The Supreme Court has spoken, and the CDC’s nationwide eviction moratorium is over. And while this can be seen as good news for real estate investors, the path ahead is not especially clear. State and local eviction bans remain, almost 90% of the federal money set aside to pay impacted landlords has yet to be paid out, and Congress may consider new legislation to head off a possible eviction surge.
The Supreme Court decision was hardly a surprise.
The Supreme Court ruled 5-4 in late June against the federal eviction moratorium established by the CDC — the Centers for Disease Control and Prevention. The main issue was that the CDC did not have congressional authority for the eviction ban beyond a certain date.
Not deterred, the CDC created a new federal eviction ban after July that covered most of the country’s investment housing. The result was another Supreme Court ruling, this time not so friendly.
The new CDC eviction ban had huge problems, said the Court. It was, again, not authorized by Congress and it was unclear that the CDC had any authority to undertake the ban.
Unstated was another issue: Coming soon after the first eviction ban decision, the second ban defied the Court’s authority, an intolerable institutional challenge.
As President Biden explained, “any call for a moratorium based on the Supreme Court recent decision is likely to face obstacles.”
And yet, the CDC — an entity not normally associated with real estate, leases, or mortgages — came out with a modified eviction ban three days after the old one expired. The CDC claimed that it had the ability to order a nationwide eviction halt under a 1944 law, a ban with criminal penalties for landlords who did not comply.
What the Supreme Court Said
The second eviction moratorium predictably wound up before the Supreme Court. While the first CDC ban decision lost by a vote of 5-4, the second failed in a wider 6-3 vote.
Without Congressional approval, said the Court, “the CDC has imposed a nationwide moratorium on evictions in reliance on a decades-old statute that authorizes it to implement measures like fumigation and pest extermination. It strains credulity to believe that this statute grants the CDC the sweeping authority that it asserts.”
Using the same logic advanced to justify the eviction ban, the decision asked if the CDC could “mandate free grocery delivery to the homes of the sick or vulnerable? Require manufacturers to provide free computers to enable people to work from home? Order telecommunications companies to provide free high-speed Internet service to facilitate remote work?”
The CDC’s claim of expansive authority, said the Court, was “unprecedented.”
Going further, the Court pointed out that real estate investors have significant interests at stake.
“The moratorium has put the applicants, along with millions of landlords across the country, at risk of irreparable harm by depriving them of rent payments with no guarantee of eventual recovery,” said the Court. “Despite the CDC’s determination that landlords should bear a significant financial cost of the pandemic, many landlords have modest means.”
One way to stop evictions is to pay rent, and toward that end the government has set aside substantial funds. Such appropriations are important, but the reality is that the money is not reaching landlords or helping tenants.
“According to the latest data from Treasury, only $5.1 billion or 11% of the $46.6 billion in emergency rental assistance funds has been spent by state and local governments to aid struggling renters and landlords,” explains Rep. Maxine Waters, (D-CA), chair of the House Committee on Financial Services.
“Many renters and landlords,” she added, “have applied to receive assistance through local and state programs but have been left waiting due to delays by grantees in reviewing and processing applications, which too often have included overly burdensome documentation requirements. Other renters lack internet access or the technology needed to apply online and require additional supports to access assistance. Equally troubling is the number of renters and landlords who remain unaware of the availability of assistance.”
It’s not clear that another eviction moratorium can get through the Congress, or get through quickly. What might succeed are modifications to the 2020 and 2021 emergency rental assistance programs now in place, the programs that were given the $46.6 billion.
Waters says she may introduce such legislation, including provisions many landlords are likely to support:
- “Remove the barriers preventing tenants from receiving assistance, including by requiring grantees to accept the self-attestation of a tenant and to provide assistance directly to tenants in certain circumstances;
- “Allow landlords to directly apply for back rent after providing notice to their tenants that they intend to apply, and conditioning the federal assistance the landlord receives on certain requirements, such as the tenant being able to remain stably housed for at least 120 days after receiving the assistance.”
“Both tenants and landlords have suffered significantly as a result of the pandemic, a pandemic that’s not over,” said Rick Sharga, Executive Vice President with RealtyTrac. “If leaders on Capitol Hill can agree to pragmatic, actionable steps to get allocated funds distributed, then communities nationwide will quickly benefit.”
We don’t know what will happen in Washington when Congress returns after the summer break. The devil, of course, will be in the details.