Yves here. I’m the first to admit that I don’t have a good answer to the question of what to do about the problem of millions of tenants and homeowners being unable to keep up their housing payments and facing eviction. But Warren’s unduly simple-minded eviction bill, which provides for a one-year eviction freeze, is not it.
First, as even the fan of her plan, Eric Kramer, concedes, it doesn’t work on a stand-alone basis. He argue it would require bankruptcy reform and bank bailouts to work. But these recommendations reflect a lack of understanding of bankruptcy and housing debt.
Anyone who is keen about bankruptcy is almost certain not to have gotten close to it. The best thing that can be said about bankruptcy is that it (often but not alway) is better than the alternatives (I know someone who simply stared down her creditors past the five year statute of limitations in her state). Bankruptcy is emotionally draining. It regularly leads to divorce. If you have too much income to qualify for a Chapter 7, you instead have to resort to a Chapter 13, which requires the borrower to adhere strictly to a 60 month plan in which they make payments to the trustee, who in turn pays the creditors. Those 60 month plans are designed to be punitive. They contemplate minimal spending on food, for instance. Rice, beans, and ramen become dietary mainstays. No room for emergencies like a car breakdown either.
And the bigger issue is that bankruptcies are a blot on your credit record in a world where pulling a credit report is a normal part of pre-hiring background checks. So anyone who has gone bankrupt puts himself at a serious disadvantage in the job market.
On the “what about the landlord or lender,” they can be anyone from a multifamily complex, where the loan might be held by a bank or sold to a commercial real estate securitization, to a tenant in a private equity owned single family home, to a homeowner. Most residential mortgage debt is securitized. The Obama Administration was unwilling to figure out how to pressure mortgage servicers to do mortgage modifications. One year of non-payment, if that is what results, simply assures an eventual eviction. The arrearage would be so large as to make it difficult to work out a sensible mod, even if you could get over the fact that services are not set up to do modifications, which are time-intensive one-offs, and are resistant to spend the money to gear up to do that.
So shorter: saying you need to bail out banks reflects a lack of understanding of who the players are. Oh, and the owners of the lowest rated but not yet defaulted mortgage tranche will also fight mods. It takes a lot of ink to explain why.
And I also wonder if this sort of prohibition could be contested on eminent domain grounds, as in landlords/lenders being barred from getting non-payers out and getting a paying tenant in or selling the property sooner rather than later amounts to a taking and the government needs to pay for that directly.
Kramer also has an odd comment about how the eviction prohibition would impact small businesses. Again he conflated small businesses that own their buildings but have borrowed against them (a minority) versus tenants. I assume he is referring to the fact that small business owners often have to make personal guarantees of borrowings and other major obligations, so a business bankruptcy would trigger a personal bankruptcy.
In fact, many commercial landlords now are cutting deals with tenants, since these leases are big enough to justify the cost of renegotiating (and the landlords recognize re-leasing the space now is an uphill battle). One way of sharing the pain is for the landlord to get a cut of gross revenues rather than a fixed amount.
Warren’s bill is radical enough to get a lot of pushback yet not radical enough to address the real problem. Warren seems to be unwilling or incapable of concluding that landlords need to be first in line to take losses. Proposing an eviction holiday and then being silent on what happens next leads too many to assume that the landlords/lenders can and should still try to claw as much as they can back out of households and business tenants. So who takes the hit will be be subject to an ongoing legal and political battle.
By contrast, this is what Murphy said:
What I am suggesting is that whatever we think or do we are heading for the most almighty economic crash. The things that we have treated as stores of value – which are mainly shares and both commercial and residential property – are massively overvalued now. And there is nothing we can do to prevent the value of them crashing because the Ponzi style financialisation that has gripped western economies – and those of the US and UK in particular – for the last forty years was always heading for a massive crash, and now it has arrived. The genie is out of the bottle and it will not go back in again.
But that is not to say that our government (and other governments) are left powerless in the face of this. They are not. They can still make a decision about which factor of production – labour, business (enterprise), banks (capital) or landlords they wish to favour in the crisis to come
If they favour people and business and sacrifice landlords (whos assets will survive, come what may, albeit at considerably less worth) and banks (which will inevitably need to be nationalised) then more people and many more businesses might make it through the coming crisis. If they favour landlords and banks – as the UK government is at present – then the chance that much business at all will survive this is pretty remote. And in the end, nor will the banks or the landlords either. That’s my bleak prognosis. And either way, pension funds and pensioners are in deep trouble: most will now be dependent on the state, which means much more generous provision has to be thought about now than we have ever previously imagined…..
As I have said since this crisis began, even if every landlord fails now, the properties that they own will still be there: in other words, even if their financial capital disappears, their physical capital does not. What that means is that the economy can survive the failure of landlords more than it can survive anything else because whatever happens to the current owners of these properties they will still exist. We cannot say that of any other part of the economy.
In that case what is required now are statutory rent holidays. The rest of this year should be required, at least. And thereafter rents should be reduced, drastically, and by law, and right across the board. Eighty per cent cuts may be appropriate. It may be more. Whatever is necessary to ensure business can survive must be done.
I stress though that I am not seeking to wipe out the rentier: I have also argued, and repeat that argument now, that if, as I think appropriate, there should be long-term statutorily enforced rent holidays and then mandatory rent reductions I would match that with a right to bank loan holidays, and a right to a statutory reduction in loan liabilities so that the sum secured on a property cannot exceed its market value, whatever that might be in the future. To be fair over time to all involved, this would have to be subject to periodic reviews. This is hardly a concept landlords are unfamiliar with. Rentier insolvency is not my aim: rent reduction is so that businesses and people might survive.
Needless to say, a rent holiday is a very different beast than an eviction holiday with the money still owed when the suspension is up.
By Eric Kramer. Originally published at Angry Bear
Senator Elizabeth Warren has a new bill out to prevent evictions during the COVID-19 crisis. The bill imposes a 1 year moratorium on evictions nationwide. That’s it.
On its face, the bill seems to have two deficiencies. First, millions of low-income tenants will be unable to repay their past due rent. To give them a fresh start we will probably need a streamlined process for consumer bankruptcy filings. Second, a rent moratorium may trigger a financial crisis, as landlords default on their mortgage payments. To prevent this, an eviction moratorium will need to be accompanied by a bank bailout if banks end up having their capital depleted by mortgage defaults. Although bank bailouts are unpopular, an eviction moratorium coupled with bankruptcy reform and a bank bailout will potentially be much cheaper for taxpayers than giving insolvent tenants money to pay their landlords in full, because it pushes losses due to tenant insolvencies from taxpayers to landlords and banks.
In a rational world, these predictable problems would be addressed in Warren’s bill. But we do not live in a rational world, and an eviction moratorium is much easier to sell politically than a bankruptcy overhaul and a bank bailout. (We know this is true, because a 120 day limit on evictions included for federally financed properties was included in the CARESact, Democrats have made numerous proposals for a more comprehensive approach, and many statesand localities have put a temporary freeze on evictions.) And – this is the critical part – Congress will deal with the bankruptcy problem and bank bailout if they lead to crises in the future. There is certainly some risk here, especially if a bank bailout is handled poorly, but the benefits to struggling tenants (avoiding homelessness) and savings to taxpayers could easily be worth the risk. Warren knows what she is doing.
The general approach of shifting losses caused by the COVID economic collapse from renters and taxpayers to landlords and banks would also be valuable for small businesses, who (if I understand this correctly) cannot avoid past rent obligations in bankruptcy reorganizations. An eviction moratorium – especially if coupled with bankruptcy reform – might do more to help small businesses survive than the Paycheck Protection Program, which did not adequately address non-wage costs and probably channeled hundreds of billions of dollars to businesses that did not need support.
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The banks should have been allowed to collapse 12 years ago. The banks should have been allowed to collapse 12 weeks ago. Only way to get true market discovery including true market price on housing purchases and rents.
Best government money can buy.
I agree.
Also raise interest rates to best guess fair rate, about 3%, end quantitative easing and let asset prices find their true level.
Fed’s prime directive is to make the stocks go up. It’s been doing this by QE (quantitative easing) but this affects the entire economy. Pollutes it you could say, and one of the pollutants is to drive up housing prices.
If the Fed can’t discard it’s highly destructive prime directive of making the stocks go up, it should at least do it efficiently in a way that doesn’t stink up the entire rest of the economy: Get the list of stocks that the VIP’s own and buy them to make them always go up, for the obvious political reasons: Trump, Mnuchin, Pelosi, McConnell, Shalala, etc.
Flooding the financial sector of the economy with trillions of free money via QE carries with it fantastic intermediary costs and ends up in driving stocks up only in part. The rest of it flows and infects other corners of the economy, like a cancer.
Direct stock purchases by the Fed would be enormously more effective and much less costly. It would also be more honest for all to see the Fed’s true motives and actual contribution to society.
There is no “true level” for asset prices. It was never a natural thing to start with. This is perhaps the biggest error of neoclassical economic thinking. The idea the market is some kind of “natural” thing that we can just step away from and let function in a true manner. It doesn’t work like that, at all. I may even agree that rent and real estate prices are not very in tune with median income or something along those lines, but this kind of statement is in no way the same thing as saying housing has a “natural” value.
Sure it does, its just much lower and much much more volatile than you’d be comfortable with. Also houses would mostly be much smaller with less amenities.
There would also be a much needed disconnect between the theory of housing as “a place to live” and housing as “an investment.” The only legitimate “investment” I can perceive for housing to be considered is in personal and societal stability.
Let’s be real here. The Fed’s prime directive is to manage inflation and unemployment.
You are judging by Fed words and law. I am judging the Fed by it’s actions.
The Fed’s actions are more “real” than the words you base statement on.
>The banks should have been allowed to collapse 12 years ago.
That is a lovely concept. I’ve heard people talk about it a lot over the years, but no one can ever explain to me how the world economy would have recovered without Global Letters of Credit and International bank escrows.
Global Cargo shipments were already freezing up because Companies were no longer accepting Citigroup’s LOC. They didn’t believe they’d get paid by Citigroup.
People more knowledgeable than I am will correct me, but we could certainly have nationalized the banks, as Roubini and even Krugman (!) recommended.
The likes of Goldman Sachs, JPM and AIG would have to had meeting / duels at their off shore tax haven pirate coves, sort of like mobsters settling up. The 99% would be compensated by Fed FDIC “brrrr” machine.
I think Governments would have had to step in as lenders of last resort. You could for example refinance your mortgage at the post office.
Yves said: “Warren’s bill is radical enough to get a lot of pushback yet not radical enough to address the real problem. Warren seems to be unwilling or incapable of concluding that landlords need to be first in line to take losses. ”
Landlords? Why?
Why not fund the loss by a tax on Congressional and Congressional Staff salaries over $80,000? Or better, the salary or retirement income of U.S. government civilian employees over the same level (many are my friends)? Or a real estate tax on all primary residences valued at more than $200,000- well over the national average? How about vacation homes or IRAs? Oh, the Horror! Paying to protect people from eviction is always a worthy goal- until you are asking ME (or my social class) to take the loss.
Proposing a tax to pay for it? Inconceivable. It is so much easier to say “Just make someone else take the loss”. And a tax on landlords avoids the inevitable NYT sob-piece which begins ” John Froom, an unemployed, disabled Department of State employee but a loving son, has been taking care of his mother, and the four children of his drug-challenged younger sister until today, when a new tax on government disability income to help pay for eviction protection cast a shadow over his once happy family…”
We currently live in an illusion, bailouts, rent deferral, liz warren bills, none of this matters until we actually face reality.
Yes, an awful illusion, Mr. House. In my opinion, the *reality* is to turn people out on the streets, no way to pay rent or back rent. The evicted will be scrambling to find an address to register to vote. I’m thinking this is part of the plan, perhaps because I’m suffering from legitimate paranoia.
“legitimate paranoia”
I for one don’t blame you, nothing feels real about our current circumstances
“Who the Oligarchs would destroy they first drive mad?” Hmmm…..
No conscious “conspiracy” needed. The design of the system does the job.
No worries Dave_in_Austin; the rentier-in-chief currently occupies the White House so landlords will not be first in line to take losses.
Why landlords? Because rental prices have been artificially inflated for decades at the benefit of “land owners” and the expense of peasants.
The rents they charge are not based on market demand (we have more empty units in the Us than homeless people) but are based on inflated markets subsidized by numerous systemic benefits to property owners.
Property values need to come down to what they are actually worth on a level market, and this means rental prices too must come down.
When you have professionals and other people who work full time living with multiple roommates just to afford renting a roof over their heads it is obvious the current market is rigged. Upstairs from me are three working women sharing a two bedroom apt. I had to take on a roommate after the last few rent increases. I haven’t had to have a roommate in over a decade but just got tired of barely scraping by each month. And we have a nice landlord who isn’t greedy, just priced his units based on similar rates for the area. I could go on with numerous similar stories from my own little circle.
Just as college costs have been hyper-inflated, so have housing costs. This is why it’s time for landowners to take a hit. They’ve been pounding us peasantry for a long time.
Yves talked about this some months ago. In part it is because landlords are the only ones who can afford to pay for this. The other reason is that landlords do not perform other economically necessary activity. Banks are needed to kick start businesses and provide liquidity. Workers are needed for work. Rentiers are mostly just parasitical, though they do provide some minimal function for housing arbitrage and as a home maintenance service. I never met one gleeful to do that though.
Ah yes, as I recall, the other thing is if the landlord goes under, the building will still be there serving its function, now owned by the bank. So even if the landlord can not afford the loss of revenue, “we don’t care”.
Is this post missing a “not” from its title? If the title is quoting the repost, I did not spot it!
The title in quote is quoting the original post from Angry Bear, with which I disagree in my long intro.
The bill spends most of the text talking about how the precariat spend way too much of monthly income on just maintaining housing.
It then goes on to not provide any meaningful solutions to that concern at all.
Good job, everyone.
“I feel you pain.”
*turns the screws tighter*
Dumb question – if the bill ends up just being a bail out for the usual suspects, then why not just issue some form of voucher for rent/mortgage?
Because the proposed voucher perpetuates the uphill flow of money from renters to landlords, leaving the voucher only to kick the can of unaffordable housing with no job down the road. Rents and eviction need to be either absolved until a broader economic equilibrium is reached post COVID collapse, or force the landlords to forfeit properties to the tenants who can structure the rent and building maintenance as they see fit. Not an easy solution nor a plausible one but far better than anything offered by politicians or economists. Such a voucher also provides no incentive for the landlord class to change their actions long term or prepare for an inevitable situation similar to this economically. Any positive solution or plan to this overtly takes power from banks and landlords and gives it to the tenets. People need agency over where they live to have stability anywhere else in life.
That seems overly idealistic for today’s world, So nothing will happen, evictions and foreclosures will just proceed apace. There will be no relief.
Too many out there enjoy and take pleasure in the suffering of others.
This is a typical Warren proposal, the equivalent of a loud fart.
It smells bad and produces nothing but everyone looks at the person who farted.
And yes, you bet that’s a “Taking”, my late father was an Appraiser and expert witness in Condemnation Law, pass this legislation and expect a stay from the federal courts within 24 hours and quite likely a summary judgement within a week.
The current plan is to “Grind the peasants into dust”, which the Peasants are likely to object to in ways that are quite messy.
+100
and thanks for the laugh
The Peasants may object, but on the other hand, there’s a chance that a great number of them will, as James Kunstler has said, “just decide to sit there and die in front of their televisions.” As long as the cable, satellite, cable-streaming, etc. can be kept up. No bread needed, just circuses.
Clearly the plan needs a cable disconnection moratorium too.
You’ve perfectly captured the essence of Warren. I hope you don’t mind if I borrow that line.
Well, some judge somewhere might remember this little precedent. . . .
Quoting Murphy regarding saving the rentier : “….
Exactly the problem. What is the process of price discovery of a property in that dark future? Is the benchmark of market value pegged to it’s pre-statute value? Do the arbiters of these value reductions continually mandate haircuts until some arbitrary indicator of the economic is revival is achieved, then revert to letting things return to the way they previously were run? What a mess we’re in.
With Keynes’ “we all die in the long run” in mind, bankruptcy and death will result in a kind of price-discovery in the future. But I would make Murphy’s point thus: Economic value is created by the business / user. Any property’s future value is fictive and extremely uncertain. Owners can fall in love with their property’s balance sheet *market* value all they want. But without a productive renter, I wish them the best of luck.
Well then, that property just needs to up and get a job like the rest of us!
Warren’s bill covers only residential evictions (vs commercial which were the primary focus of the Murphy article) and does not impose a corresponding moratorium on landlord mortgage payments as does the expiring CARES Act. About 50% of US rental housing units are owned by individuals, mostly mom and pop investors who self manage rental SFRs, duplexes and fourplexes. This proposal seems like standard ‘reward your friends, punish your enemies’ politics as economic hardship is shifted from largely Democrat voting renters to more Republican voting bourgeoisie.
Glass-Steagall revived? And antitrust enforcement? While “we” are musing about fictive remedies for a terminal disease (extractive human activity)?
All rentiers pull credit reports.
Under the Fair Credit Reporting Act, a prospective landlord is considered akin to a bank that you have asked for a loan. In return for the loan of his housing unit the prospective landlord may request your SS# and initiate a background check. If the prospective tenant refuses to provide the SS#, the landlord is within his rights to deny tenancy.
And I have no problem with landlords going broke. Widespread bankruptcies would lead to rent abatements for people who are currently spending half their income to the landlord. I understand that their would be much chaos, but the it’s easier to deal with if you a roof over your head. A good way to deflate the asset bubble. Other benefits would include the euthanasia of the airb&b’s and the sale of second and third homes to buyers of first homes.
My pessimistic take is that Congress will do exactly nothing to stop the eviction/foreclosure crisis we’re heading into, and the end result will be massive immiseration, huge increases in homelessness and all the other problems that accompany that, and Berkshire Hathaway and Blackrock will end up owning essentially all the property in the country. If I’ve learned anything from watching our economy for the last couple decades, it’s that a financial crisis leads to retrenchment and consolidation. I have a bad, bad feeling that Jack London’s The Iron Heel is going to turn out to be far more prescient than one might hope. Especially the part about “the people of the Abyss.”
We live in times of giant problems and flea-size leadership. The eviction/foreclosure crisis is not one of those giant problems I most fear. It could be solved without transforming it into a giant problem. A part of our economy is a system of cash-flows to and from various parties. The Corona pandemic has dammed the source flows. But these flows are not the water of life or flows of air, they are just flows of money. Are these rivers and streams so unknown, so badly understood, such a heart of darkness, that our government is unable, unwilling, or simply incompetent to engineer a remedy? Instead, by in-action and bad-action a simple problem of cash flows is being transformed into a true and giant crisis of human dimensions [not of size but of suffering, displacement, anger, …].
I cannot work through engineering all the channels and streams but we have too many trained and competent people who could. I can attempt a sketch: As long as we are so strongly biased to favor economic theory I must wonder what are the classic [post Adam Smith] justifications for the collection of interest? I believe the Corona pandemic more than erases all those justifications, and also erases justifications for penalties accruing with late and missing payments. In a world of rational and humane social relations we would need no Government to create and enforce laws to adapt to the Corona cash-flow problems. If there is no flow at the source of a river it is plain idiocy to demand continued flows at the base of that river, no matter how those flows may have been promised — or coerced into promise. But in our world Government is needed to legislate and enforce a rational solution. With you — I have lost faith we have a government able or competent to handle this relatively simple cash flow problem in a rational or reasonable way that avoids turning it into a giant crisis.
The Corona pandemic is bad but it is not among the true crises we face in the very near future. It is small in the domain of crises, and the US has handled it and continues to handle it most horribly.
There may be an attempt to encourage foreign dollar holders be allowed to buy properties.
If foreign dollar holders are concerned about their dollar securities, there might be some effort to buy up US real estate.
This would be akin to the earlier selling of the Pebble Beach golf area on the Monterrey Peninsula in California in 1990/1992 to Japanese interests.
Japan has 1.268 Trillion of US government securities and China has 1.092 trillion.
https://www.reit.com/data-research/research/nareit-research/estimating-size-commercial-real-estate-market-us has the size of the US commercial real estate market estimated at between 14-17 trillion.
A couple of trillion of foreign money flowing into the market could help prop it up, but I’d estimate that these buyers would be looking for good deals as would big US players.
In the Sonoma County area (north of San Francisco) it seems more commercial properties are sporting “for lease” and “for sale” signs. A few days ago I saw a “for sale” sign on shopping center building with a fitness center logo.
Since you mentioned Jack London, the ruins of his burned down 26 room “Wolf House” are in Sonoma County.
https://jacklondonpark.com/wolf-house/
His wife was quoted “the razing of his house killed something in Jack, and he never ceased to feel the tragic inner sense of loss”.
London’s sense of loss may be felt by great many in the near future who are not propped up by the US Government.
It’s a harder call to frame a pure eviction moratorium as a taking. I suspect that’s why Senator Warren went that route–if she actually reduced rents by legislative fiat (without other governmental reimbursement of the difference), that probably a taking. After all, the purpose of such rent reductions would simply be for public benefit (to prevent large scale evictions and the related social problems) by singling out landlords to bear the financial burden. That’s the whole purpose of the Takings Clause–to prevent the few from being compelled to sacrifice property without compensation for the benefit of the many.
However, by framing as a moratorium, the bill distances itself from directly taking legally owed money from landlord’s pockets. I’m sure, as a bankruptcy scholar herself, she is aware of this distancing. A clever attorney would argue that a moratorium defers the obligation to pay rent, without eliminating such obligation, so _at most_ the just compensation owed to landlords (should a court find a taking) would be the time value (i.e., interest that could have been earned) on the unpaid rent. In making this argument, the attorney would further point out that there is never a guarantee of rental payments (tenant bankruptcy is always an option), so the moratorium by itself did not take away the landlord’s contractual right to rental payments or the possibility that the tenant would occupy the leasehold rent free for a period of time.
With that said, it’s far too clever and generates legal drama where none is necessary. If one wants to prevent evictions and avoid legal gymnastics, reduce rents by a percentage and have the federal government make up the difference. No takings problems.
Renting the property you “legally own” involves risk of loss. Rentiers, whether Black Rock or Grannie, get priority of payment only because the game is rigged, in part thanks to Biden, Clinton and Obama.
Risk of loss is not the same as risk of confiscation.
Quick question for those who may know: My landlord is a pain EX: The day i was to meet her to sign my lease last year, she texted to ask if it was ok to raise the rent an hour before i was to meet her. This year she wanted to raise the rent again but i refused, she agreed and gave me a lease renewal form already signed by her. One for me and one for her. Anyways a few hours after she dropped it off she texts to say i now need to get renters insurance because she changed plans to save money. If i already returned a signed copy of the prior lease renewal to her, am i legally forced to accept a new lease?
Tenant-landlord laws vary by state. I’d suggest doing a quick search your state’s code and seeing what kind of protections you have. In Montana, that would not be allowed (unilaterally changing the lease after it’s been signed) but IANAL and your state laws may vary. If you can’t figure it out be reading your state’s T-LL code, I’d suggest getting in touch with your state legal services clinic.
You could look at NOLO: Every Tenant’s Legal Guide. Probably a copy in the library, if that is still a thing?
I wouldn’t. You have a signed agreement with her. Who cares what the law says? Make her make the next move, then assess your options. Most likely, she’s just trying to back you down. I would stand up to her. And also begin making plans to move. If nothing else, you need a contingency plan.
Silly thought, but, a hundred years ago, or so, small businesses often had the shop on the ground floor, (“getting in on the ground floor,”) and the proprietors living above in a flat in the same structure. Now, most businesses are mandated to be set in stand alone structures, generally in municipality zoned “business districts.” The owner/operators live in separate houses elsewhere, in municipality zoned “residential districts.” This splitting of the functions and facilities leads to suburbanization. If, as many here have asserted, a more Nineteenth Century “densepack” form of urban living is appropriate, for many reasons, a return to the old “live above, work below” form of small proprietership would be in order. It will serve many socially useful functions, such as the removal of a segment of the ‘needed’ living quarters stock, a consolidatiopn of the population into higher density nodes, and the removal of a generally wealth regressive factor, the need for two mortgages for one family store.
Per Warren’s bill-o-mania; the Technocrats were never really in charge of anything. They were just intellectual labourers for the Oligarchs. How to wake the Technocrats up from their Fever Dream and let them discover who their real allies are? By the time they are sharing the tumbrils with the Neo-Aristocrats and arguing over precedence at the guillotine, it will be too late.
Silly thought #2 — Local governments serve the interests of local land developers and rentiers. We cannot have mixed commercial and residential [of course you might prefer a next door retail shop to having a perfumier or a knacker in the ground floor building next to you]. The trouble is that the design for local development shifted to newly planted trees along winding roads of lawn surrounded houses. This benefited our Automobile, Steel, Glass, Rubber, and affiliated industries — as they demonstrated with their investments in local cable cars and their determined scatterings of their right-of-ways and land four-ways to the winds and most to the cold Northern winds.
Warren’s bill-o-mania. only leaves me wondering who is her ‘daddy’ [or ‘mommy’ to be politically correct]. I believe bills do not appear from nowhere, and few are the work of a particular politician, or even their staffs.
Our betters are not too worried about their “precedence at the guillotine”. They believe they can be long-gone in their bunkers before things come to that. They believe they have funded plenty of MRAP vehicles, assault weapons, and ammunition to the police who ‘serve and protect’.
Actually, ‘you’ can have mixed use neighborhoods. Just look at how urban centres were organized a hundred years ago. I call this to mind because, the Reactionary Classes obviously wish, wittingly or not, to return us to those Halcyon Days of Yore. Their wish seems to be the return of massive wealth inequality. (Does anyone seriously think that the Aspirational Class imagines that they, as individuals, might end up on the “wrong end of the stick?”) Mixed use “densepack” urban areas were the order of the day then as well. So, all I am arguing for is parity.
I do not agree that landlords have been singled out by this discussion to “take on the government’s role” [for providing housing]. [Before going further — did you invest in your buildings out of concern to provide housing for the whomever? Forgive me if I doubt that were your intentions. After having been a very small-scale landlord, I understand but do not sympathize with your concerns and laments. You, like I, assumed a risk in the hopes of securing a stable and comfortable future for us and my children — a very noble goal. But sorry the risk went sour as the Black Swan flies. Were you unaware of that risk? If so, you had no business investing in rental real estate.
If cash flows halt or if cash flows diminish — I do not believe landlords [or banks] or any other entity should have special stature at law protecting their very particular interests. “The point is, spread the pain around–don’t force it all on one party.” I agree with that sentiment completely. However, I am not sure landlords — as a class — share that sentiment. And do remember that individual landlords are but small category of landlords. I have no sympathies for Blackrock or their kin.
You argue against a supporter. Mixed use is not a new concept, nor an idea I oppose — but neither is it a concept without some caveats. [My favorite ‘story’ about this is a land-developer who purchased a large parcel within the limits of a town in Vermont. His every effort to develop a housing complex for wealthy Long Island retirees met failure at the local town council (this was in the late 1970s). Becoming angry, the developer used the agricultural zoning of his land to place a rather nasty Industrial pig-farm on his land.] In short — I am NOT a proponent for other than ‘rational’ restrictions on the mixed use of real estate — especially mixed use along Main Street. I am also strongly opposed to the many restrictions on the types and manner of construction allowed in residential zones — even merely zones within city or county limits. There are already more than enough restrictions, and I defy those who might argue they are needed for public safety in construction. That joke went by-the-way after too too many cases where our ‘zoning-protectors received a back-hand and the statute of limitations protected those back-handers from liabililty when slabs cracked, walls cracked, or entire houses slipped off their ‘inspected-approved-and-fee-paid’ ‘foundations’ into a ravine.
Sorry for the confusion on my part. Any slights on my part are regretted and repudiated.
My Dad, for a decade, was a City Inspector. I have stories about the ‘inside’ machinations and perfidies of City Administrations. It is one reason I am a bit of a Cynic.
Land use rules are a major tool in the forming and control of communities.
My bottom line here is the primacy of Health and Sanitation as regards the ‘livability’ and safety of urban areas.
This fiasco regarding the Dreaded Pathogen makes me fear the return of the sanitation linked diseases, such as cholera and the rest.
This one is simple enough, it could have appeared from nowhere.
Always love how ‘capitalists’ constantly make the mistake of conflating land and capital. Land is its own distinct factor of production, and humans played no part in its creation (outside of a few landfills), its quantity being a fixed variable. Privatized banking exacerbates the (unearned) income motivations derived from speculation in the rise of site value, a value which the community creates in the first place and has a rightful claim to. Socialize ground rents and the cost of ‘housing’ will eventually dissipate. This is not to say that emergency measures don’t need to be taken given the context of the current crisis. Write off unpayable rents for a given period and cut subsistence checks for everyone, land’lords’ included.
Land is the mother of all monopolies. Intellectual property is her cousin.
…the menace of legal privilege
https://www.hgsss.org/wp-content/uploads/2015/10/Georges_Economics_of_Abundance.pdf
I’m so done with her. I haven’t forgotten how she repeatedly stabbed Sanders in the back. Once I might have given her the benefit of the doubt, but I have nothing but contempt now for Liz. Just shut up, please.
Agree. Mz Warren seems to be the poster child for a new political class: The Educated Useful Idiot.
What is scary to me, is how far Warren came in the democratic primaries. I can only hope she in not on any lists for key appointments in either possible new administration … or on lists for any key senate committees.
This years primary season was an “enlightening” piece of performance art. Sanders was kneecapped so effortlessly, it makes me despair of peaceful change being possible any more in America.
I can see Warren being given some cabinet or sub-cabinet appointment, not in any way related to her primary field of expertise. A reward for her perfidy with no power at all. A figurehead appointment, say, head of the Department of the Interior, or, for a bit of “fun,” head of the Bureau of Indian Affairs.
Why are we singling out landlords to take on the government’s role. If we agree housing is a right, that implies the government should provide it (or compensates the party that does). No one is suggesting grocery stores be forced to give food away
This blog often focuses on socialist policies like medicare for all, jobs programs, affordable education, UBI, etc. These policies are paid for by everyone. Why for this one area, is a more communist approach dictated best. And that’s exactly what this proposal is: Seizing assets from a select group for the government’s use to provide welfare to others. Even if you intend to only seize it temporarily, its still seizure.
The argument here seems to hinge on the fact that the assets still exist once its commandeered. If that argument is sufficient, why not also apply it to other forms of assets. Ford’s assembly lines can continue to produce cars even if the government seizes them. Farms will continue to produce. We’re choosing to single out Landlords because its convenient
Yes, Landlords face a lot of deserved criticism. They benefit at the expense of all via the tax code. The government subsidizes them via Federal Reserve’s actions and Congress’ Freddie/Fannie mandate. Some landlords are unscrupulous and lobby for favorable development/zoning restrictions or take advantage of their customers who don’t have the means to fight back if the landlord doesn’t uphold their end of the contract. I’m all for tackling these issues, but non of them require the drastic Russia/Cuba approach of simply nationalizing them for the common good
And I’m not suggesting Landlords get a free pass. If their profit/rents are unsustainable–force the appropriate amount of pain on them. Maybe it makes sense for the government to reimburse them only their cost of providing housing (utilities, taxes, maintence,.. possibly mortgage) not their profit. The point is, spread the pain around–don’t force it all on one party
I do not agree that landlords have been singled out by this discussion to “take on the government’s role” [for providing housing]. [Before going further — did you invest in your buildings out of concern to provide housing for the whomever? Forgive me if I doubt that were your intentions. After having been a very small-scale landlord, I understand but do not sympathize with your concerns and laments. You, like I, assumed a risk in the hopes of securing a stable and comfortable future for us and my children — a very noble goal. But sorry the risk went sour as the Black Swan flies. Were you unaware of that risk? If so, you had no business investing in rental real estate.
If cash flows halt or if cash flows diminish — I do not believe landlords [or banks] or any other entity should have special stature at law protecting their very particular interests. “The point is, spread the pain around–don’t force it all on one party.” I agree with that sentiment completely. However, I am not sure landlords — as a class — share that sentiment. And do remember that individual landlords are but small category of landlords. I have no sympathies for Blackrock or their kin.
Exactly what risk are you referring to? Are you referring to the risk that the government would step in and say you have to provide a good to someone for free? I do not think many people prepared for that risk.. which is exactly the point. Should farmers have to worry about the risk they will be required to give food away for free. Should power companies have to give power away for free.. Car companies give cars away, and on and on. Having to worry about these risks questions the entire foundation of capitalism
Now, If your talking about the risk that the economy will sour and tenants will not be able to pay their agreed upon rent–a cashflow halt/diminish as you say–yes, I and presumably all real estate investors factor that this in. If that happens, you just lower rents to what current the market will bear, just like any other industry
I think the risk I am referring to is clear enough. As a landlord you take the risk that your tenant may not be able to or may not be willing to pay rent. As a landlord you depend on the government to help you make your tenant move out. As a landlord you also take a risk that unusual events may occur and change your standing and the standing of your tenant at law. The IRS could change a ruling to your favor or detriment. Your state or city government may change the equity laws determining the duration and dance of an eviction process. The Corona pandemic and its impacts on the economy are another kind of risk.
You suggest the “government would step in and say you have to provide a good to someone for free”. As a landlord you have already benefited from considerable government provisions of a good to you for free. If you’ve been reading the postings on this website you would realize the almost continuous increase in the value of real property was provided to you by the government, essentially for free through its monetary policies. The value of you property may have been increased by road construction or maintenance in your area, or changes to local zoning, or perhaps the construction of a school or the coming of a large employer to your community.
The Corona pandemic has resulted in a collapse of employment, and the flow of wages and salaries. Many tenants are unable to pay rent staunching the flow of rents to landlords. The landlords are hard pressed to pay their mortgage payments and the interest on their mortgages. The banks and financial interests holding the mortgages and their derivatives have been taken care of. The economic argument for interest as a share of the growth accruing to money loaned has collapsed. I don’t see that any party in the flows of payments should receive special standing.
There is one kind of party in this sketch who may feel injury — a landlord who holds free title to the property he rents. The rent may have been that landlord’s primary income. The provision of an income for purchasing food and other essentials has been a topic of other posts, and clearly the simple flow of rents is but one of many cash flows Corona has impacted which need an interim fix for the Public Welfare. But back to the situation of the landlord who feels injured — within the context of the larger crisis I cannot find a violin small enough to play a sad song. Besides — if that landlord thought about things a moment, an empty domicile at this moment could easily cost far more than the costs of carrying a tenant unable to pay rent but with some interest in caring for the property and perhaps feeling some human regard for the landlord.
Landlords in your world would just lower rents to what the market will bear. If the “market” will bear no rent — like now — then you should be pleased in receiving none.
I own two properties that I rent to others. One tenant pays full rent every month and the other tenant has said that he won’t be paying anything and that he will remain until he is evicted and then will likely be declaring bankruptcy if I get a judgment against him as he will owe me perhaps as much as $20,000 for rent and for the utilities that I am required by the state to pay on his behalf. I have enough money. I know that I own my properties and have some wealth in part because of favorable conditions provided by the government and lucky circumstance. I am frugal by nature and my lifestyle will not really be impacted by my tenant’s refusal to pay. But I would much prefer to get half the rent from each of the two tenants instead of all of it from the one that has decided to honor his contract with me.
In the financial crisis of 2009 I lost a lot and had to lower rents to keep my tenants. It was a stressful time, but I don’t remember feeling the way I do now. I’m grateful to my tenant that is still paying every month and I can understand the perspective of the other one. But I’m angry that the government is once again punishing good behavior and rewarding bad behavior. A friend suggested I should hire people who would get the guy to move out. Is that where we’re headed?
Thanks to Yves for bringing up this very important issue.
The HEROES Act had the core of a good solution….it would set up a fund which actually Paid the Rent (or at least most of it.) The tenant and the landlord would each benefit.
Here is a brief outline….(from the website of a Washington congressman)…
“The emergency rental assistance provision included in the HEROES Act is Rep. Heck’s Emergency Rental Assistance and Rental Market Stabilization Act, which provides $100 billion to help Americans pay rent during the COVID-19 crisis. The legislation distributes these funds through the Emergency Solutions Grant (ESG), an existing program that supports emergency short-term rental assistance. The ESG program has organizations throughout the country that can verify lost income and provide tenants with vouchers to cover the balance of their rent. By supporting tenants struggling to pay rent, this legislation also supports rental property owners of all sizes and bolsters economic recovery as Americans weather the pandemic”
If someone was unemployed, they would get help.
If 30 million persons remain unemployed and they each owed $1000 a month in rent, and assuming that the program paid $800 on their behalf, the federal dollars needed would be $24 billion a month.
We would have to wind the program at some point.
Warren and the others are trying to solve this issue without spending real money.
My own current writing on economic rescue plans does not make that mistake.
Since Warren has been an advocate of ditching the filibuster, perhaps this is best viewed as a short-term fix, designed to get the country into 2021, when a new Democratic Senate can abandon the filibuster and then be prepared to move massive legislation through in short order.
yes absolutely the the dems should go left… after the election, of course
promises promises
Not that I don’t think they’ll have massive legislation ready, it just won’t do anything to impact the lower orders lives except in the form of more bills to go with the student loans. insurance premiums and deductibles…while funneling MMT to the socialists in the c suites
While I agree with a lot on this forum (M4All, UBI, the evils of private equity, etc.) I must disagree with the piling on versus landlords. We are here because government, under thrall to neoliberalism and moneyed interests, has simply denied that affordable homeownership for the working class is a worthwhile policy goal. If it did we’d be fixing up the homes and selling them for a profit. But right now the only potential buyers are other landlords.
First of all, I deny that landlords of single-family homes (or duplexes, etc.) are properly a “rentier” class. It’s not true that we produce nothing. We fix up homes, and maintain them. The idea that “the property will be still there” no matter what is sheer lunacy. Yeah, it will be there, just like a house under foreclosure is “still there”. You’re not moving people in there tomorrow. You’ll have to fix the plumbing, the electricity, the flooring, the painting, the roof, the windows, etc., etc….., which will often amount to several tens of thousands of $$$$. This is not like a “landlord” in the proper sense who rents out his land to tenant farmers, and he need do absolutely nothing except cash the rent check.
Second, while a temporary emergency stay of evictions can be justified under the facts that it is an emergency (and only during the emergency), any attempt to grant a “rent holiday” is a taking, legally speaking, and the government will be legally obligated to reimburse the landlords. This is right. The government cannot oblige a landlord to grant the use of his property to another party for absolutely free, while he is still on the hook for property taxes, mortgages, repairs, etc. But what is so wrong with government reimbursing landlords, I would like to know? (And please don’t give me the “we can’t afford it” line after the multi-billion dollar bailout of airlines.)
Third, we are providing tenants with the opportunity to live in a home, which they would not otherwise have. This isn’t right, but it isn’t our fault. Although tenants could afford a mortgage to purchase the property, they won’t get one because either their credit isn’t good enough or banks simply categorically refuse mortgages under a certain amount. We disagree with this, but we didn’t make these policies. And our lenders simply refuse to make land contract-type deals which would make the tenants the de facto owner.
So, you want more affordable housing for all? So do we. Just don’t insist we’re the bad guys.
I am probably the first person to leave a post here that actually is a landlord. And I have some low income rentals. So here is how it really works: First, we are actually not hurting that bad, with the exception of some places like NYC. People are mostly coming up with rents. Second, I’ve had less “turnovers” during this pandemic. Actually, I’ve had close to zero, a radical departure, as usually 20 units turnover during the springtime. That is profitable for me.
Now, evictions. Most of the rental housing stock is in the hands of private owners. We need laws to help us remain profitable. This is somewhat of a low margin business, with the majority of our profits are actually from paying down our mortgage over time plus appreciation of assets. It doesn’t take that many delinquent tenants to make a property bleed.
Let’s say a property bleeds. Good landlords have reserves, but most would start to wobble if they had numerous tenants who don’t pay for a year. More housing instability will be created from an apartment foreclosure than simply evicting the errant tenants. From experiences in low income housing foreclosures, lots of buildings were eventually emptied out when the landlord ceases to be involved. The buildings get blighted and vandalized. Someone eventually buys them, but the bank bleeds a lot more than if they did a workout with the original borrower.
I think you just can’t put a full year moratorium on evictions and offer nothing to the landlord. You would think they could at least cut our real estate taxes. Nope, they want it all.
Going to the bank and asking for relief has consequences. The banking relationship is probably toast. The loan is forced to go into special servicing. Most loans are 5 year loans that are renewed. They won’t easily renew these loans. Loan modifications are a big mess.
Well, lots of lower quality office buildings and hotels are headed to foreclosure in the next year. Maybe protect the tenants and just let a batch of apartment buildings follow suit. With the government bailing out so many sectors of industry, it kind of hurts as a landlord that government takes away from our industry.
Hi Brian. Thanks for explanation. You mention property taxes. I don’t know of anybody in government who has missed a paycheck or even an hour of pay. What % is the property tax as compared with the gross rent? Thx!
Not to presume to answer for Brian, but in our half-horse town, the annual property tax for a not owner occupied first home, (our state does have a property tax exemption for owner occupied first homes,) equals out to, (from several cases I have gleaned from private conversations over the last year,) about twelve to fifteen percent of the annual rent expected from the property. This is on top of the monthly “service fees,” such as: water, sewer, garbage pick-up, recycling. The service fees, being held to be the responsibility of the renter, are purely regressive. A wave of evictions will have a negative impact on municipal revenue streams. No renters equalls no fees collected.
One big reason for the preference for ex-urban living is the much lower taxes and service fees. Oddly enough, here on the Gulf Coast, many water and sewer and garbage collection fees are now by county or parish. The coastal and second tier back from the coast counties here in Mississippi are under a Federal Consent Decree to enforce county wide “services.” The groundwater pollution from septic tanks in denser populated areas was becoming a problem. Centralized sewage collection systems were mandated at the county level by the Feds. The same with garbage collection. As can be expected, corruption expanded from just a nuisance into a systemic cancer on the body politic.
I am not currently a landlord, but I was a landlord some years ago. Neither a temporary rent moratorium, nor eviction moratorium solves the problems at hand. Warren’s bill is theater. If the Federal government takes no more action than what it has the collapse of rents will hold a small place among the chaos that could come.
You wrote: “… the majority of our profits are actually from paying down our mortgage over time plus appreciation of assets”. Consider what that statement means. At least a part, and perhaps the larger part of the returns on your property investment are returns to a speculation.
“More housing instability will be created from an apartment foreclosure than simply evicting the errant tenants.” — This statement of yours coupled with your pleading for relief from property taxes make very strong arguments for the need for far reaching actions by the Federal government in place of theater and bailing out and giveaways to not so many sectors of industry. “People are mostly coming up with rents.” — for how long? My neighbor in the downstairs unit has sold everything he has of value. Nothing is left to sell and his situation is not improving.
“Most of the rental housing stock is in the hands of private owners.” — I am not sure that is still true, but regardless, the CARES Act was designed to assure it will not be true in the future. Private landlords, like small and medium businesses are one ‘harvest’ Big Money intends to gather from the Corona pandemic.
“Private landlords, like small and medium businesses are one ‘harvest’ Big Money intends to gather from the Corona pandemic.”
yep, just creating another bagholder, they already fleeced the poors, now they’re leveling up…
If the government actually pays the rent, or most of it, as I propose, then landlords do not default, banks do not need to be rescued (on this issue at least), and tax collections keep flowing in.
My estimate is it would cost $20-$24 billion a month to pay the rents of people who are unemployed. This is much cheaper than the bailouts I just noted.