Rents and mortgages — Is there a housing safety net?

Reprinted from the Richmond Sun

Public health experts agree — until a vaccine is developed, the best way to keep the coronavirus from spreading is by maintaining as much physical “distancing” as possible. Policies to keep people in their homes now and for the next year are an essential public health strategy. Are we going to succeed?

The federal government has adopted significant protections for those who have lost their jobs or their businesses, including expanding federal unemployment insurance, the one-time cash payments, and the forgivable small business loans. However, these emergency measures leave many people inadequately assisted, including undocumented workers and those who were previously unemployed, underemployed or gig workers. And many small businesses. How do we keep everyone in their homes?

Renter and homeowner protections so far

California, Contra Costa and Richmond have passed specific protections for renters. In March, Governor Newsom issued an executive order that postpones eviction cases going to court until 90 days after the state of emergency is ended. But it still allows landlords to send eviction notices and demand that tenants provide proof that their failure to pay was a result of the pandemic.

Fortunately, Contra Costa and the City recently passed declarations that greatly improve tenant protections during the emergency.

• Prohibits landlords from terminating a tenancy for failure to pay rent applies to residential and commercial properties
• Places a moratorium on rent increases on those rental units where state law allows rent control
• Provides a grace period of six months after the emergency for tenants to pay off past-due rent
• Prohibits late fees for the same six months
• Provides tenants the right to recover damages if these requirements are violated

The County ordinance also:

• Makes this retroactive to March 15
• Simplifies the documentation required

Unless the City adopts these last two measures, the additional county rules probably do not apply to Richmond tenants because City rules in this area supersede County rules.

Homeowners are better off. If their mortgages are backed by the federal government (FHA, VA, Freddie Mac or Fannie Mae), the CARES Act allows them to defer mortgage payments for up to a year. In some cases, the skipped payments are being added to the end of the mortgage. For home loans not backed by the Feds, mortgage forbearance is up to the private lender. Some are offering similar flexibility.

Are these protections enough?

We will likely come out of this “economic pause” slowly. Employers will be slow to call people back to work. People will have exhausted their emergency savings and sources of help. Businesses — large and small
— will have difficulty getting all their customers back. And when they do come back, they’ll spend less. Soon, the COVID-19 state of emergency will begin to be relaxed, and the postponements will come due. Tenants will have six months to catch-up. Some homeowners may face balloon payments. Many will be earning less than they did in 2019. Many will be in much deeper financial trouble in twelve months. Many will face eviction or foreclosure.

Speculators will swoop in on homeowners facing foreclosure, and large numbers of renters will receive eviction notices. Some will end up homeless. And small landlords, devastated by so many missed payments, will be unable to pay their property taxes and maintain their buildings. We’ve simply postponed a disaster. If we don’t demand a solution to this problem now, our chances of lessening the pain will go down. It will be much harder to get the government to take the needed action. Federally, another $1,200 cash stimulus is unlikely and the federal unemployment supplement will run out. On the state level, unemployment funds — already underfunded — may dry up. Locally, reluctant politicians may claim they already addressed the problem by passing the eviction moratorium and rent grace period back in April.

What should we do?

How can we prevent a “no-fault” temporary loss of income from causing widespread dislocations and homelessness? The people who get months of full unemployment with the extra $600 per week for four months may be able to cover their rent or mortgage payments without much difficulty. But many, many others will not receive any help or enough help.

One approach that is getting more attention is based on the simple idea that we are all in this together. There is no reason that property owners — landlords and banks — should be immune from sharing in the burdens imposed by the shutdown. And at the least, for low-income people not eligible for full unemployment insurance, we could:

• Suspend/Cancel rent payments
• Suspend/Cancel residential mortgage payments
• Help small landlords who have lost their income by cancelling their mortgage payments and helping them apply for small business assistance

The advantages of this approach are that it is immediate, helps those who need help, and pumps more dollars into the economy. And it doesn’t have the disadvantages of complicated individual applications.

Many landlords will be unable to collect rent simply because their tenants do not have the money. If their mortgage payments were canceled at the same time, the loss to landlords would be greatly reduced. And if local governments assist these landlords in applying for small business aid, losses could be reduced still more.

The #CancelRent movement

Several cities, including Los Angeles and Seattle, and the state of New York are discussing measures like these to prevent massive debt from piling up. Federally, the Rent and Mortgage Cancellation Act has twenty-four sponsors in the House of Representatives. Groups across the country are campaigning for rent and mortgage cancelation. You see #CancelRent all over social media.

And big corporations like The Cheesecake Factory and Staples have announced that they are suspending their rent payments. If they can do it, why not distressed working families?

In late April, our City Council refused to take such an approach by a 5-2 vote. Opponents argued that it was unconstitutional and violated contractual agreements. One councilmember who voted against it argued that it might be a good idea if adopted at the national or state level, but that the city has no authority to take this kind of action.

Supporters argued that, in an emergency, local government has the power to take action to protect residents. If the government has the power to prevent people from going to work, it should have the power to tell banks they cannot collect mortgages and landlords they cannot collect rents. Citing a report by the Law Foundation of Silicon Valley, they argued that in a state of emergency, local governments can legitimately suspend normal constitutional rights in cases of flood, fire, and disease.

Our City Attorney described the approach as legally risky for the City. But many would say that the destabilization caused by a wave of unpayable debt and increased homelessness poses far greater risks for Richmond and all of California.

The Richmond Sun is a publication of the Richmond Progressive Alliance.