Battalions of Sorrows: Part 3, The Only Thing Worse Than Evicting

There is only one thing in the world worse than evicting, and that is not being able to evict.
– The management handbook at Dorian Gray Apartments

Three and a half years after it began with the best of intentions, state-level programs and laws intended to help residents avoid eviction have cost many of the country’s largest, best and most ethical affordable housing owners upwards of half a billion dollars – and the total keeps rising. 

It’s a financial epidemic that is invisibly ‘disemboweling’ (as one nonprofit confided to me) our nation’s best, and it’s unlikely to abate any time soon.  I’ll extrapolate on their behalf as those suffering endure largely in stoic silence. 

Abode in Los Angeles reckons it’s lost $8 million to rent arrears, of which only 45 percent ($3.6 million) was covered by relief funds, leaving them $4.4 million out of pocket. Community Roots Housing of Seattle figures its losses at $9 million. Beyond these two on-the-record data points, every owner with whom I spoke (off the record) confirmed they were experiencing similar loss levels. HPN has over 100 members; at $4 million apiece, that is $400 million, among large non-profits alone. Add in the smaller nonprofits, and the many large nonprofits, and it’s clear the damage is north of $500 million, and rising at a rate of $100 million a year.

How on earth did we get here? Blame COVID-19 and our response to it. 

During the summer of 2020, and partially in response to the George Floyd protests and riots, many states and municipalities enacted eviction protection measures, which were capped in September when the CDC issued an order banning eviction nationwide. Regardless of the value of minimizing eviction wherever possible, which I covered in Eviction Minimization Done Right, I immediately thought the CDC’s order a wildly Unconstitutional overreach – and 11 months later, the Supreme Court effectively agreed. Lifting the CDC order, however, did not and could not address state or local statutes, and these continued in force long after COVID-19. Most of them are in force today – and by now, most have evolved in ways that almost no one foresaw.

Typical of the progressive response to the eviction risk was Massachusetts’ expansion of its Residential Assistance for Families in Transition (RAFT) program, which began life in 2005 to “provides short-term financial assistance to low-income families who are homeless or at risk of becoming homeless.” When COVID-19 hit, the City of Boston overlaid judicial relief atop RAFT declaring, “Applying for rental assistance may ‘stop the clock’ on the eviction process if you currently have a case in Housing Court.” 

Boston Housing Court judges have read ‘may’ to mean ‘must unless faced with compelling evidence otherwise.’ Specifically, a tenant in a Boston property can choose voluntarily to stop paying rent, wait until served with an eviction notice, go to court with a RAFT filing even up to one day before the judgment…and receive an automatic stay. Whether the tenant was in arrears before, or that the maximum possible RAFT relief will be below the current rent arrearage – those facts don’t matter. The owner is nearly always admonished ‘to work something out’ with the tenant and return on a stipulated future date. That interval of time having passed with no resolution, the owner returns to court, usually to repeat the process, possibly in front of a different hearing judge who imposes the same work-it-out interval. 

Meanwhile, a tenant using the RAFT strategy will often decline to respond to income recertification requests from management. If these are not obtained—and a savvy non-paying tenant has little incentive to cooperate—then the Department of Housing and Urban Development stops payment on any Section 8 subsidy for the apartment, massively multiplying the rent loss because it is no longer tenant share but the subsidy as well. Once it becomes clear that the system can be gamed, and this becomes known throughout the complex, what began as an isolated incident can be an outbreak where a quarter or more of the residents are living free. Robin Hughes, CEO of the Housing Partnership Network, was quoted in Shelterforce as saying, “Having 20 percent, 30 percent of your tenants not paying has a significant impact on you being able to keep up with day-to-day maintenance and keep the property afloat.”  

Nor is the Boston experience unique. HPN’s Robin Hughes was quoted that “in places like Washington, DC, it could be a whole year before an eviction is processed. We’ve seen that in Michigan as well.” From my knowledge, it’s at least half a dozen other cities and states, and HPN’s members report that “higher rent arrears often correspond to what the eviction process looks like in a given state or locality, and how long the courts take to process evictions.”

All because eviction is estopped as a remedy.

As Steven Landsburg puts it, “Most of economics can be summarized in four words, ‘People respond to incentives.’ The rest is commentary.” My corollary is, if a system can be gamed, it will be gamed. I’ve seen it first-hand in affordable housing, whether HUD resident income recertification, New York City rent stabilization or rent control in Cairo and Mumbai. Now it’s here with eviction. 

State and local elected officials are slowly waking up to the problem. Early stirrings have been limited to expressions of sympathy, recommendations that some other part of government should do something, warm words without action, or promises of relief in a future legislation session.

Overreact in haste, repeal half a billion dollars (or more) later.