The Permanent Housing Crisis

Continuing government bans on eviction and foreclosure are doing more harm than good

WSJ editorial.

"One problem with government emergency actions is that the political class never wants them to end. Witness the Biden Administration’s extension of the eviction and foreclosure moratoriums, which by now are creating more trouble than they’re worth.

The Consumer Financial Protection Bureau this week proposed a rule that would effectively prohibit foreclosures through December. It has also threatened to penalize mortgage servicers and landlords who don’t take action to prevent a surge in “avoidable foreclosures” and evictions when government forbearance programs end. 

In short, the government is bludgeoning private businesses to fix a problem it created. Suspension of rent and mortgage payments was justifiable last spring when states locked down and some 22 million workers lost jobs. But the jobless rate has dropped to 6% from 14.8%, and employers are desperate to hire.

The Cares Act from last March let borrowers with federally backed mortgages pause payments for 360 days. The law also imposed a 120-day moratorium on evictions in housing developments supported with federal funds. After the Cares Act eviction moratorium ended, the Centers for Disease Control and Prevention in September extended it through December and expanded it to all rental housing. Households making up to $198,000 qualify as long as they say they lost income due to the pandemic. 

The CDC invoked the 1944 Public Health Service Act, which allows the agency to take measures to prevent the spread of communicable diseases between states. People who get evicted might move in with family or friends and spread the disease, the CDC explained. What diktat couldn’t the CDC justify under this expansive rationale?  

Landlords say they increasingly can’t afford their mortgage payments, utilities, and maintenance costs because they can’t remove nonpaying renters. District courts have rendered conflicting decisions on the order’s legality that are being appealed. Meantime, the Biden Administration has extended the moratorium through June.

Most people hurting financially amid the pandemic have received plenty of relief from the government including direct payments—$2,000 per person since December—refundable tax credits and $300 in enhanced weekly unemployment benefits. They should also be able to find jobs.

The same goes for homeowners taking advantage of government mortgage forbearance. The Federal Housing Administration in February extended the deadline for requesting forbearance through June, which will let many skip mortgage payments through the fall. About 17.5% of FHA-insured mortgages are delinquent or in forbearance.

These crisis programs are distorting the housing market. Home values have soared in the past year amid increased demand (see nearby), so some borrowers currently in forbearance could avoid foreclosure by selling. Government forbearance may be contributing to a housing shortage by keeping people in homes they can’t afford and limiting supply for potential buyers.

The Biden Administration wants to maintain the air of pandemic crisis so it can take credit for coming to the rescue. But on housing, as on other things, it is now doing more economic harm than good."