A Federal Court Steps Into The Eviction Moratorium Controversy

If you’ve been reading my blog over the past few months, then you’re fully up to speed on the New York State and Federal eviction moratoriums that have been in place over the past year to deal with the COVID crisis. I know this issue is important to the landlords I serve, so I will always tell you about it when something new happens.

On February 25, a United States District Court Judge in Texas ruled that the Federal CDC Eviction Moratorium is unconstitutional and unenforceable. In theory, this Judge’s ruling applies not just in Texas but nationwide, but it doesn’t work that way.

The Biden Administration Justice Department has already appealed the case to a higher Federal court. As with all complicated, socially significant legal issues (remember the same-sex marriage cases and how long it took that to be resolved?), it takes years for a final result to emerge from the Supreme Court. That said, we should pay attention to the arguments made in Texas.

Essentially, Judge Barker ruled that the Federal Government does not have the authority to issue a blanket eviction moratorium, viral pandemic or not.

Here’s a quote from his decision –

“The federal government cannot say that it has ever before invoked its power over interstate commerce to impose a residential eviction moratorium. It did not do so during the deadly Spanish Flu pandemic. Nor did it invoke such a power during the exigencies of the Great Depression… The Federal government has not claimed such a power at any point during our Nation’s history until last year.”

The Judge is right when he says that the Federal Government has never before invoked police-type powers to forestall evictions. That they did so to stop the spread of COVID – people who have been evicted will have to seek shelter in over-crowded facilities – may or may not ultimately pass a constitutionality test.

For now, nothing changes. New York’s eviction moratorium remains in place and is unaffected by Judge Barker’s Federal ruling (or by any Federal ruling, for that matter).

Regardless, what will have to be addressed by our political leaders in Washington and Albany is how the imbalance in the landlord-renter equation will be resolved. Approximately one in five renters in the United States are behind on their rent payments. In New York City, it is estimated that unpaid rent now exceeds more than 1 Billion dollars.

While there has been plenty of pain to go around since COVID-19 struck America and the world a year ago, landlords have been asked to bear the burden of unpaid rent without much help from Washington. Some rent relief measures are included in previous and in the upcoming Stimulus bill, but the money hasn’t yet reached its intended targets to any significant degree.

A year ago, as a nation, we decided to shut down our economy to battle a viral plague. Regardless of anyone’s views as to the wisdom of that decision, millions of people were thrown out of work.

The hardest hit were people employed in the restaurant, tourism, and retail sectors. As of today, only some of those jobs have returned. Hopefully, as the vaccines become widely distributed, many of those jobs will come back when we slide into something like a pre-COVID normal.

But what about the billions in unpaid rent? Who pays that bill? As of right now, the landlords are paying it. The Texas case should tell everyone that landlords cannot bear the entire burden of the rental housing side of this crisis. Further, it should serve as a wake-up call for those who think we can “kick the can down the road” forever and hope that the crisis will magically resolve itself.

I don’t often include video links in my blog, but I’m making an exception this week. Click on this link – NBC Story – and watch the short video. If you’re like me, you see the problem for what it is, the result of a Federally manufactured flash economic depression. Again, setting aside a discussion on whether or not that was a wise thing to do, it was done.

Neither landlords nor tenants had any control over what happened. That said, now landlords and tenants are being asked to pick up the pieces and make the system work.

What’s going to happen if (and when) tenants are either forced to pay months’ worth of back rent that they don’t have or face eviction or when landlords, especially non-corporate landlords, are asked to permanently eat billions in losses?

I don’t pretend to have a magic formula that will easily solve this crisis. I do know this much. The people who created this problem, our elected officials in Albany and Washington, need to develop a plan that protects the interests of both tenants and landlords and re-sets the rental market equation.

Simply extending eviction moratoriums and hoping for the best is not a good plan. If we do that, the courts may impose “solutions” on all of us that nobody wants to see.

At Sterling Property Solutions, we have a team in place that can answer all your questions and address any challenges. Please give me a ring at 914-355-3277 or send me an email at [email protected].