street and be in considerable trouble, trying to rent again without rent money. These are the people we need to be concerned about and those it would be wise to confine our interest to if our goal is to address the problem of homelessness as it is supposed to be.
We opened up the vault with the original stimulus bill, but have reached an impasse on more help now, as solutions proposed by the Democrats remaining obscenely overbroad at a time where we’ve already spent ourselves into a big pit that we won’t ever be able to get out of, with the only question being how much more we wish to bury ourselves over this.
Their main spending bill, the so-called HEROES Act, is a heroic act all right, if you consider promoting a socialist agenda heroism. They put plenty of pork in the last bill but this second bill has a lot more packed in, and while they once again are holding the country hostage and demanding ransom, the ransom payment has grown a lot and the Republicans aren’t willing to pay it this time.
We need to really make sure that additional amounts that we spend on this crisis are spent wisely, and especially need to make sure that we’re not forced to spend it on things that have nothing to do with this pandemic or accept political solutions that we may not want such as massive immigration reform.
The Dems have pushed through another bill in the House that only deals with housing issues, but this is bloated as well, as we would expect from them. Among the issues that Republicans have is the bill providing relief to those residing in the country illegally, people the Democrats affectionately refer to as “undocumented.” There are several other matters being quibbled with, where the Democrats are looking to attach several other changes related to who is entitled to receive Federal aid, as well as what sort of urgency we need, with the Republican controlled Senate understanding that we need something but not this much and not in haste.
Americans in total pay about $500 billion a year in rent, and when an emergency bill looking to cover a portion of a year costs $100 billion, we don’t have to look any further to see how broad this is. This tells us that being in an emergency situation isn’t a requirement at all here, as if you paid everyone’s rent that will become evicted, there would be much left over. If you pay everyone’s rent that makes a below average income, and a lot of renters do, that involves a whole lot more money.
We Need to Set Political Ambitions and Goals Aside to Solve This Problem
The Democrats have redefined the meaning of risk of homelessness by setting existing law aside and are looking to incorporate a whole lot more people in this, those who make 80% of the median, the income standard that the bill uses. While there is mention of hardship of some degree being required, lower income in itself is portrayed as one.
This also should not just address risk of homelessness but actual homelessness, where you use the concept of risk as an excuse to put money in a lot of people’s pockets that are seen as more needy. This $100 billion that addresses homelessness starts to make sense when we consider the intent of the bill.
It extends for a period of three years, and not only seeks to put an end to homelessness entirely, which actually wouldn’t even be anywhere near this expensive, it also seeks to raise the standing of those in the lower financial echelon to take them further from the risk of homelessness.
It’s not that they aren’t entitled to pursue these broader goals of socialist redistribution, as whether you are a Democrat and strongly support such a goal, or desire that we choose a less redistributive approach to the problem like the Republicans believe, it is distasteful and harmful to have these broader political goals included or else. This time, the “or else” doesn’t scare the Republicans anywhere near as much as when Democrats held the entire economy of the country hostage during the CARES Act, and the two parties appear ready for a real standoff on this one, and actually doesn’t scare them much at all.
The big problem with the original CARES Act is that it cared for things it needed to as well as cared way too much about what it should not have. The goal here should have been to target genuine needs that we would not wish to see left unaddressed, not use such a broad and undifferentiated approach. This was like addressing a fairly small percentage of people not having enough to eat by creating a food bank and then opening it up to everyone, and we get stuck with the bill.
Any money put into anyone’s hands that is not wealthy is seen as a benefit by socialists, but redistributive political goals need to at least be addressed separately and not just used as leverage to coerce the achievement of the legitimate goals of emergency relief programs such as these.
They are looking to pad the pockets of people for non-emergency purposes by just calling it an emergency, which is not a sensible approach to emergency financial aid, as we should at least require a real emergency and not benefiting people whether they have an emergency or not. That sums up this new bill well, unfortunately, and together with the other $100 million earmarked for other things than emergency renter relief, there’s lots and lots of nice to haves packed in there.
It’s not that the actual mission of this has been forgotten by the Democrats, it’s that they have other agendas which they are not even willing to turn away from even if it means the people that should be helped are left without. They would rather try to score political points it seems, and if this means that people get put out on the street because they want illegal immigrants to be granted legal status and open the doors to a lot more, the real crisis will indeed be turned away from.
The first thing we need to do is assess the impact of all of this, and this will require that we spend more on this actually when needed, not as a blanket approach. This is not about stimulating the economy, it is about not seeing people who have lost their job and still don’t have it back not losing their homes as well and having to take their families to emergency shelters.
Democrats have built up such a strong position in the House and may even manage to take control of the Senate this time around, and the Presidency is virtually in their hands. They are using this power as we speak to pursue a political path that is far away from anything we have ever seen, a potential political crisis that has the potential to inflict unimaginable damage on our economy and way of life, and with even Joe Biden declaring the police in general our enemy and wanting to get rid of them all, our very civilization itself is planned to be abolished.
The Republicans want to help, but we want to make sure that we are using our heads a lot more when we do it, and it is actually a lot better to see these people suffer than the much greater amount of suffering that we will all face if we just use this as an excuse to spend a lot more money that we don’t have and don’t really need to spend.
We sit at a political impasse now and while it should be very obvious to everyone who the real villains in this movie are. We’re in enough trouble with Biden preaching again how he’s going to get corporate America to pay their “fair share” of taxes, telling us that this will raise a mountain of money that will be used to “grow our country.”
This is the stupidity that we have to look forward to when he becomes President. With people like former Treasury Secretary Jack Lew seconding all this, and when your party has a former Treasury Secretary who also shows such an utter lack of understanding of economics, and the next person will almost certainly be worse, there won’t be anyone on board that even knows how to steer our ship away from the rocks.
Thinking that taxation is going to grow the economy is simply ludicrous and is a new low even for these guys. Whoever Biden appoints as the new Treasury Secretary will be just as confused but even more militant, as the country’s rent in arrears will explode and we’ll be left in a place that no future president may be able to atone for.
In the meantime, we should be doing something for our new homeless and those who are getting ready to join them, but need to balance this with getting us all in big trouble, even more than where this has all sent us already. Joe Biden may be approaching dementia, but his dementia still represents the moderate view in a party has taken this a step further and simply lost its mind completely.
We may end up rooting for Joe to keep it together enough to fend off the much more extreme influences in the party, but given that these are the people who are advising him, and they already have gotten him to change his mind from we need the police to we do not, we’re in for a pretty violent storm indeed. Let’s hope too many more people don’t get thrown out of their houses when all they need is a little helping hand, with the Dems insisting on a grand feast or nothing, because nothing is where we are headed on our present course.
Ironically, the Emergency Housing and Protections Relief Act of 2020 isn’t just the Democrats’ bill, they are the party that cares a lot more about these issues, and it’s essentially their own kids who are being kidnapped now, yet they are still insisting Republicans pay their extra ransom demands. Given that they clearly love the people who will be harmed by inaction more, they need to focus more on seeing them get the need to haves without throwing in so much outside the scope of either the actual emergency they face or even the present crisis itself.
When the Senate shoots back that they aren’t going to even be looking at this bill until August, this should send a strong enough message to the House that they need to make sure that whatever bill they look at should focus more on areas where bipartisan agreement can be achieved, and especially come to realize that using coercion with these further bills won’t work anymore and will just leave them disappointed.