Effects of Covid-19 on Real Estate
Covid-19 has affected everyone as well as most businesses. One primary industry that’s seen many unprecedented changes is real estate, including the rental and the housing market. Some of these changes have led to investors making tough decisions. Investors now have to consider the pros and cons of purchasing an investment property and gauge how it will go in the upcoming months or years.
This past year, heath orders such as the stay-at-home order greatly affected real estate. During the spring months, people were hesitant to leave their current positions, meaning that home sales dropped dramatically. In addition, during this time, fewer people were looking to move into a new home or rental unit.
Unfortunately, the pandemic also created some changes in home rentals for both tenants and landlords. The eviction moratorium has lead to some unfavorable changes for landlords and tenants alike across the United States.
If you’re unsure of what’s going on in the world of real estate, keep reading to learn about the effects of the pandemic, the eviction moratorium, and ways that real estate investors can navigate the ongoing obstacles.
What Effects Did the Pandemic Have on the Rental Market?
There’s no doubt that the pandemic has affected most social aspects of life, businesses, and more. The rental market is not excluded from these significant changes. Tenants and landlords are navigating ways to keep things fair for both parties. However, the eviction moratorium is making it hard for tenants to find a middle ground.
Along with that, there has been a dramatic increase in tenant criminality, lack of rental payments, and difficulty evicting poor tenants. Due to many people losing jobs and the declining economy, it’s no surprise that some haven’t been able to make rental payments on time. If you are a landlord who depends on the monthly income you get from your rental tenants, this could potentially pose a huge issue. However, just because the payments aren’t made doesn’t mean they don’t have to be. Despite the moratorium, tenants are expected to repay landlords the money that they are owed.
Not only has the moratorium affected the rental market, but other aspects of the pandemic have also changed things for landlords and tenants. For example, more people working from home has increased the number of people leaving their expensive city rental units for cheaper living options. In addition, without having to go to work in person, people are finding it more affordable to live on the outskirts instead of in the city.
With that, the pandemic hasn’t only had adverse effects on landlords. It has made some positive changes that landlords have been able to benefit from. For one, more people these days who don’t have a permanent place to live are looking for long-term rental options. This is guaranteed cash flow for landlords who are looking for long-term renters. While this isn’t always the case, this can eliminate some of the stress associated with vacancies.
With that, landlords also have the ability to raise their rental rates. After all, the pandemic has affected almost everyone, including landlords across the United States. Without receiving rental payments on time, having to take care of damages, and the inevitable inflation rates, landlords are permitted to raise their rental rates when they choose.
What is the Eviction Moratorium?
If you aren’t a landlord or tenant, then all this talk about the eviction moratorium may have you wondering what’s going on. Basically, the Centers for Disease Control and Prevention (CDC) has placed a temporary halt on evictions in counties where Covid-19 cases are rising or easily transmissible.
At first, the eviction moratorium started on September 4, 2020, and was set to expire in December. Unfortunately, that date is continuously being pushed further back.
The exact order reads as follows:
“CDC is issuing a new order temporarily halting evictions in counties with heightened levels of community transmission in order to respond to recent, unexpected developments in the trajectory of the COVID-19 pandemic, including the rise of the Delta variant. It is intended to target specific areas of the country where cases are rapidly increasing, which likely would be exacerbated by mass evictions.”
Unfortunately, this has posed some apparent issues for landlords. It states that evictions may cause a rapid increase in Covid-19 cases in some counties. However, it fails to recognize the loss of finances that landlords are taking each day. However, there are specific criteria that distinguish who falls under the eviction ban. Tenants have to provide their landlords with a written declaration that they fall under the CDC’s guidelines of the moratorium.
According to the CDC’s guidelines, just a few of the qualifications for the moratorium are as follows:
- Tenant(s) used all effort to gain governmental assistance for housing.
- In 2020, the tenant earned no more than $99,000 filing separate or $198,000 filing jointly.
- Tenant(s) cannot pay rent or housing payment due to loss of income, loss of work hours, or loss of wages.
- Tenant(s) is using best effort to make partial payments as close to the total amount as possible.
- Eviction would leave the tenant homeless or forced into close quarters in a shared living space.
- The individual lives in an area where Covid-19 cases are high or on the rise.
How Can Real Estate Owners Navigate the Moratorium?
Now that you know some specifics of the eviction ban and the effects of Covid-19 on the real estate and rental market, you may be wondering – is there anything landlords can do to fight back?
The question is difficult to answer. That said, there are ways that landlords can take action during these times. For example, the rent according to the lease does not change during this time, meaning that even if tenants cannot make payments on time, they must pay landlords in full when they have the money available. Along with that, there are still reasons for landlords to evict tenants despite the moratorium.
Some of the various reasons include:
- Criminal activity
- Health and safety violations or threats
- Extreme or unrepairable property damages
- Lease violations excluding on-time rental payments
Reaching out for help during the moratorium is recommended and reasonable for landlords in the United States. After all, there’s nothing wrong with seeking advice from professionals. Don’t be afraid to hire a property manager to help navigate the rules and regulations for your rental properties during the ongoing pandemic.