Our word “moratorium” comes from the Latin verb morari, to delay. But in the case of the small-time landlords, who have been paying for delay for the last 18 months and counting, it looks a lot closer to the Latin mors, death—in this case, of a whole sector of the housing economy.

When the Centers for Disease Control and Prevention put the eviction moratorium in place last September—yes, the biomedical arm of the bureaucracy unilaterally dictated national housing policy for a full year—it was done under the guise of health. Picking up where the CARES Act’s moratorium left off, and employing similar framing, the logic went something like this: If tenants were evicted, they would have to remove from their current work-from-home couches (or welfare-from-home couches) to different, more affordable ones, thus dangerously spreading the virus. Or something like that.

While the CARES Act provision was passed amid the March madness of early pandemic logic, it’s unclear how many Americans actually believed evictions were a key source of viral spread by September. More likely, most who favored the ban did so because the politically popular position protected those who had lost jobs in March from turning to homelessness. Congressionally passed relief programs would keep landlords from going under, and the ban would expire in December, after elections, so everyone was happy. 

What followed, however, with the help of sizable and duplicate unemployment handouts and a series of dubiously legal extensions of the ban, was something else. In December, Congress extended the moratorium to January. A few months later, President Joe Biden extended it again. And again. And again. The third time, Biden had a better reason for continuing to delay ousting glorified squatters, if one divorced from reality: to give landlords more time to apply for the approximately 89 percent of federal relief dollars that had still to be given out at the end of July. We all know what followed.

But the Supreme Court’s August 26 ruling was not the death of eviction moratoria—not hardly. The federal delay was only the first of a series of delays which are now becoming overt in American cities, like so many Russian dolls. 

“It’s not a good situation,” says Paul Getty, founder and CEO of First Guardian Group, a real estate investment and management firm based in San Jose, California. Over its 18 year existence, the group has assisted approximately 10,000 blue-collar landlords across the country, according to Getty. “Not good” is an understatement. In states like California and New York, where local moratoria are still in effect, and worse than the federal ones because they won’t end until at least January 2022, the intervention created a growing number of distortions that are just beginning to play out.  

Per the latest data from the 2018 Rental Housing Finance Survey, 48 percent of the 48.3 million rental units in the United States in 2017 were in properties with between one and four units. Most of these properties are owned by individuals and run by the owners: 77 percent of all two-, three-, and four-unit properties are run by small-time investors who often will live, or have lived, in the property they currently rent. These are the “mom and pop” landlords: relatively young, managing perhaps two or three but typically only one rental property as an investment venture on the side. They compose more than three quarters of the small unit rental market, and nearly half of all rental unit owners. They are, in Getty’s estimation, the worst hit by the eviction moratoria.

Perhaps the biggest market distortion was the way in which the pity funds from the federal government were apportioned to these proprietors. While Biden extended the moratorium under the guise of helping landlords access more aid, many landlords were unable to receive it, Getty said. As the Urban Institute reported, more than 40 percent of landlords were still unaware of emergency rental assistance by the end of June. 

“Of those who were aware, only 14 percent of landlords said they are eligible for the assistance, 21 percent said they were not eligible, and the remaining 65 percent were unsure about their eligibility. Among landlords who lost rental income in the past three months, 56 percent were unsure about their eligibility,” the nonprofit reported.

Meanwhile, only 11 percent of the federal funding had been spent at the end of July. How much went to large real estate companies, the kind that manage hundreds of tenants and can hire lawyers to devote their days to mining the labyrinth that is bureaucracy, remains to be uncovered. At least $1 in every six didn’t even go to renters or tenants, according to the Associated Press, since as time ran out on using up the rolling budget, the government did what it always does: spend as much as possible, in any way possible, to ensure you keep the same baseline, at a minimum, in the following cycle. Of what was paid out, Getty said countless of his own clients didn’t see it. 

“Most of them don’t have the resources to chase the government for money,” he explained. As in the case of the numerous small businesses who struggled to access the SBA loans in the CARES Act designed to help them, likely due to incorrectly filling out applications that required a lawyer’s eye to complete without error, very few of those landlords who did apply actually received the promised aid. Many gave up trying after their initial attempts failed, Getty said. Blame it on working out the kinks of a new federal program or blame it on the general failure of bureaucracy; it all comes out in the wash.   

Under normal circumstances (an increasingly unlikely prospect), a landlord who can’t pay his bills can usually still sell, and thanks to the 1031 exchange, a 1920s-era provision that allows rental property owners to defer all taxes on the sale of an investment property when they reinvest the money in a new rental, many can try again elsewhere. Here again, however, the moratorium caused a distortion. When tenants couldn’t be forced to vacate, landlords began using increasingly desperate means to get out of their investment properties, including offering, in one case Getty mentioned, a sum of $20,000 to the tenant to convince him to vacate the property in a so-called “cash for keys” deal. In other cases, landlords have sold properties out from under a tenant, saddling the buyer with the problem of a glorified squatter, and a state law that sides with him over everyone else. 

Never one to pull her punches, California has, in recent years, created a novel right to demand a jury trial for eviction cases, rather than the typical bench trial, giving these tenants approximately six more months of free housing, while a jury is convened. Since the pandemic, Getty explained, tenant lawyers on the West Coast have taken out billboard ads, offering their services pro bono to ensure this and other tenants’ rights are protected. One firm, Tobener Ravenscroft, published a digital pamphlet called “A Legal Guide to Free Rent During the Pandemic.” In some cases, these lawyers are even getting tenants to sue their landlords, with success. 

One such case was one of Getty’s clients, a 65-year-old woman who owns a multi-unit property in Berkeley, California. When a male tenant of hers, who stopped paying rent after the first month of the pandemic, got in touch with a contingency attorney, the tenant proceeded to sue her for attempted murder. 

“Why?” Getty asked. “They were arguing that because this gentleman was not paying rent, she was conspiring to have him killed. This is a lawsuit, they put it together.” 

The woman, whom Getty said was shocked and unsure how to proceed, sent the lawsuit to her insurance company, which settled for $170,000. 

Like all procrastination, delaying evictions only makes more problems, and worse ones, the longer it kicks the can down the road. In Illinois, New Jersey, and the District of Columbia, local moratoria were set to expire at the end of September. New York and California have already extended theirs until January 2022, and goodness knows how much longer after that. Other states have bans in more limited forms, like New Mexico’s courts, which are banning eviction for those who provide evidence of current inability to pay rent, to states like Washington and Minnesota, who have “off ramp” and “bridge through” programs in place as they phase out the moratorium carte blanche, but still hold off on a full return to normal. 

At least through September 30, landlords of multifamily properties with Fannie Mae and Freddie Mac backed mortgages were still prohibited from evicting tenants as well. Even as backlogged courts in states without a moratorium begin to face the oncoming wave of eviction cases, the road ahead to normal is a long one. At least, for the states who have begun to roll back the delay, they can bite the bullet sooner rather than later. 

One positive outcome, at least in California’s market, is a move toward ownership. Getty explained that the landlords who are able to sell their rental properties are often selling to buyers who will live in the home, rather than to other investors who would continue renting it, as the original investors move to markets that are appreciating in value, like Texas and Tennessee. A move toward permanence, rather than the continued transience of renting, seems at least a better outcome than the other distortions. Yet, as Getty points out, the reality isn’t perfect, as it limits the options for would-be renters. The rental market was already on a trajectory toward more high-rise, hundred-unit complexes, as developers make the most of the current real estate upheaval and purchase land that the average home buyer can’t afford. With mom and pop landlords leaving the market, new tenants will likely have few options other than to spend their rent dollars at industrial-sized apartment complexes, rather than small businesses. 

There’s a time limit on delay, as it turns out. After a certain point, no matter what you call it, the moratorium became a mortuary for small-time landlords. The end of the federal eviction moratorium was a good start, but still just a start in the process of undoing the wreckage of the last 18 months. For those who hung on, the road out of Eden is a long one. 

This article was supported by the Ewing Marion Kauffman Foundation. The contents of this publication are solely the responsibility of the authors.