Experts warn of pandemic-related “eviction tsunami”

Another round of stimulus payments or more creative solutions are essential to thwart a social crisis

With the first shipments of a second COVID-19 vaccine arriving as early as next week, many North Carolinians are feeling a new kind of hope as the pandemic stretches into 2021. But without swift government action at the state and federal levels, the new year could usher in an “eviction tsunami” and economic devastation, according to experts who gathered to discuss the problem Tuesday.

The virtual discussion, sponsored by the Duke Law Global Financial Markets Center and the North Carolina Leadership Forum, brought together subject matter experts from across the ideological spectrum to discuss the crisis of rent moratoriums and aid programs expiring in the new year.

“Because of COVID, millions of U.S. households risk being evicted in early 2021 because they are behind in their rent with no prospect of catching up without help,” said Leslie Winner, co-chair of the Leadership Forum and a volunteer lawyer for Pisgah Legal Services.

“Every week I talk with people — families with children and single people, white people and people of color, urban apartment dwellers and rural mobile home dwellers — who are in danger of losing their homes because their jobs were eliminated or their hours were cut back,” Winner sad. “Or they or their spouse got COVID. Or they were repeatedly exposed to COVID at work and they did not get paid for the time they were required to quarantine.” [Disclosure: Winner is also chair of the board of directors of the North Carolina Justice Center, which is the parent nonprofit of Policy Watch.]

In March, Congress passed the CARES Act, which provided a 120-day eviction moratorium for those in federal housing assistance programs or who have a federally backed mortgage. But that covered less than half of all U.S. renters and expired at the end of July. In September the Centers for Disease Control and Prevention established an eviction moratorium for those making less than $99,000 a year (or $198,000 if filing taxes jointly) who have been affected by the pandemic. But landlords have no obligation to alert their tenants of the moratorium and can start proceedings for eviction orders Jan. 1.

Jesse McCoy, senior lecturing fellow and supervising attorney at Duke Law School’s Civil Justice Clinic, said even before the pandemic eviction was a state and national problem. COVID-19 just made it worse.

“Most evictions that are filed are based around non-payment of rent,” McCoy said.

The most common reasons for non-payment of rent are traditionally loss of a job, an unexpected medical issue or loss of transportation. The pandemic has dramatically increased the number of people who are experiencing those problems because of government shutdowns, the failures of private businesses and personal exposure to the coronavirus, he said. The biggest impact has been on low-wage and hourly workers, who are more likely to be renters.

“Exposure to COVID requires a 14-day quarantine period,” McCroy said. “If you are salaried it may not make a big deal. But if you are an hourly wage worker, missing 14 days means you are missing on a complete paycheck. But you are also risking whether you will have have employment to return to. There are a lot of industries — particularly service industries — that cannot afford to have employees who are going to be out for two weeks.”

Exposure to or infection with COVID can also lead to unanticipated medical bills cash-strapped households can’t afford, McCoy said. “This takes a bad situation and elevates it to a catastrophe.”

Moratoriums can provide some relief, McCoy said, but states have interpreted the federal government policy in myriad ways; it can be difficult for people to know and assert their rights under a moratorium. Even those who find assistance face difficulties in paying rent they’ve managed to defer.

The CDC moratorium was about public health, McCoy said — not necessarily preserving housing. So little thought was given to how people would pay back the accumulated rent.

The coming wave in North Carolina

In North Carolina the potential eviction numbers are staggering — and that’s just the beginning of the problem.

“We’re looking at potentially 300,000 evictions come January,” said Rick Glazier, executive director of the Justice Center.  “There are probably another 800,000 other total folks who are in utility arrearages in this state. Those kind of numbers, which is why we’re having this discussion today, would overwhelm the courts and social service agencies in this state.”

To prevent such a situation, people need the time to work out arrangements for how and whether they can pay their rent, Glazier said.

Everyone’s interests are joined by the crisis, Glazier said — landlords and tenants as well as government at the local, state and national levels. People need to keep their housing. Property owners and management companies need to maintain their businesses. And as COVID-19 infection numbers reach new highs during the winter, communities need to prevent the further harm to public health that would result from people living in crowded apartments, homes or even shelters.

Lawmakers in Washington and in Raleigh need to understand the potential for an unprecedented crisis that is coming if action isn’t taken immediately, Glazier said. Another stimulus and relief package is needed — ideally in the next 30 to 90 days.

“The resources are available to do that,” Glazier said.

A bipartisan proposal for $25 billion in rental and utility assistance already exists at the federal level. There is another $4.4 billion in unspent money at the state level from last year’s “non-budget,” Glazier said. That’s not counting the state’s “rainy day reserve.”

At the state level House Bill 1200, a bipartisan relief bill that stalled out last session. It’s a good place to start, Glazier said, but needs immediate action when the General Assembly returns to Raleigh next month.

The state also needs to address its woefully inadequate unemployment program, Glazier said, calling it “If not the worst, pretty close to the worst” in the nation.

Time for a more creative fix?

An unexpected upside to the pandemic has been “ridiculously low long-term interest rates” said Richard Moore, former state treasurer and current CEO of First Bancorp, that have benefited businesses and landlords — particularly those with larger holdings. Most of them have been able to renegotiate their debt to take advantage of lower interest rates than most Americans have ever seen.

Similarly, Moore said, programs need to address the rent and utility debt problem that would benefit everyone.

“You say to the landlords, ‘We’re going to pay your debt,’” Moore said. “You may even two-tier it to say to the really large landlords, ‘We’re going to pay your debt, but we’re going to pay you 90 cents on the dollar on the accumulated rent that you have.’ Though it may  not be politically saleable, you can’t get blood out of a rock. The money is not there. So you say, ‘I’m going to let you skip the collection cost, I’m going to give you the benefit of the lump sum payment because I’ve saved you the collection cost.’”

And in exchange?

“We’d want them to offer discount rent for the next year or year and a half,” Moore said. “You keep your tenants in. We’re paying you for the past. But we want you to offer discounts for all the same reasons that society paid for this this cheaper cost of capital. And maybe that would us to the other side of this and get everyone back up on their feet.”

“This wouldn’t be asking anybody to get something for nothing,” Moore said. “Everyone paid into this. And they would have to be able to say they could not increase their rent. The landlords would have to say they’re going to keep this in place for a year, 18 months.”

Utilities, such as electric and gas, would have to be included, Moore said — which, given the savings they’ve seen through lower interest rates, is fair.

Steve Powel, executive chairman of real estate finance industry company SitusAMC, said it’s vital people across the political spectrum come together, whatever their interests, to push for a solution to the coming crisis before it overwhelms us. “It’s the hardest thing to do, to convince people to take the medicine before they’re sick,” he said.