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  • Ron Gallen

We Need a National Rent Moratorium




The minute California governor, Gavin Newsom, issued his order to stay home on March 19th, a treacherous line of dominoes began lining up, at the ready to begin their fall. What was going to happen in less than two weeks, come April 1st, when large amounts of people would not be able to pay their rent? And even the ones who have enough to pay the April rent will give way to the vast majority who will not be able to pay come May and June. And who's to say that June is the end? The rent default domino would immediately lead to landlords not being able to pay their mortgages or service their debt. How many of them would there need to be before the banks start turning to the Fed? And so on.

Unfortunately, none of the $2 trillion dollar stimulus package went directly to helping people pay their rent. Yes, most people will receive a check for $1200 from the government in coming weeks. That's not gonna do it. They need it for food to feed their families! In just the first two weeks of reporting, 10 million Americans filed for unemployment protection. And that's only the ones that could get through to the overtaxed state sites. Not hard to figure that if everyone but essential workers have to stay home now, that the 10 million is just the first installment. How many of those workers will be able to pay their rent? Yes, a lot of Americans will be able to make ends meet with the extended and enhanced unemployment benefits of around $1000/month. But there are 164 million people in the United States workforce. A large portions of which do not qualify for unemployment benefits. There are at least 13 million workers in the restaurant business alone. A recent study found that fully 47% of Americans did not have enough savings to meet a $400 emergency. You do the math.

States and municipalities understood quickly that this was coming, and began a sort of incrementalism. Los Angeles and New York instituted a ban on evictions, first for a month, then for 90 days. What happens then? Everyone who hadn't paid their rent gets an eviction notice? Holy cow. That would mean a huge percentage of the country would be caught in a rolling wave of temporary homelessness (although homelessness is homelessness). How can we allow that? Hey, even if the landlords were allowed to kick everybody out, where would they find renters who still have money to rent those apartments?? Where would the prices go?

Mortgage lenders, encouraged by the government, have instituted moratoriums on payments for their borrowers of up to 12 months with no penalty. No foreclosures. The payments would be tacked on to the back end of the loan. But that's sort of easy to do with a mortgage. No such mechanism exists for a lease. No such luck for renters. In fact, the orders that protected renters best had the provision for renters to repay the accumulated rent within a few months (in addition to their current rent). Most had no provision at all. How many of those renters will be able to do that? Maybe none?

Even when workers do return to work, the expectation that they will have enough to repay missed rent in short order misses the mark by a mile. They will not be able. There's some significant doubt as to how many will actually get back to work and for how long. There's a side-by-side problem of how much they will be earning and how much debt they may have taken on for food, utilities, drugs, the stuff of life. How many cars will be repossessed? Will everyone's FICO score all of a sudden be in the toilet?

If the next stimulus package included a provision wherein the government paid everyone's rent for 90 days-it would cost $189 billion (there are 47 million rented homes in the country at an average 2019 rent of $1465). That's nothing. That's less than ten percent of the first of what will need be multiple bills. And it would not only relieve unbearable financial hardship for around half of the country, it would effectively intervene on a chain of events that threatens otherwise to unravel at the seams.

It's probably not going to happen. But it should. It's not only a great idea, but the not-rent-paying part is inevitable, has already begun. The only question is whether there will be some governmental action to underwrite large swaths of the missed rent, or for it all to unfold in mind-bending chaos.

A compelling case for an immediate 90-day national rent moratorium is also made in this incisive article by Gian Paolo Baiocchi and Jacob Carlson in the New York Times.

https://www.nytimes.com/2020/04/01/opinion/coronavirus-rent-freeze.html?searchResultPosition=1




#financialwellness #financialsobriety #canceltherent #rentmoratorium #norent #money #personalfinance #familyfinance

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rgallen@mac.com

917-969-0996

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