Have The COVID-19 Eviction And Foreclosure Moratoriums Expired?

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Technically, the COVID-19 eviction and foreclosure moratoriums put in place in 2020, expired in July of 2021. However, they have since been temporarily reinstated.

1. What Do The Eviction And Foreclosure Moratoriums Do? If you are a renter and stop paying rent, your landlord will eventually file something called an unlawful detainer action to evict you.Due to the financial hardships posed by the COVID-19 pandemic, many people found themselves without enough money to pay their rent while also paying for essentials like food. As a result, the federal government and various state governments imposed moratoriums on evictions. This meant that evictions could not proceed during the set time allotted by the moratorium. The specific rules and expiration dates of the moratoriums varied and continue to vary by state. However, the concept is generally the same.

   The federal moratorium was removed as a result of a U.S. Supreme Court ruling, and the California moratorium ended on September 30, 2021. However, California may reinstate it.

   The eviction moratorium poses certain legal problems.

   First, there is a question of whether or not the eviction moratorium is even constitutionally legal. Landlords claim that when the government tells you that you cannot evict someone for nonpayment of rent, the government is taking the property away from them. Although the taking may be temporary, the U.S. Constitution provides that when the government takes something from you, it has to provide you with just compensation. Landlords should therefore be entitled to just compensation.

   Second, when the government takes something, it is supposed to be for public use. Keeping a tenant in a private house is arguably a private use rather than a public use. That raises an additional reason why the moratorium taking is constitutionally legal.

   A U.S. Supreme Court case that is particularly relevant is referred to in shorthand as “Kelso.” In Kelso, a town in New Hampshire wanted to take a house so it could build a shopping mall. The owner argued that a shopping mall did not constitute public use, but rather private use. The Court ruled in favor of the town.

   The moratorium also implicates social costs. Many landlords are not big corporations. A typical example is of couple who buys a second house to rent out so that they can have income during their retirement. They don’t have enough life savings to pay for the house outright so take out a mortgage. If the tenant stops making rent payments, the couple won’t have the money to make the mortgage payments. They will soon lose the property and their life savings through no fault of their own.

   I can see the issue from both sides. I’m certainly sympathetic to a renter who has no place to go, doesn’t have the income to pay rent, and doesn’t want to become one of the many homeless people that wander around the Los Angeles area. However, I also sympathize with the landlord who may lose the property and life savings because the moratorium prohibits the eviction of the tenant who isn’t paying rent.

2. The Budgetary Problem Of Compensating The Aggrieved LandlordsThere is a big problem with the government — whether state or federal — paying landlords for the temporary taking associated with the moratorium. Where will the government get the money? The two sources are tax revenues, which are never enough to cover the annual budget, and borrowing money.

   How does the government borrow money? It sells bonds to individuals, companies, and even countries. However, no one will buy the bonds unless the return is more than the original purchase price. The amount in excess of the purchase price is interest.

   Suppose the interest rate is 5%. As of the writing of this article, the national debt is just a little under $29 trillion. 5% of $29 trillion is 1.45 trillion. Therefore, the federal government must set aside $1.45 trillion just to pay the interest on the debt, without paying any return on principal.

   If the annual budget is $4.79 trillion — the amount for 2020 — then almost a third of the money must be used to pay interest on the debt. And as the debt grows, more of the budget must be devoted to just interest payments. That’s money that is not being used to repair roads. That’s money that is not being used to keep post offices opened. It’s not being used for the military; it’s not being used for social security payments, or anything else.

So, if the government compensates landlords, it must take away money from other things.

In sum, the eviction moratorium is fraught with all kinds of problems. My own feeling is that it’s best not to renew the moratorium.

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