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Should rent be canceled because of the coronavirus?

What’s happening

Paying rent on the first day of the month can be a daunting challenge for many in the United States even in normal times. The economic impacts brought on by the coronavirus pandemic have turned that ongoing concern into a potential crisis. Stay-at-home orders have shuttered businesses, causing an unprecedented spike in unemployment. 

Without money coming in, millions of Americans are struggling to pay their bills. Nearly a third of renters failed to pay on time in April. As the outbreak continues, the number of people who cannot make rent is likely to increase. 

Lawmakers have taken some steps to address the problem. Many states have imposed temporary bans on evictions, meaning people can’t lose their homes for missing rent payments. The $2.2 trillion stimulus bill passed by Congress included mortgage relief provisions that could allow landlords to offer tenants a break on rent. 

These steps, while welcome, aren’t nearly enough to avoid a national rental crisis, housing advocates say. The only way to prevent millions of people from losing their homes in the coming months, they argue, is for rent to be canceled for the 44 million rental households in the U.S., as long as the economy is closed.

Why there’s debate

Supporters of a rent freeze say it’s unfair to expect renters to keep up with payments when lockdown orders prevent many from earning an income. Banning evictions helps for now but may lead to a mass wave of evictions when the bans are lifted and rental debt becomes due, housing experts say. The costs of having millions of newly unhoused people relying on government assistance and unable to socially distance would be far greater than the expense of canceling rent, advocates argue.

Plans for rent cancelation call for the government to cover rental costs either by paying landlords directly or by compelling banks to offer landlords mortgage relief. One estimate suggests this would cost roughly $66 billion a month — though that number could be reduced significantly by targeting relief to landlords who own a small number of properties or who rent to low-income tenants. A formal rent cancelation policy would help protect landlords from the chaos that could ensue when tenants suddenly cannot pay or if they coordinate to hold a rent strike.

Opponents of a rental freeze say it would deny landlords of income they need to pay their own expenses. If a property owner goes into foreclosure because of unpaid rent, their tenants will likely lose their homes as well, some argue. That possibility of that pattern repeating at a national scale raises fears that rent cancelation could lead to a mortgage crisis similar to the one that caused the 2008 financial collapse.

Programs like unemployment insurance, payroll tax relief and direct cash payments are a more effective way to help struggling renters than a rent freeze, some argue. 

What’s next

The idea of a rent freeze has gained popularity, but there’s limited support among lawmakers currently. Rent strikes are expected at the beginning of May in several parts of the country, including high-cost areas like New York and California. 

Perspectives

Freezing rent would prevent a catastrophic surge in evictions

“This would be a bailout for people — for the countless families already facing difficulties making their next rent payment and who soon will face the real prospect of eviction. If we do not act now, people will lose their access to housing. The social impact of evictions on individuals, families and communities will be brutal.” — Gianpaolo Baiocchi and H. Jacob Carlson, New York Times

It’s better to boost other benefits without passing risks along to landlords

“Many tenants will be cushioned by unemployment benefits and stimulus checks. Politicians who want to help them even more shouldn’t do so at the expense of another struggling group.” — editorial, New York Post

It’s unfair to ask people to keep up with bills when they’re unable to work

“The government was right to call for a shelter-in-place for communities being affected by coronavirus. But you can’t shut down the free market, close businesses and mandate that your citizens stay home without providing a remedy to the devastating harm those orders cause.” — San Francisco Board of Supervisors members Matt Haney and Hillary Ronen, San Francisco Chronicle 

Landlords need rent money to stay afloat

“Landlords are just as cornered by this crisis. Commercial property owners with deeper pockets and credit options likely can weather the storm. But many landlords need the steady flow of rent revenue to make mortgage payments on the properties they own.” — editorial, Chicago Tribune

Canceling rent could help prevent a financial crisis

“If commercial tenants don’t pay rent because of a lack of cash, then property owners might be squeezed and default on their mortgage payments. The same goes for homeowners. That could bring the problem squarely onto the balance sheets of large U.S. banks, which will suffer steep losses on their loans.” — Brian Chappatta, Bloomberg

Any rental relief needs to be paired with protections for landlords

“We cannot advocate to ‘cancel rent’ as a singular measure without considering the unintended, yet foreseeable, harm to other marginalized groups. … Canceling rent without other protections in place could hurt small landlords, many who share the same demographic as affected tenants: Black and Latino people with low-income.” — Rose Marie Cantanno and Jonathan Fox, City Limits

Housing prices could go up if rental income disappears

“The financial toll caused by lost rental income could prompt landlords to sell their properties in droves, which could trigger a real estate market crash. Or it could also hasten the ongoing shift from mom-and-pop landlords to investment firms. Advocates say that shift, which accelerated after the last recession, has already resulted in the loss of older, more affordable apartments as investors buy up properties to remodel and raise the rents.” — Kerry Cavanaugh, Los Angeles Times

Delaying payments isn’t enough, the debt must be voided

“A nationwide rent pause would help, but eventually, the rent will be due. We can’t leave it up to tenants and landlords to suffer the losses. We need federal assistance to help people pay rent and stabilize the housing market.” — Mary Cunningham and Laurie Goodman, the Hill

Reference: Yahoo News
Should rent be canceled because of the coronavirus? Reviewed by Daily News & Analysis on 9:43 PM Rating: 5

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