There was no moratorium on paying mortgages and a lot of people have made huge sacrifices in order to hang onto their properties in the last 14 months.
Personally I am not opposed to this type of bottom-up bailout, however I think this move should not end up being profit-generating for landlords. Not sure how you'd determine that, etc.
It’s in vogue to harp on landlords, but it’s one of the more common small business models; owning a rental property is probably the most realistic way you or I could earn some income on the side. They’re not all Scrooge McDucks.
'in the future you will not own anything' #WEF https://awealthofcommonsense.com/2021/06/is-blackrock-buying...
Plenty of housing available before blackrock snatches it all up
https://www.zillow.com/homedetails/3723-Bridlewood-Dr-Montgo...
- more traffic since buying and selling a new home takes a lot more effort.
- barrier to moving to a different city with better opportunities / QoL
- lots of capital (most of one's net worth) tied up in a very emotional and personal investment
- incentives that pit their housing investment against things that they might otherwise support, like more housing being built, homeless services, etc
In my experience, landlords are often a pretty toxic element in local politics (opposing upzoning, opposing progressive policies in general.) IME as a renter corporate landlords were not really better or worse than small-time landlords. At least with the corporate landlords, I can buy shares in the company and reap some of the rewards back. Even better, the government could buy shares through a social wealth fund, and return some of the profits to the whole of society.
Why is enforcing legal contracts so important?
Besides being one of the very primal functions of a working government.
It also probably pulls wealth out of the local area, depending on where the owners of those larger corporations are.
I would rather give ~$500 a month in profit to a member of my community, than a national chain. I think it's odd to be against "the rich staying rich" while shrugging your shoulders at corporations throwing their weight around in the rental market.
Landlord are absolutely fine.
A sensible solution 12 months ago would have been to pay renters rent for them directly, but that wouldn't have been as desirable politically.
Housing would also be far cheaper if it wasn’t common to speculate on it, by landlords small and large. It used to be, in fact.
A far more sensible solution would be to outlaw owning a property one doesn’t live in, so housing prices would come down to levels where us renters would be able to buy.
An in-between solution would be massive social housing programmes, so people can rent much more cheaply from a non-profit entity. After all, building housing is a tiny fraction of the cost of housing, the rest is all speculation.
Homeowners speculate too. It would be hard to find someone buying a home who was not considering its future value.
After all, most cities have large numbers of unoccupied homes, owned merely as a financial instrument.
A single minimum wage used to be enough for a family to get a mortgage, that has not been true in many decades in most countries.
You truly can not determine if you can afford to buy a place until you take a multitude of factors into account, and they vary for each person and each property.
Not to mention, housing has high fixed costs and just isn't available for a lot of people. You need a down payment, various closing costs, proof of decent credit (not just that you haven't defaulted on a loan, but that you've been actively building credit), and ofttimes proof of some moderately high amount of income or sustained bank balance. Even with enough income to make the monthly payments you could still have to save and plan for years to get over the hump of actually buying a home.
Once you've actually bought the house, your actual expenses are burstier than when renting. You might get lucky, but if the furnace or something dies in the first couple of years you won't be able to weather that loss if you were just on the cusp of affording home ownership (whereas a renter would be just fine because it's their landlord's problem). Since certain major components of the house are effectively self insured, that raises the bar for initial savings you need to purchase a house with the same financial safety as renting.
There's an additional assumption you're glossing over -- that for every apartment there exists an equivalent or worse house. At times when I needed really cheap rent I could grab a 200sq ft studio apartment, but that option isn't readily available for most home buyers.
Even assuming buying were feasible for everyone it still wouldn't be close to optimal. The extra fixed costs associated with a home purchase or sale make it much more difficult to move for family issues, school, job opportunities, .... If you're in a situation where you plan to move every couple years then renting is likely cheaper (certainly easier) than purchasing a home, even in places where the rent is higher than an equivalent mortgage.
And on and on and on. If you're going to stay somewhere a few years and have a bit of a financial buffer then I totally agree that home ownership is often a good idea. It's not that clear cut for huge swathes of people though.
Maybe not for large commercial loans, but traditional mortgages (usually for 1-4 unit properties) absolutely could be deferred for ~1 year if you could show a loss of income from the pandemic.
But I doubt most of them are really "crippled" in light of crazy price appreciation on the other hand. They might be forced to sell due to cash flow problems (immediate cause of most business failures anyway, no?), but should still be in the plus after the sale goes through.
Governments that do such things tend to have very poor economies as a result, as very few businesses are willing to undertake such risks.
This is a textbook case of a moral hazard.
If you see someone steal something you shouldn't think you have to steal too because others will have benefit you don't.
It sounds less like moral hazard and more like jealousy. The people who didn't pay took a risk, ruined relationships with management. It will probably follow them around to credit reports and to the next place.
This isn't the situation, though. The situation is more like the government announced that theft of Playstations wouldn't be prosecuted; my friend stole a Playstation, I paid for my Playstation, and at the end of the day the government stepped and paid of my friend's Playstation off for him.
You're totally right that the government isn't punishing me for having paid for my Playstation. But economically I am being penalized for having not stolen my Playstation.
When the responsible thing to do and the economically advantageous thing to do are at odds, it's not far-fetched to expect fewer people doing the responsible thing.
Not allowing an owner to exercise all of his rights of ownership is a taking, even if it's not permanent.
You see this often with construction projects that expropriate not only the title to land needed, but also temporary servitudes (leases) on adjacent land for site access or extra room for construction.
Point being, the "temporary" nature of the order, and the fact that the landlord retains title/ ownership, doesn't preclude it from being an (un)constitutional "taking" of private property.
See, e.g., https://www.inversecondemnation.com/files/eviction-moratoriu... (massachusetts)
(A federal court also declined to block it)
I am too lazy to look at all of them.
The reason they are usually found not to be takings is twofold.
First, they only prevent a specific type of relief. In most of them, nothing in them stops the landlord from suing for money damages, or even necessarily for breach of contract with ejection as a remedy. They only usually prevent you from filing eviction petitions.
Second, they generally do not state that you are not owed the money, only that you may not temporarily collect it.
https://www.law.cornell.edu/wex/takings goes through most of the current tests, and most moratorium rules fail them.
For example, taking again the MA one:
1. It does not allow permanent physical occupation (they are temporary)
2. It does not cause loss of all beneficial/productive uses of the land (you are still owed the money, and in fact can sue for money damages)
etc
To my mind, if the government suddenly refuses to evict anyone for public health reasons, the taking of intangible property rights is minimal, non-discriminatory and justified. We’re at war with a virus here, some sacrifices will have to be made. If people can be evicted, more people will die than if they stay put.
It's not that the judge needs to step in to decide whether failing to pay rent should result in eviction. It's that you can't forcibly evict someone as an individual (because forcible eviction can go nasty, from either party, very quickly, and historically abused).
You need the judge to determine that it's now time to invoke the police to enact a forcible eviction, because the renter won't leave quietly/on his own.
The judge does not determine whether the renter is qualified to live there despite not owning up to his side of the renter's agreement -- the judge determines whether the use of force is now justified.
>To my mind, if the government suddenly refuses to evict anyone for public health reasons, the taking of intangible property rights is minimal, non-discriminatory and justified.
But that's not the problem at hand. Any reasonable person over the last 1.5 years should have not paid rent, regardless of capability to do so, because the law guaranteed you couldn't be evicted for it (inability to pay was a qualification for the law, but it's hardly trivial to prove it wasn't covid-related). The worst case scenario is you have to pony-up when the moratorium expired (and did you really expect the majority of the population who couldn't pay rent, to suddenly have enough money to cover 1.5 years of rent? The government bailing them out was inevitable -- the alternative is a massive wave of backed-up evictions).
Furthermore, you could barely even evict misbehaving tenants, let alone sufficiently-wealthy-but-not-paying, because the courts assumed it would fall under a covid eviction.
The entire thing was a naively well-intended shitshow.
I say "if not someone actively worsening the system" because if you're buying property with the exclusive intention to rent it, there's a decent chance you're just taking available property off the market and contributing to ever-increasing prices, even though the value of the property is kind of just fake number, which increases the need to rent (and be dependent on you) in the first place.
Arbitrary regulation is not the economy.
If CA decides tomorrow to pass a bill that mandates all tech workers to have proper accreditation, including a bar exam, and to fine to oblivion companies that don't comply, is that the economy?
While not explicitly designed for landlords they technically qualified - even if the only person on payroll is themselves. I know multiple people, albeit in different lines or business, that had 5 to 6 figures of payroll loans forgiven.
The real loser here is the future of the US dollar.
This presumes that the quantity theory of money (and/or the theory of Ricardian equivalence) is correct, which it most likely is not[0]. Money printing does not cause hyper-inflation, as demonstrated in this CATO paper[1]. Governments are not households[2], because they hold monopolies on currency creation[3]. Also, currency creation is not 'debt'.[4]
It follows from this that there is a vast and largely unexplored space on the graph of currency creation over time, where the line can rise before it triggers negative systemic effects. A fiscally sovereign nation can never run out of its own currency.
This policy space is where the future lies, awaiting us. The worldview-assumptions implicit in your question would discourage us from exploring this space. That, in my view, would be the heart of folly.
Many thinking people in the economic and policy professions are realizing this, and not a moment too soon.
0. https://saylordotorg.github.io/text_money-and-banking-v2.0/s... 1. https://www.cato.org/working-paper/world-hyperinflations 2. https://www.youtube.com/watch?v=ba8XdDqZ-Jg 3. https://www.youtube.com/watch?v=1AyT9zftNrE 4. https://www.youtube.com/watch?v=XIe_BiRIlgU
Governments that do such things tend to have excellent economies as a result by preventing a cascade of unneeded financial collapses and the social costs associated with dealing with that along with the increased human suffering of an already significant homeless population.
And, no, no one is going to buy your house if it has non-paying tenants that can't be evicted. They would just be inheriting your problem due to tenant's rights.
This would have required ~1 year of reserves, full on, for every unit. Thats a lot to ask if we want a real estate market that is diverse and not feudalistic in nature.
This is truly a moral hazard. https://en.m.wikipedia.org/wiki/Moral_hazard
You must give a tax refund to anyone that did pay rent fair and square and also prove they paid under duress (paycheck to paycheck or some threshold near it). The only ones that don’t get a refund are those who live in affluent areas, or are well off beyond reason.
https://www.youtube.com/watch?v=TBbXwQTvl_g
It circumvents the moral hazard you mention while alleviating the problems that are impacting all of us.
It is not immediately. This has been going on for a year.
>This is a frustrating thing as someone who saves and has a safety net and other fallbacks in place.
It is one thing to save, but many people are not able to save for a year or more. They may have lost their job AND no longer get any rent money for a year.
You're just confused about who the parasites are.
The people who haven't paid their rent have done so by and large because they couldn't afford it, not because they just chose not to. Paying off their rent helps those people, the people who couldn't afford to pay it themselves, and ensures they don't lose their housing as a result.
It certainly is true that landlords benefit from this package as they get their money, as opposed to an alternative like forcing all rent debts to be forgiven. But "landlords benefit" isn't a harm.
Perhaps a more equitable solution would have been to determine the median rent across the state and then give that amount of money to all renters. But that has a lot of difficulties, such as how do you handle folks who rented only for part of this time (including those who had to stop renting due to job loss). And what about folks who own their homes and are dealing with mortgages; paying off rent is likely to be more accepted by non-renters than a plan where non-renters get money and renters don't. Of course, the plan could be extended to people with mortgages too. Or heck, just give this money to every person over 18 (or 21?) in the state. This would presumably significantly expand the costs involved in the plan though, but it would certainly be the most equitable.
opportunity cost?
I wasn't really objecting to the initiative necessarily, just lamenting the fact that the people who decided to sacrifice more to keep their rent paid up during a tough time instead of just letting it slide hoping they can figure something out later are the ones that aren't really gaining anything here. I don't know what the best solution would be here.
Something like a 0% interest loan from the government seems more fair here, but much harder to implement.
This specific way (and all the other bailouts the US does) wrecks people who are responsible and save. But it should be clear to everyone by now that holding USD and playing it safe are the losing positions, as all risk will be socialized and profit will be privatized.
Not playing the game means losing.
No, the middle class family benefits because there isn’t an army of homeless people in their city.
If landlords find their speculation doesn’t pay off, I’m not harmed. If millions of people are evicted, we are all harmed.
"I had known I was going to get a bailout I would have purposely not met my contractual obligations" isn't really the best argument.
No so hard to understand.
If you would have stopped paying then you're just mad that you didn't get out of your obligations and sacrificed when you didn't have to and feel like because of that you deserve it more, not that meeting one's obligations is something holy.
I understand the anger. But we're supposed to take a step back and not be jealous about good things happening to others.
Good for the people that didn't sacrifice and had a better quality life during COVID as a result. How could I ever wish anything else on them?
A tech worker could basically stop paying rent, stating they've been effected by COVID, even if they weren't, or if it was short-term, and then basically collect their tech salary check's while not paying rent.
They _could_ pay, chose not to, and reaped the benefits.
Plenty of rich people shoplift. It doesn't mean you should too.
A percentage of people park in handicap spaces when they legally shouldn't. Some people feel entitled and will take advantage of any situation.
You had to be that person above and still have the foresight to see this coming to pull off this scam.
Back to your example of shoplifting: If it’s a riot and looting is happening, then even people who normally wouldn’t steal or commit often join in. It’s mob mentality. “If everyone is doing it, why can’t I?”
By your logic if everyone but you get a $10,000 check you haven’t been punished? That’s ridiculous.
The reason to forgive any kind of debt is because the economic benefit of doing so it better than the alternative. Not because it's a reward for people who deserve it.
Idk if that changes anything but I think it’s worth pointing out.
There are plenty of ways for the state to use this money to benefit everyone instead of only landlords.
every time the government alters the fair-market price for things, a transfer of wealth is created. sometimes for the better. but yeah, in every case, someone is getting boned.
at least this is only addressing the past and not creating upside-down incentives going forward. if the state said they were paying off any delinquent rent going forward, then only a fool would pay their rent. although, I'm sure a lot of people are making a mental note for themselves to stop paying rent the next time there is a state of emergency.
Well, then this program should be welcome news. Instead of wrecking the lives of millions of people and turning them all out on the street, they instead get to keep their lives and careers and continue to pay taxes. Even if you ignored the incalculable misery a mass-eviction scenario would create, it wouldn't surprise me if paying off everyone's unpaid rent is actually cheaper than mass evictions, when the total cost of handling the resulting mass homelessness is taken into consideration.
That is how it harms people. Even worse, it harms only the most responsible people.
Whether you view it as an ethical win or a practical one, reducing homelessness helps all of us.
Like, if you're worried about the inflation shock that would create, then the same people who have the power to give a million dollars to everyone but me would certainly have the power to raise interest rates and take other measures to prevent the sudden mass availability of wealth from wrecking havoc on the economy. But that's a separate topic, and if I'm affected negatively by this, I'd be upset at the powers that be for failing to mitigate the negative consequences of their actions. I wouldn't be upset at all at the hundreds of millions of people who are suddenly wealthy.
Your company gives bonus to everyone except you.
Or if I live in a people-that-didn't-just-get-a-million-dollars-go-instantly-homeless-with-their-entire-family community, this is another big win for me. What a boon to the economy, and man we all just dodged a massive bullet.
Yeah, somebody is harmed. First, it's unfair. Second, you are competing for the same resources (house and etc.). Now you are at disadvantage.
Sorry California this is simply unacceptable.
The 2021 playbook: move to SF, defer your rent payments to the state to spend $0 on rent, steal all your necessities (up to $949/day) to reduce overhead
Outside of that, like all investments renting a dwelling involves risks including the risk that you may not able to boot your tenet if they stop paying for a time.
I agree that this is a risk landlords must consider, but there is a big difference between ordinary investment risk (mispredicting future supply/demand/cost/etc.), or unforeseen accidents or "acts of god" (e.g. losing your rental property to a wildfire or flood), and the risk that some powerful third party will step in and prevent you from evicting someone squatting on your property. The first two cases are either your own fault or no-fault; the third case is a direct result of deliberate action by someone else, which means that they, not you, should be liable to repair the harm which they caused.
Is there? Your one example js weaker than you seem to think. For emergency room services, the law requires that for Medicare-participating hospitals. That's practically equivalent to a general requirement, but its legally distinct, and landlords don’t have a practical necessity to sell their services to the government as well as other customers.
And it's (generally) only mandatory when the patients condition is emergent, and the hospital is only required to stabilize them before discharging them. Not treat them indefinitely, or even treat/test for every presenting symptom they might have at the time.
Most states have similar eviction laws, giving renters 7-14 days to move out. After that, it's no longer an emergent condition.
In this case, however, the law was changed retroactively to an open-ended, tenant-gets-to-live-in-your-house-for-free. Hard to see how landlords should have factored the likelihood of that in.
If small investors were basing their calculations that the only risk is up to 90 days without rent... then yeah, they miscalculated the risks.
Succeeding in the real estate game is all about numbers. Lots of properties in a variety of locales spread the risk of one individual tenant bankrupting you.
You can raise the baseline without excessively penalizing those who were more responsible.
We believe the pandemic to be an emergency, and we believe college education to be noble, so people that take on this type of credit are more … noble? We don’t question that maybe some of these people took on an apartment that takes way too much of their budget monthly, or a degree that costs way too much for room and board and poor upside in the economy. But, we are totally willing to say ‘hey you know what credit cards are, you deserve what you get’.
Any of these people taking a bailout willing to take a hit on their credit report or the impact bankruptcy can have on you forever? Are they willing to move to public housing in exchange for the relief? Probably not, right?
No, sorry, this is the sins of the upper class spilling into the upper lower class, where there is a ‘noble’ group, your too big too fails, your white collared too good for jail, or in our lower ranks - ‘too good and decent to fail’.
We are expanding the pattern of the wealthy, and two wrongs don’t make a right.
Note: I'm not saying I agree with the mindset above, but this is a how a good chunk of people think.
I think "government bailout", while technically true, is a bit loaded, however. Landlord's hands were forced by the eviction moratorium - so it's a bailout for a problem the government caused.
Now, that "problem" is probably better then the alternative (a bunch of people suddenly becoming homeless in the middle of the pandemic), but the state did force landlords to not evict even if rent wasn't getting paid (not allowing them to find new renters who could try to).
It's money that's either contractually owed by the renter, or constitutionally owed by the government, as a private taking.
The landlords are being made whole, not getting "free" government bailout money.
Well, no, its not; its saying that if the government declares an eviction moratorium (which is extremely rare) without a rent moratorium, it might also, later, if finances ard convenient and it otherwise feels it expedient, retroactively decide to pay off unpaid rents before the end of that moratorium gets you evicted for unpaid rent.
(OTOH, the Fifth Amendment litigation already happening around the eviction moratorium itself might make that non-optional, anyway, and mooting that by providing full compensation now potentially saves the additional costs associated with litigation.)
I totally agree that the government screwed over landlords with the moratorium. Everyone with an IQ above room temperature at the time agreed a better solution was better unemployment insurance for those who lost their jobs.
It is created de novo within a computer system.
It is conceptualized, according to intellectual paradigms, as originating as a 'debt' and being "paid back" by taxes. But this accounting is fallacious. There is a movement in economics called MMT which is going to challenge these paradigms.
I suspect these sorts of political actions are a large part of the reason. It is just one more kick to a person who worked hard to cover their responsibilities. One more thing to make them wonder why they even try.
One can argue how much or in what way. One persons result doesn't translate to another's result.
Take your example, If you stopped going to work, I expect your success would probably go down. If you tried harder, your success would probably go up.
If there is no correlation between work and outcomes, why ever get a job, why ever get an education, or do anything remotely challenging?
I think it is crazy that people are propagating the idea that there is no advantage to self improvement, education, and trying anything.
You work on challenging things because it’s interesting to you, not because you’ll necessarily get paid more for it. If you work for JJ as a researcher you’re probably paid well, if your a postdoc you’re paid like shit. Same work. Being an ICU nurse is extremely challenging, but the paper pusher administrator above them will make more.
Education and self-improvement on average will increase your success. Toiling away at your job 80 hours a week, working two jobs, gigging on the weekends on average won’t.
One could argue (I would disagree) that taxpayers are hurt by this, but taxpayers and people who paid rent are not the same group.
How would you argue that they are not hurt by it?
Also, seems like this is largely being paid for with pandemic-related federal aid money, which I think had restrictions on how it can be used, unlike tax revenue.
The mass evictions have already been prevented, spending the money now will not retroactively change history. are you saying this will prevent future evictions?
>Also, seems like this is largely being paid for with pandemic-related federal aid money, which I think had restrictions on how it can be used, unlike tax revenue.
I don't see how the money coming from federal aid changes the cost to the tax payers? The money is either spent at the taxpayers expense or not.
No, they have not, because the eviction moratoriums were expiring, which allows landlords to start evicting now. You don't think the rent was just forgiven, do you? The law only stopped evictions, it didn't go and change all the rental contracts and force anything to be forgiven. It's still owed, and landlords can pursue tenants for the balance, they can add liens and garnish income whether an eviction happens or not. So there is a big overhang of unpaid rent that is going to be burning through people's credit histories, their future income, and their future ability to not be evicted or find housing elsewhere. The existence of that debt has nothing to do with whether the tenant is evicted -- it is owed even after eviction -- it can't just be ignored because there was a temporary moratorium on evictions.
Honest question- do they in fact end up OK? What about their credit? I imagine most credit agencies, future landlords, lenders, etc. would consider it material information to know whether a borrower / prospective tenant had declined to / been unable to pay their rent for over a year.
"people... would rather make twice as much as others even if that meant earning half as much as they could otherwise have. How irrational is that?"
Loss Aversion in action - people who were generally gainfully employed and able to make rent despise people who generally were not reliably employed and unable to make rent.
My last two industries (corporate events and travel respectively) got demolished by the pandemic. I'm much happier being consistently employed, staying off the dole, and being able to make rent but I should be thinking the poors can shove it, I guess.
They continue to live in the same world they did prior to the rent being paid for the others. It's simply, in my view, that someone else received an advantage and they did not.
My brother's gain is also my gain. Is the viewpoint I'm choosing to take on it.
Same reason why we are upset if our colleague has higher salary for the same job.
You are correct in the sense that programs like this incentivize being irresponsible, on the surface. I went through all of college working extra-hard to make sure I came out debt-free, while other people racked up debt partying - and now they maybe get to get these loans completely forgiven?
It feels similar. But one thing I came to realize is overall, the people who are actually being benefited here are typically not people who wanted to not pay rent. They are people who wish their livelihoods weren't necessarily uprooted due to an unforeseen pandemic.
It punishes the "responsible" in the same vein that a libertarian might view taxes as punishment. But this is overwhelmingly helping those who got affected the hardest in society - so I think "punishment" is the wrong mindset, and it could really be viewed as just "helping" those who need the help the most.