Moratoriums are a disaster for ordinary landlords


(Given calls to extend the state and federal moratoriums on rent, the foundation is reprinting its essay of a year ago warning of the damage that such a policy will do to small landlords.)

Private property, a foundation block of western civilization, is under attack on many fronts in today’s America. It’s not surprising that the radical left-wing rioters have been calling for further progress on the road to implement Marx’s plan for a socialist utopia.

Signs calling for abolition of rent and destruction of property are standard fair at a Black Lives Matter rally. But perhaps the greatest blow against our right to own private property was struck by the federal government. It was an order issued by the CDC (Center for Disease Control) to place a moratorium on evictions from residential property.

Americans who believe in individual freedom and personal responsibility might themselves feel homeless in the current array of political parties. Democratic mayors and prosecutors in many cities allowed the social justice mob to destroy store fronts, factories and churches, causing a great deal of bodily harm along the way.

In some midwestern towns, volunteers took to arming themselves to protect the lives, liberty and property of their neighbors in lieu of the police their tax dollars have paid for. This, of course resulted in deadly violence, as the mobs don’t respect the very premise of private property, much less an individual’s right to defend it.

And even Republicans in Washington turned on those who had counted on them to protect them from the mob. And because of election year politics, few Republican congressman had anything to say in opposition to the CDC’s unconstitutional dictate. Only Rep. Thomas Massie and Sen. Rand Paul, both Republicans of Kentucky, condemned the power grab publicly. For despite the unfortunate politics of it, private property must be defended — from all enemies, regardless of party.

In Indiana, Gov. Eric Holcomb followed the lead of other midwestern governors and listed a ban on evictions in his Corona Virus decree of April last year. It was a two-month moratorium that coincided with restaurant and retail closures as well as other encroachments on civil liberties. While egregious, it was implemented in conjunction with stimulus payouts to individuals, so most people had the means to pay their rent. But the federal CDC mandate stood alone with no-windfall stimulus check to cushion the blow.

Secure ownership of private property is the fundamental difference between a free-market society and the default setting of the world; that is, the procession of concentrated power in the hands of a select few such as a king and his court or a Stalin and his politburo. But how does merely delaying the eviction of tenants in arrears diminish property rights?

We could get into the timing and certainty of the expected cash flows from which we derive the value of the property, which is all cast in question if an administrative department of the federal government can simply nullify contracts on a political whim. We could talk about the change in the marketability, or even management of real estate if the terms and conditions of the leases were subject to bureaucratic fiat. There is a real danger that such action could reduce the available stock of affordable housing and increase the cost of rents in the future, given their new uncertainty due to government edict.

You need only imagine it was a room in your house being renting to someone in need of such an arrangement. When the government tells you that you cannot evict someone for non-payment or rent, that room moves from the asset side of the family balance sheet to an immediate liability. You have lost control of your property, your home in this case.

Most rental properties are the possessions of savers — ordinary people who instead of putting all their proverbial eggs in the stock market have deciding to invest in local real estate. People in the residential rental business are trying to receive a return on their investment while providing for someone who needs the type of housing they are offering. They are investing in their community, not simply sticking their money in a bank or handing it to a stock broker.

If this action holds, though, it will irreparably damage these mom-and-pop real estate investors. In their place may come Cabrini-Green style government owned or financed “affordable” housing projects. Housing shortages will be exacerbated.

Meanwhile, those in the government-subsidized housing market will get by. They have the staff and experience to gather the taxpayer money that will be made available to solve this new crisis that Washington has created.

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