Extending the moratorium on evictions could decimate the rental industry and hurt renters in the long-term.
President Joe Biden is a savvy negotiator; an elected leader with decades of experience hammering out tough deals between opposing parties.
At times those opposing parties have been Democrats and Republicans; at other times members of his own party, disagreeing about what to do, how to do it, or both.
There has been just such an inter-party struggle happening within the Democratic Party since the moratorium on evictions for non-payment of rent expired at the end of July, with both Houses of Congress and the Supreme Court neglecting to extend it.
Progressives, activists, and nervous renters still reeling from the fallout of COVID-19 seethed when the deadline to extend passed. Protests were launched, sit-ins were held, arrests were made. Twitter and the mainstream media landscape were strewn with liberal scolds decrying the heartlessness, and gutlessness, of elected leaders who allowed families to be thrown out of their homes during a combination pandemic and economic crisis.
A good Democratic Party negotiator is one who is willing to lose- if that is what it takes to support the policy goals of the party and the voters it represents. A good negotiator is also one who knows when they’ve been beaten, and can give in gracefully.
As indeed President Joe Biden did, giving into progressives and agreeing to extend the edict preventing evictions. And progressives rejoiced.
The President can’t do anything he wants, however; the U.S. Constitution separates governmental power into three district branches for just that reason.
But what a U.S. President can do- legal or not, constitutional or not- Biden is willing to do to appease the progressive wing of his party and the voters who vociferously back them. Even if it only buys a bit of time.
A good politician doesn’t mind being course-corrected by the voters. More corporate-minded Democrats might not like the extension much, but elected leaders are supposed to bend to the will of the people- and the people, it would seem, had spoken.
But are they right?
Property owners have already lost 18 months of investment income, while still having to pay taxes, insurance, and a myriad of other operating costs. Some are out millions; some thousands.
By the beneficent hand of the government, tenants have lived rent-free; but this is not government-provided housing. These costs have been borne by private citizens and private corporations. Only a small fraction of the millions earmarked to reimburse landlords for back-rent, and indeed to pay rents, has managed to reach its intended recipients.
Those on the left who are celebrating the moratorium’s extension should reconsider the long-term impact of such a strategy.
Progressives point out that for people who can’t pay their rent due to COVID-19 hardships, losing the roof over their heads is much worse than an investor who- as it turns out- made a bad investment on a rental property tenant and ended up losing instead of making money.
Housing may be a human right- that is a moral question- but the owners of houses are not legally required to provide housing to those who need it. In our democracy, with very rare exceptions, the state cannot force private citizens or companies to provide a good or a service- even if people reallyneed it.
That’s communism. Under communism, there is no private property: All the housing is owned by the state, and the state can certainly decide to provide housing as a human right to all citizens during a crisis, or at any other time.
The flip-side is that under communism, the state can also charge whatever it wants for all the housing- during a crisis or at any other time. There is no competition like there is in a free market.
While property owners and property management companies in the rental business are powerless now to recoup their losses, nothing lasts forever.
There will be consequences and aftereffects felt in the real estate market for years, if not decades, based on what has transpired over the past 18 months, to say nothing of what will happen if the moratorium continues much longer- with or without relief for cash-strapped rental property owners.
It’s not unlike the loan underwriting industry, banking, or the insurance business. If someone, or in this case the entire residential rental industry, becomes too insecure a credit risk, no more loans.
That is, there will be far fewer investors in the rental industry. No more reasonably risk-adverse individuals or companies who see rental property as a sound investment.
The same thing that happens to credit risks in the insurance and banking world will happen to renters: Sub-standard offerings at much higher prices.
The new investors and property owners in the rental industry won’t be like the old ones. There will be no more mom and pops, no more hobbyists, no more small operations, no more retired couples on a fixed income investing some of their savings into a few rental properties.
Progressives are right about one thing: For property owners who rent their property, it is an investment.
With rental property looking like an extremely risky investment at the moment, smart investors will simply turn the page in their portfolio and invest in something else. Plenty of places to invest in our globalized economy.
Who on earth would want to go into the residential real estate rental market these days?
Who knows what the Delta variant might do. The next Covid variant- Lambda- is already warming up to bat. Someone investing in residential rental property now has to consider the strong possibility of future eviction moratoriums. Just how long they are likely to last, who knows.
There will be a few who are willing to take the risk to find out, though: The payday lenders of the real estate world. For less, tenants will have to pay them more- much more.
Lenders who make risky bets take plenty of losses, but that’s ok because their business model is to charge as much as possible, and pay employees as little as possible, in order to make up the difference.
As the current owners of rental properties sell off and run for the hills, and a more predatory class of investor moves in to hike up prices, the next step will be obvious to any student of communism.
More government-run rental housing projects.
Considering the government’s dismal track record managing residential housing developments, the future prospects for renters aren’t looking good.
No system of government is perfect. There is a shameful homelessness crisis in America, being steadily worsened by an unholy union with America’s substance abuse crisis. Neither was improved by COVID-19.
But there is a reason capitalism and democracy have flourished and multiplied over the past 100 years- through thick and thin, wartime and epidemic- while communism killed over 100 million people and its practitioners dwindled down to two countries: Cuba and Venezuela.
China isn’t even communist country anymore. The Chinese Communist Party has harnessed the massive Chinese workforce and combined it with China’s plentiful natural resources during a post-industrial, pre-regulatory heyday in oder to make and sell products to…capitalist countries.
Is communism still communism if it needs capitalism to work?
Nor are the so-called “Democratic Socialist” countries progressives frequently tout success stories for that system of government. Those countries didn’t become wealthy under socialism or communism; they got rich under capitalism, then expanded their social benefits.
Whatever progressives may think about “free rent” in the short-term, the government preventing private businesses from recouping operating costs, while demanding they keep operating, is not a free market idea.
In the end, extending the moratorium is very likely to hurt the people it was designed to help.
A break in the rent might have been nice during the worst of COVID-19, but when people can’t find a decent place to rent in a few years, progressives will have no one but themselves to blame for the excesses of this moment.
(contributing writer, Brooke Bell)