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Andrea J. Boyack: Mind housing cost gap between tenant, landlord

Andrea J. Boyack
Special to Gannett Kansas
Andrea J. Boyack

Our nation is in crisis — medically, economically and politically. Without immediate action, we will also be facing a housing crisis of historic proportions. At the end of the summer, the Centers for Disease Control cited public health concerns as justification for a limited, nationwide moratorium on tenant evictions.

This controversial moratorium has been inconsistently enforced across the country, but it did delay mass home loss among the most financially vulnerable tenants. It did nothing, however, to bridge the growing gap between housing costs and tenants’ ability to pay. The moratorium’s short-term gains in preserving housing allocated costs unfairly and created a precarious housing reality that will prove unsustainable without housing assistance.

Simply prohibiting eviction does nothing to bridge the gap between landlord costs and tenant renal payments, and that gap must be bridged.

The CDC moratorium is set to expire on Dec. 31. Congress has been unable to reach consensus on a new federal aid package. What happens next?

The failure of Congress to fund the gap will cause one of two outcomes, both unacceptable. Either 1) Tens of millions of Americans will be evicted from their homes in the dead of winter, at the height of a raging pandemic, or 2) The CDC (or, perhaps, state or local entities) will extend an eviction moratorium for several more months (recent comments suggest up to a year) to avoid mass homelessness.

The first option would be devastating, but the second option would be harmful as well.

Landlords’ costs have increased during the pandemic, in part due to required prophylactic measures to keep their tenants healthy. At the same time, landlord revenues are down, in some cases significantly so. Mortgage payments, property taxes, required building upkeep and maintenance — all these expenses continue to accrue.

If tenants are not making rental payments, landlords have insufficient revenue to maintain and pay for the property. Landlords can, theoretically, take out loans to fund the gap, but the underwriting criteria for FHA-associated loans has increased during the pandemic, raising the cost of capital for landlords.

All residential landlords are struggling with these challenges, but the costs imposed are particularly burdensome — even unbearable — for small landlords who face higher borrowing costs and have more limited sources of capital.

The Joint Center for Housing Studies and the U.S. Census Bureau calculated that 74.4% of rental properties in this country are owned by individual investors — many are “Mom and Pop” operations. Most could not access the Paycheck Protection Program available to other small businesses, either because they had no employees or had no access to administering banks.

Small landlords will be economically ruined unless the government covers their losses or funds unpaid rents.

Recognizing the unsustainable housing cost gap, some states, like Kansas, have pioneered programs to allocate funds to stabilize housing. The Kansas Eviction Prevention Program conceives of a joint landlord-tenant application for funding (capped at $5,000 per household). This program provides a possible blueprint housing cost gap allocation; now all we need is adequate funding.

It would be disastrous to allow mass evictions to occur during this economic and medical crisis. But it is also unfair and unsustainable to force landlords to bear the costs. Tenants and landlords are innocent parties here. Landlords do not want to evict tenants, but landlords need rentals as much as tenants need homes.

A continued moratorium without adequate public funding for and programs to distribute housing assistance will likely destroy small landlords and decimate already precarious housing markets.

Andrea J. Boyack is the Norman R. Pozez Chair of Business and Transactional Law, professor of law and co-director of Business & Transactional Law Center at the Washburn University School of Law.