The eviction and foreclosure moratoria was the right policy response to the coronavirus pandemic, according to a new research paper from UCLA Ziman Center for Real Estate. The paper, written by Ziman Center director Stuart A. Gabriel, reviews a study on the benefits of the foreclosure moratorium implemented after the housing crisis in California. Foreclosure prevention laws enacted in California during the Great Recession helped to curb mass eviction and hold up property values, and it is an indication that similar moratoria—this time for both foreclosures and evictions—could have a similar positive impact.
“If you look to the question of do we have evidence of the economic impacts of an eviction moratorium, the answer is that we don’t have much, but we do have this study,” Gabriel tells GlobeSt.com. “This study went through blind peer review and is published in one of the top three academic finance journals, so it has really been through the wringer in terms of careful scientific vetting.”
Gabriel has been an advocate for both foreclosure and eviction moratoria during the pandemic, arguing that widespread eviction would be more detrimental for the economy. “I have argued consistently during the pandemic that there is various rational for foreclosure and eviction moratoria,” he says. “Putting people out of their homes in the middle of a public health crisis when they don’t have incomes is the worst idea possible. Obviously, it could exacerbate the virus and homelessness, and there is also a lot of political unrest in the economy. Putting people out of their homes that have no source of income is not a place for a happy society.”
Gabriel also notes that the dynamics of this recession are different because of the public health element. Many of the people that have lost jobs aren’t able to find new employment. “We aren’t talking about people that are not paying there rent. We are talking about people that got paid off during the biggest public health shock that we will see in our lifetimes, due to no fault of their own,” he says. “Unemployment that we are facing is so widespread, so deep and so perilous.”
However, apartment owners have virulently argued against eviction moratorium, saying that it merely shifts the consequences from landlords to tenants. “The home foreclosure side had almost immediate support,” says Gabriel. “On the rental side, we are surmising or extrapolating results that we have on the owner-occupied side. I have full appreciation for the fact that property owners have their own mortgages to pay and without cash flow will be put in a perilous situation.”
Apartment owners with a GSE-backed mortgage are in good shape. Foreclosure moratoria cover these owners as well, and the deferrals offered by lenders can be passed onto renters. In those instances, the system is working. For owners with private and alternative debt, which represents a huge portion of the market, has been fewer options. “It is important to note that the victims here are also the landlords,” says Gabriel. “The landlords don’t necessarily have the deep pockets to withstand this shock. Rather than simply shift the shock from renter to landlord, which in many cases is a very unfair thing to do, there should be some central facility that is supportive of both the renter and the landlord.”
Many are advocating for government-funded rent relief programs, but Gabriel says that any rent relief will have to come from the federal government, not the state. “The state is out of money, and the state does not have the capacity to run deficits like the federal government,” he says. “The federal government is the only entity that can engage in the deficit spending that we are seeing currently.”
With a lack of alternative relief options, Gabriel says that landlords should work with tenants through the pandemic. “Trying to get to the other side, which is the gradual re-opening of the economy and the gradual re-employment, may be in the best interest of the landlord,” he says. “There is no scenario B were the landlord is back to pre-pandemic conditions with the flip of a switch. Landlords may think they want to evict, but eviction may not get them to a better scenario.”