Eviction and foreclosure armageddons each postponed twice in under a month

Housing system remains a ticking timebomb as underlying problems caused by pandemic remain unresolved

Short on time? Read to the red line for the highlights. Want to learn more? Items that are bolded in the top section are expanded upon beneath the red line.

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What’s new at Housing for All?

Housing for All episodes 2 and 3 released

With our friends at Outrageous Mechanisms, we distill all the essential information you need to know about reforming the American housing system into 4 episodes. Since the December issue of the newsletter, episodes 2 and 3 were released. Episode 2 continued our discussion of housing systems that work really well (and what we can learn from them). After learning about housing in Norway and Singapore in episode 1, we visited the Netherlands, Austria, and Sweden in episode 2, and also had an extended discussion on rent controls. All 5 countries we talk about use rent controls because they are an important tool to make a housing system work well.

If you’re not a podcast listener, we’ll recap the major points from the podcast in this newsletter. If you want to learn more, the podcast really is worth checking out. Below, we’ll look at the housing system of Norway, which makes homeownership affordable to everyone.

Subscribe today! The final episode is due out soon.

New rent control ordinance in Portland, Maine

Because the December newsletter was so crowded, we postponed writing about this. But it’s big news! Despite being outspent approximately 33:1 and having the mayor and all but one city council member publicly oppose the measure, rent control organizers succeeded in Portland. Voters overwhelmingly approved a rent control referendum on election day in November (Portland is the most populous city in Maine). We’ll look at the nuts and bolts of Portland’s new rent control ordinance, and how it compares to other types of rent controls.

COVID-19 housing crisis is still of historical proportions

Majority of renters cannot afford rent, millions of Americans cannot afford food

The previous issue examined data showing that shocking numbers of Americans can’t afford basics like food in the wake of the COVID-19 pandemic.

  • Census Bureau data on the depth of suffering remain grim, with 12% of American households unable to afford enough to eat, a majority of renters unsure if they can pay next month’s rent, and a majority of households reporting difficulty affording usual household expenses.

Eviction moratorium

Since the December issue of this newsletter, the eviction moratorium was extended twice, first under President Trump on December 27 and again under President Biden on January 20, his first day in office.

  • Under Trump, the moratorium was extended to January 31 as a part of the stimulus package. Capitol Hill reporters believed this to be a done deal on December 20, but the stimulus bill did not actually pass until December 27. President Trump threatened to veto the bill because he wanted $2000 stimulus checks to all American households, but the bill passed by Congress only included $600 checks. Trump eventually relented and signed the bill on December 27.

  • The eviction moratorium was a part of the stimulus package. The law simply extends the eviction moratorium imposed by the Centers for Disease Control to January 31. The law does not make any changes to the existing CDC moratorium, a measure we discussed at length in the previous issue.

  • Without this bill passing, the eviction moratorium would have ended on January 1. If you’re not one of them, try to imagine the terror tens of millions of Americans who can’t afford rent must have felt not knowing if they would have a place to live until 4 days prior to doomsday.

  • Bernie Sanders, a key ally for the $2000 checks, attacked Trump’s delays, saying "What the president is doing right now is unbelievably cruel.” With literally tens of millions of Americans unable to pay rent, January 1 would have been an eviction armageddon, sparking a homelessness crisis of historical proportions in the middle of winter. This was averted with only 4 days to spare, and while $600 checks may be incongruent to the scope of the problem, sacrificing the entire bill (including $600 checks plus the eviction moratorium) would have been a cataclysm.

  • Prior to taking office, President-elect Biden indicated that he intends to extend the eviction moratorium until September 30 and wants Congress to pass additional financial assistance for renters. On his first day as president, Biden extended the eviction moratorium to March 31.

Without something fundamental changing, we will see a catastrophic homelessness crisis the day the eviction moratorium is allowed to end. As discussed in the previous issue, a typical renter benefitting from the moratorium owes several thousand dollars in back rent and utilities. The amount owed is too great for a typical renter to ever catch up on; to expect people who lost their jobs due to the pandemic to catch up on 6, 7, 8, or more months of unpaid rent and utilities is preposterous.

  • The stimulus includes $25 billion in financial assistance for renters to cover unpaid rent and utility bills. However, the National Low Income Housing Coalition estimates(pdf) that American renters are collectively behind on rent and utilities by $100 billion.

More about the eviction moratorium:

  • The previous issue mentioned the eviction moratorium’s many loopholes. Though certainly better than nothing, the moratorium was poorly conceived and countless people who should be protected are falling through the cracks, forced into homelessness after losing their job or having hours reduced due to the pandemic. Neither President Biden nor Trump addressed this issue.

  • Eviction Lab and Nolo continue to keep track of state eviction moratoriums, and you can find out what will happen in your state if the eviction moratorium is allowed to expire, as scheduled, on March 31. The previous issue discussed the massive variation of approaches between states.

Foreclosure moratorium and mortgage forbearance

The foreclosure moratorium has also been extended twice since the December issue. First, it was extended until February 28 under President Trump on his last day in office. Then, the very next day — the first day of his term — President Biden extended it to March 31. In addition to the moratorium, borrowers have the right to put their loan in forbearance for up to 360 days (meaning they do not have to make payments) if they are experiencing financial hardship due to the pandemic. Full details on the foreclosure moratorium — which offers far superior protection than the eviction moratorium, but is more limited in scope — as well as forbearance can be found in the previous issue.

  • One of the biggest limitations of the foreclosure moratorium is that only loans owned or guaranteed by the federal government are eligible. Ironically, Fannie Mae and Freddie Mac’s portfolios have the lowest forbearance rate.

  • Though dramatically improved from early on in the pandemic, mortgage delinquencies remain an immense problem and we face a looming foreclosure crisis if serious steps are not taken.

    • The good news: since the forbearance program started, 3.7 million homeowners have ended forbearance. These are happy endings: that’s 3.7 million households who could not make their monthly payment, but now can.

    • 2.8 million homeowners remain in forbearance as of December.

    • 54% of households who remain in forbearance have little or no confidence in their ability to resume normal monthly payments once their forbearance ends. Forbearance will expire for 25% of all loans in forbearance in March. This means that we are staring down an imminent foreclosure crisis if nothing changes.

Justicia continues to track state-level foreclosure protections.

Housing in Norway: What if everyone could be a homeowner?

If you’re not a podcast listener, we’ll spend the next few issues summarizing the major points of the Housing for All podcast. This issue: Norway.

You think homeownership is the American dream? At 80%, Norway’s homeownership rate is far higher than in the US. However, homeownership is not desirable for many young people early in their career, who choose to rent in order to remain flexible for work or educational opportunities. A whopping 95% of Norwegians will become homeowners as an adult.

Norway accomplished this high homeownership rate with public, subsidized loans. Starting just after World War II, public banks began issuing loans with subsidized interest rates so a typical household would only pay 20% of their income on housing. The goal was to maximize homeownership: no down payment was required until 2010(!), and for those unable to qualify for a public loan, the government offered cash down payment assistance.

In this way, affordable homeownership was available to all, even the most disadvantaged.

Crucially, anyone with a public loan had price controls on their home: if they ever needed to sell their home, they could only sell it at an affordable price. The logic was simple: if Marit and Haakon got assistance buying a home, they should be expected to pay it forward to future generations. If everyone with a public loan can only sell their home at an affordable price, then there will always be an ample supply of affordable housing and Norway’s splendid “homeownership for all” model can continue to work forever.

A major disappointment of Norway’s housing system is that Norwegians forgot how bad their housing system was prior to reform, and beginning in the 1980s, have allowed many of the most important planks of the housing system to be repealed. In the past, any Norwegian — no matter how disadvantaged — could become a homeowner. Their children, despite growing up without some of the advantages of their peers, nevertheless eventually inherited wealth through their parents’ home. Now, there is a subset of Norwegians for whom homeownership will never be realistic, with their children denied the possibility of inheriting housing wealth.

Now, you might think: with so much government support for homeownership, of course, Norway’s homeownership rate is higher than that of the US. However, the US has a similar level of support for homeownership as Norway, it’s just not as obvious as it is in Norway. That’s the topic of episode 3: American mortgages aren’t so different from Norwegian state-owned, subsidized mortgages.

We learn all about the Norwegian housing system in episode 1 of the Housing for All podcast. Subscribe today!

Census Bureau data continues to reveal unthinkable suffering in wake of COVID-19 pandemic

According to the latest Census Bureau data, 12% of all households and 16% of households with children reported not having enough to eat earlier this winter. An additional 26% of all households and 28% of households with children reported having enough to eat but having to cut back and buy foods they do not like to save money — that means that well over a third of Americans struggle to afford food. These data cover early December, and that’s no way for people to be spending the holidays in the richest, most powerful country in the history of the planet — or anywhere, for that matter.

Massive numbers of Americans are unable to afford their housing. Only 63% of homeowners with mortgages reported “high confidence” that they could afford January’s mortgage payment. Even more shocking, just 36% of renters reported “high confidence” that they could afford January’s rent payment.

Appalling numbers of Americans continue to be forced back on essentials. A minority of Americans are able to meet their basic needs: just 39% of households reported it was “not difficult at all” to afford “usual household expenses during the coronavirus pandemic.” 19% reported it was “somewhat difficult” to do so and 17% reported that it was “very difficult” to do so, meaning well over a third of Americans have made substantial cutbacks to their essential needs.

Much-needed rental assistance in the new stimulus package

Part of the stimulus passed on December 27 is $25 billion for rental assistance. The money is distributed to states; the National Low Income Housing Coalition has a map and directory of agencies where people can apply for assistance. Assistance is means tested:

  • Someone in the household must qualify for unemployment benefits or be able to prove loss of income due to the pandemic.

  • Households must prove that they are at risk of becoming homeless without aid.

  • Households must provide copies of past-due rent statements or past-due notices from their landlord.

  • 2020 household income cannot exceed 80% of the area median income (AMI; in other words, a household must be in the poorest ~40% of their region).

  • States are to prioritize applicants at 50% or less of AMI and those who have been without work for over 90 days.

As discussed in the previous issue, tens of millions of Americans owe several thousands of dollars in unpaid rent and utilities. These bills are simply unpayable: no amount of time will enable households to catch up. Simply extending the moratorium over and over will not fundamentally change the situation because people who lost their jobs or had their hours cut will never be able to catch up on missed bills: this is the logic of rental assistance.

However, the stimulus only provides $25 billion and the National Low Income Housing Coalition estimates(pdf) estimates that $100 billion is needed. In other words, this aid does not match the size of the problem, and tens of millions will still face homelessness as soon as the eviction moratorium is allowed to end.

For those lucky enough to receive aid, up to 12 months of unpaid rent and utilities will be paid directly to the tenants’ landlords and utility providers.

COVID-19 foreclosure crisis looms

We discussed the foreclosure moratorium and forbearance in the previous issue; here, we’ll look at the looming foreclosure crisis.

In brief, anyone with a loan owned or guaranteed by the federal government — that’s most of them — are eligible for forbearance (they do not have to make their monthly payments) for 360 days, and they cannot lose their home in foreclosure.

First, there is a great deal of good news: 3.7 million homeowners have ended their forbearance. That’s 3.7 million households who needed forbearance because they could not make their monthly payment, but no longer need forbearance. That’s great progress!

Unfortunately, 2.8 million homeowners remain in forbearance, and homeowners are only eligible for 360 days of forbearance, even if they are still encountering financial hardship due to the pandemic at the end of 360 days. 54% of households who remain in forbearance have little to no confidence in their ability to resume normal monthly payments once their forbearance ends. In other words, US homeownership is sitting on a ticking time bomb: that’s 1.4 million probable foreclosures if nothing fundamentally changes. For perspective, in 2009 — the height of the catastrophic foreclosure crisis — 2.8 million homeowners were foreclosed on.

Many of these struggling homeowners are approaching doomsday. According to Black Knight’s data, a quarter of all loans in forbearance will reach their 360-day limit in March. This means an imminent foreclosure crisis, with limited time to avert it.

As discussed above, the foreclosure moratorium was extended from January 1 to February 28 and again to March 31. That means that no foreclosures can actually occur until April 1. But with forbearance periods about to start expiring in large numbers, we can expect to see a wave of foreclosures.

Finally, there are 369,000 homeowners who are behind on their mortgage payments but unaware they are eligible for forbearance. This is a serious problem; these people might lose their homes — and their life’s savings — simply because news of the forbearance program hasn’t reached them.

Rent control in Portland, Maine

Portland’s rent control ordinance faced very long odds. Part of a package of 5 ballot initiatives in the November 3 election, rent control faced tremendous opposition. Portland’s mayor and seven out of eight city council representatives publicly opposed all 5 measures. Opponents of the measures spent around $1 million campaigning against them (in a city of 60,000!); the coalition supporting them raised well under $30,000. And, just three years ago, voters overwhelmingly rejected a similar rent control referendum, with nearly 2/3 of voters opposed.

This time around, organizers did the necessary legwork. Huge numbers of volunteers took the time to patiently explain — and address misconceptions — about rent control to their fellow citizens. It worked. The rent control referendum passed with a 58% majority.

How does Portland’s new rent control work?

Rent control discussions can get very muddy very quickly because “rent control” has no single definition. I find it helpful to use the terms “rent control” and “rent stabilization” but there is no uniformity; ask 10 different people to define rent control and you are likely to get 10 different definitions.

The terms “rent control” and “rent stabilization” are used in New York City. Rents for rent controlled apartments in NYC are calculated based on the cost for the landlord to responsibly manage and maintain the entire building, plus a small profit. The key here is that the market plays no role; rents are based on the cost of maintaining a building and have no relation to the supply and demand of rental housing.

By contrast, rent stabilization does not regulate rents per se, but rather imposes a limit to the amount a landlord can increase rents. This amount varies year-to-year in NYC. Oregon has a state-wide rent stabilization law, which allows for a 7% increase in rent plus inflation each year. For rent stabilization, the market for rental housing plays a fundamental role: the initial rent level is the market rate for rent. Thereafter, if there are upward market pressures on rents (ie, there are more renters looking for housing than there are available apartments), then rents will increase. If not, rents will not rise. In other words, market forces still influence rent levels, but the amount that rent can be increased is limited by rent stabilization regulations.

In sum, rent controls can lower rents, whereas rent stabilization can only slow down how quickly rents increase.

This naming convention (rent control vs rent stabilization) is not universal. New York follows this convention but Oregon’s rent stabilization policy is still referred to as a “rent control.”

Portland’s new ordinance is rent stabilization: landlords can only raise rent once per year and only to match inflation or landlords’ costs (such as increased property taxes). Landlords can never raise the rent more than 10% in a year.

Jack O’Brien, who organized Portland’s 2017 and 2020 rent control referenda, argued that one reason the referendum failed in 2017 but succeeded in 2020 was that rents went up by $300 in the short time between.

Portland’s new rent stabilization ordinance is very strict. Landlords can only raise rent once per year, and only to match inflation. Landlords can increase rents more than the rate of inflation, but only if they experience increased operating expenses (such as higher property taxes). If the landlord can’t prove their operating expenses increased, they can only increase rent by the rate of inflation. Compare this to Oregon’s rent stabilization law, where landlords are allowed to increase rent by inflation plus another 7%. The landlord does not have to justify that 7%; if the landlord thinks she can get away with it, she can raise rents for no reason at all. In 2020, that meant that landlords could increase rents by a whopping 9.9% with the stroke of a pen.

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