Facing a staggering amount of back rent, hundreds of thousands of individuals and families may be put out of their homes this year as the eviction moratorium comes to an end, according to research from Goldman Sachs.
Following the Supreme Court’s decision last week to strike down the pandemic-era policy that kept renters in their homes despite being unable to pay, economists at the investment bank said on Monday that about 750,000 US households will ultimately be evicted later this year, barring action by Congress.
Crunching data from the Census Bureau and landlord trade groups, Goldman estimated that roughly 2.5 to 3.5 million American households are behind on rent, with landlords owed as much as $17 billion.
Delinquent renters appeared to be safe from eviction until at least October. However, the high court’s decision to lift the federal ban on evictions indicates that further action may need to be taken from Congress, which the justices cited as having ultimate authority on the matter.
While renters in larger states like California and New Jersey, are currently shielded from eviction under state laws, "roughly 90% of the country will lose access to these emergency protections” by the end of next month, Goldman said.
"The end of the eviction moratorium is likely to result in a sharp and rapid increase in eviction rates in coming months unless Emergency Rental Assistance (ERA) funding is distributed at a much faster pace, or Congress addresses the issue," the report added.
Landlords confront bitter reality, few options
Other estimates see the potential for even greater fallout as the eviction protections expire. The National Equity Atlas, a project of Right to the City and the University of Southern California, estimated recently that more than 6 million households were behind on rent as of early August.
Congress authorized almost $47 billion in rental assistance but the pace of funds being distributed by state and local governments remains sluggish; roughly 11% percent of more than billions in aid has been given out, according to estimates released by the Treasury Department.
Meanwhile, property owners have financial problems of their own as their own costs mount and tenants — many of whom haven’t paid rent in a year — continue to occupy their units.
Among those who have voiced concern over the rental assistance program is one small landlord in Montclair, New Jersey who spoke to Yahoo Finance on the condition of anonymity.
“I have a two family non-owner occupied property so there's no funding available in my situation,” the person said.
To that end, under the new legislation in Montclair, the moratorium will end in August for renters whose households make at least 80% but less than 120% of the area's median income (AMI).
However, the moratorium continues through the end of the year for households with incomes below 80% of the AMI, which is $99,500, according to Census records.
“They made it way too easy and they keep changing the rules and they keep becoming more and more lax as the time goes on,” the landlord added.
Like many other landlords, the situation is getting dire for this Montclair property owner. The person’s tenant owes more than $33,000 in unpaid rent dating back to April 2020. The landlord was forced to put a mortgage loan in forbearance in order to get by; meanwhile, the tenant has not applied for rental relief.
The landlord tried to have a credit bureau claim filed against the backlogged tenant, which prompted the renter to try and strike a deal. However, New Jersey law protects the tenant until September, the landlord explained.
Meanwhile, the process of recovering back rent through the emergency rental assistance program remains slow. According to Goldman’s analysis, it could jeopardize an additional 1 million to 2 million households once state protections expire on September 30.
"The strength of the housing and rental market suggests landlords will try to evict tenants who are delinquent on rent unless they obtain federal assistance," Goldman Sachs analysts wrote.
Without new legislation, landlords are also hiking up prices as COVID-19 restrictions end and housing demand spikes. According to RealPage, newly signed rents surged 17% in July compared to the amount paid by previous tenants, reaching record highs.
If an eviction crisis emerges, it would create new inventory of available rental housing, and somewhat offset the increase in housing costs, according to Goldman.
“I've had four people ask me for an apartment in the last month,” the small landlord told Yahoo in an interview.
However, evictions could slow down the job growth and household consumptions, and the risks for Covid infections and public health are more severe, the report said.
The end to the eviction ban has been marginally helpful to landlords and property owners who have been struggling to pay high costs associated with taxes, insurance, utilities and upkeep.
However, some have already been forced to sell their property as debts mount, and the impact of having tenants live for free — for over a year — may linger.
“But I'll still have that nut at the back end of my mortgage, if I decide to refinance, it'll end up costing me a lot more money or I'll have to pay off a balloon payment at the end or I'll have to refinance it,” the New Jersey landlord explained. “So either way I still have to pay more in finance charges.”
Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter: @daniromerotv