Eviction Ban Expires Just in Time to Save Landlords

3 houses' roofs with chimneys

Eviction Ban Expires Just in Time to Save Millions of Landlords

It’s the beginning of the month and rent is due! The eviction ban has expired! Landlords can finally collect rent from tenants that haven’t paid rent for months. 

The Supreme Court stated that it wouldn’t extend the renter protection past the end of July, leaving it to Congress to keep the moratorium in place. It looks like the verdict is in: Back to business as usual. If you don’t pay rent…you’re out!

The eviction ban has put rental property owners in a difficult position. Their mortgages are still due. In order to avoid foreclosure, they have to pay out of pocket for tenants who can’t afford to pay rent. 

Yet, there may be a bright side to this tough situation for renters and landlords alike. There is a way to tap into more federal money to stave off the wave of expected evictions.

The Unfortunate Situation Created by the Government

In the heat of the Covid Pandemic, the Federal Government stepped in to prevent people from being evicted but did nothing to directly help property owners (more on the effectiveness of the rental assistance program below).

More specifically, on September 2nd of 2020, the Centers for Disease Control and Prevention instituted a moratorium preventing landlords from evicting their tenants regardless of whether they could pay their monthly rent in full or at all. That ban ran out last week on July 31st.

Who Were the Real Property Owners Impacted?

Don’t kid yourself. This isn’t the ‘little guy’ versus large corporate greed. The far majority of property owners are individual owners or LLCs owned by no more than 2 investors. According to a U.S. Department of Housing and Urban Development report issued in June of last year, nearly 72 percent of rental properties, representing 41 percent of all rental units, are owned by individual investors and 86 percent of all rental properties contain only one rental unit. 

Further, a study by the Aspen Institute and the Covid-19 Eviction Defense Project published in August of last year, noted that over 12 million property owners were at risk of not being able to collect rent. 

What this simple math means is that close to 10 million regular Americans like you and me, mom and pop property owners, not big corporations, were suddenly unable to evict a tenant that didn’t want to or couldn’t pay their rent.

Millions of these property owners relied on this rent to pay their own bills. They took a risk to invest in a property and improve it. 

The Rental Assistance Mess/Legislation

Yet, these same small business owners (which owning a rental property essentially consists of) weren’t given access to the Economic Injury Disaster Loan Program (EIDL), Emergency EIDL Grants, or the Paycheck Protection Program (PPP). In fact, nothing was directly provided to help landlords in either of the Covid relief bills.

Now, some of you may already be saying, but hold it…wasn’t there rental assistance given to property owners? No.

— Federal rental assistance was given to tenants, not to rental property owners. 

If you were a rental property owner during the Covid Pandemic, essentially…your tenant had to apply for rental assistance so you could get a check.

In December of 2020, Congress allocated $25 billion (of the $2.3 trillion Covid Relief package) to the Coronavirus Relief Fund Payments for Rental Assistance. Then in March of 2021, another $25.5 billion was added to the ‘Fund’.   

However, as of August 1st, according to the U.S. Treasury, only $3 billion of the entire fund has been distributed to landlords! Essentially, only 6% of the money allocated to help landlords has reached them.

The Stark Reality for Landlords Needing Assistance

The bureaucratic nightmare of accessing the money (pushed to local agencies in each State to administer) was nowhere near as swift and effective as the PPP and EIDL programs. 

In fact, in a report by the National Low Income Housing Coalition, it found over 340 different agencies attempting to administer the ‘Fund’. Some programs require onerous documentation. Others don’t make it easy for landlords to apply and most require the tenants to provide extensive proof of need. This ultimately and indirectly hurts the landlord for whom it was intended.

I knew many landlords that tried repeatedly to get their tenants to finish, or start the process for rental assistance. They were even going as far as to prepare the paperwork for them to sign.  That way they could submit the paperwork on their behalf.

How Much Back Rent is Out There?

In a study issued by the Urban Institute, they estimate the amount of back rent owed across the country ranges from $8.4 billion to $52.6 billion. This is somewhat promising taking into account that we have $43 billion allocated in the Treasury for back rent. The problem is getting it into the hands of landlords before they start evicting tenants.  

In California, the Center on Budget and Policy Priorities reports that as many as 1.6 million renters may be in arrears, yet most landlords can’t move forward with evictions until October

However, landlords are being cautious when accepting rent from the ‘Fund’ under terms that local agencies may impose. For example, some programs can include a ban on evicting that tenant in the future, or raising their rent for a window of time if they accept the assistance.

The Possible Bright Side of the Eviction Ban Expiring

Fact #1: Landlords hate evictions because they are expensive. They would rather get their rent than have to go to the cost and headaches of pursuing an eviction.

Fact #2: All of that Treasury money for the rental assistance is still available for the taking…if applied for.

The Hope: Tenants that cared less about applying for rental assistance previously and don’t want to get evicted, may get off the couch from collecting unemployment and fill out the paperwork for the feds to get landlords some money and back rent.

The Solution to the Eviction Ban Expiring

If you want to get this money, avoid the process of eviction, it’s critical you engage yourself in the process. You need to implore your tenants for their help with important data. Hopefully, they will realize it’s in their best interest as well to help in the process.

The National Low Income Housing Coalition has a state-by-state list of the 483 programs giving out federal money. The Consumer Financial Protection Bureau also has a new tool to help you apply for rental relief.

The good news is that landlords/tenants can get up to 18 months of rent relief. It will be in a mix of back and future rent. It’s just working through the process. 

Look at the state agencies that may be administering the fund in your area. Then determine if and how your tenants may qualify for assistance. Make sure t oget involved and try to work with your tenant to get as much money as you can. It is a win-win if possible.

Interested in Learning More:

* To sign up for Mark’s weekly Free Newsletter and receive his Free E-Book “The Ultimate Tax Strategy Guide – 30 Steps to Saving the Most Money on Your Taxes” visit www.markjkohler.com.

Mark J. Kohler is a CPA, Attorney, co-host of the PodCasts “The Main Street Business Podcast” and “The Directed IRA Podcast”, and the author of “The Business Owner’s Guide to Financial Freedom- What Wall Street Isn’t Telling You” and, “The Tax and Legal Playbook- Game Changing Solutions For Your Small Business Questions”, as well as several other well-known books. He is also the CFO of Directed IRA Trust Company, and a senior partner at the law firm KKOS Lawyers.

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