If legislators pass one of the leading proposals on Beacon Hill to deal with a possible eviction crisis without offering funding equal to its scope, they could be opening a pandora’s box.
HD.5166, the brainchild of Reps. Kevin Honan and Mike Connolly, would ban the eviction of anyone who cannot pay their rent due for the duration of Massachusetts’ state of emergency and for an additional 12 months, on the assumption this is due to COVID-19. The current moratorium requires tenants to document their hardships.
To compensate the landlords who would be hit hardest, it requires mortgage lenders to provide forbearance to all landlords who own 15 units or less. It also sets up a fund fueled by unspecified public and private money to pay what tenants and homeowners out of work due to the pandemic cannot, although it puts the neediest homeowners and “mom and pop” landlords with 15 units or less at the front of the line to receive this money.
There is no question that the state will face some kind of eviction crisis this summer and fall. Twenty-nine percent of Massachusetts renters missed some or all of at least one rent payment between April and June, according to MassINC. The state continues to see its jobless numbers decline unbearably slowly week after week, with one-third concentrated in the troubled hospitality and retail sectors. The longer this goes on, the more impacted tenants rack up arrears they have little hope of paying in full.
It’s obvious something must be done to stabilize the situation until the economy improves. But legislators court danger if they ultimately motivate landlords to sell out of frustration or necessity. Enough properties on the market and property values will drop significantly, and there are already plenty of buyers with dry powder looking for deals. One only needs to look at what kind of landlords some private equity firms have been in the Sunbelt’s single-family markets after the Great Recession to see a possible worst-case scenario.
To many in the real estate industry, this extension of the eviction ban smacks of unfair treatment. Some are dealing with problem tenants with jobs who are using the ban to refuse to pay rent, and this bill’s presumption that all non-payment starting in March was caused by COVID-19 positively welcomes abuse. But many simply want to end the frustrating uncertainty surrounding their finances, a large number own too many properties to qualify for HD.5166’s forbearance terms and all are still liable for real estate taxes and other big expenses.
Honan and Connolly are smart to create opportunities for the private sector to buy good will with contributions to a recovery fund; doubtless many large banks would be interested in taking part. But unless the legislature can seed this fund with an initial contribution or plow tens millions of dollars more into existing rental assistance programs as a gesture of good faith, they risk destabilizing Massachusetts’ rental housing sector even while they try to stabilize its customers.
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