Victims of the CDC Eviction Moratorium
UPDATE: On August 26, 2021, the U.S. Supreme Court issued a ruling that ended the CDC Eviction Moratorium. However, the messages in this article are equally applicable to similar state and local moratoriums.
Most people think of Carnegie Hall as a performance venue for musicians. But when Andrew Carnegie built the building, he added apartments over the Hall. Called the Studio Towers, these 170 apartments were also designed to be artists’ studios, with high ceilings and lots of natural light.
Residents of the Studio Towers reads like a performing artist hall of fame. Dancer Isadora Duncan, actor Marlon Brando, and conductor Leonard Bernstein all lived there.
By 2007, only 33 of the apartments were occupied. By then, pianist and composer Donald Shirley, a Steinway artist whose photo hung in Steinway all alongside those of Rachmaninoff and Horowitz and whose experiences were said to have inspired the movie Green Book, had lived there for 51 years. Model/photographer Editta Sherman, whom Kodak had selected for a one-woman exhibit in Grand Central Station and was a subject of Andy Warhol, had lived there for 58 years. And Josef Astor, whose work appeared in Vanity Fair, the New Yorker, GQ, Esquire, and Rolling Stone, had lived there for a mere 22 years.
In 2007 a court ruled that Carnegie Hall Corporation could evict the Tower's tenants so the building could be converted for educational use. Seven of the long-time tenants, including Shirley, were guaranteed “comparable” housing under New York City’s rent control laws. The remaining 26 artists had to find new housing on their own.
The Tower tenants appealed, and some got a short reprieve from eviction. But by 2010, the last tenant, poet Elizabeth Sargent, moved out of the Tower. Currently, there is a Center for Disease Control and Prevention (CDC) Evictopm Moratorium (Moratorium), which also gives tenants a short reprieve from eviction. The Moratorium has been extended several times, but the current expiration is October 3, 2021.
The CDC Eviction Moratorium
On August 3, 2021, the CDC issued an order (Order) extending the Moratorium through October 31, 2021. Even though the Moratorium doesn't state a goal of reducing economic hardship, the Order temporarily stops only residential evictions due to nonpayment of rent. Other evictions may proceed even if the tenants will be homeless or living in congregate settings that could make them vulnerable to COVID-19.
But the flaws in the Moratorium don’t stop there. The Moratorium doesn't prevent landlords from using predatory tactics to evict vulnerable individuals whose leases expire – even if those tenants pay rent. And by not requiring tenants to document that they qualify, the Moratorium opens the door for opportunistic tenants not to pay rent even when they can afford it.
Consider the two examples below, which are loosely based upon real-life situations I have seen during the pandemic.
Predatory Landlord
Sofia is a 73-year-old widow who receives $30,000 per year in Social Security and works part-time as a cashier at a local grocery store, earning an additional $12,000 per year. Sofia lives with her brother, John, who uses a wheelchair due to an accident. His sole income is $24,000 per year in Social Security. They have lived in the same two-bedroom apartment for the past ten years and always paid her rent on time.
Sofia and her brother are fortunate. Their household income has remained stable during the pandemic, and they have had no significant medical bills.
Sofia’s rent had steadily increased by three percent per year. Because the annual increases were small, Sofia and her brother have always been able to afford the increases. In 2020 she paid $1,500 per month in rent. However, on May 1, 2021, Sofia's landlord informed her that due to the boom in the real estate market, her rent would increase by more than 45% - to $2,200 per month when her lease renews on June 1, 2021.
Sofia tells the landlord she cannot afford to pay $2,200 per month. She asks the landlord if she can stay and pay $1,725 per month in rent -- a 15% increase (still five times her previous increases).
The landlord tells Sofia that the rent will be $2,200 and if she doesn’t want to pay that much, she should find a new place to live before her lease expires on May 31. Sofia cannot find another apartment that meets John’s needs this quickly, so Sofia signs a lease for $2,200 per month in rent.
Sofia has money in savings and can pay $2,200 in rent on June 1 and July 1, but on August 1, she can only pay $1,800. On August 10, she receives an eviction notice.
Sofia contacts an organization that provides legal assistance to senior citizens. She is surprised to learn that because she and John haven’t experienced a reduction in income or increase in medical expenses, they do not qualify for the Moratorium even though she and her brother are facing eviction because they cannot afford to pay their rent.
The organization helps Sofia apply for government rent assistance. She learns it will take a month to process her application, and she is eligible for only $250 per month in rent subsidies. With the $1,725 per month Sofia can afford, Angie is still $225 per month short of the rent her landlord is charging.
Opportunistic Tenant
Fred and Sally are retirees. They receive $55,000 per year in Social Security and withdraw $10,000 per year from their retirement accounts. Fred and Sally also depend upon rent from a duplex they own to supplement their retirement income. Each tenant pays $3,000 per month in rent. After making their $5,000 per month payment for the mortgage and real estate taxes on the duplex, Fred and Sally net $1,000 per month in net income from the duplex.
Angie and Jim Jones live in half of the duplex. Jim works in IT and earns $100,000 per year. Because he can work from home, his income hasn’t been affected by the pandemic. Before the pandemic, Angie earned $75,000 per year as a travel agent. She was laid at the end of February 2021. Angie was paid for two months of accumulated vacation and her four months of severance pay totaling $37,500. Angie earned $12,500 in 2021 before she was laid off, so Angie and Jim expect a total income of $150,000 in 2021.
Angie and Jim apply for government rent subsidies but are told their income is too high to qualify. Upset about their lifestyle changes, Jim asks his parents to pay half of the rent. Jim’s parents refuse to pay their rent because they think Angie and Jim should live within their means. But when Jim protests he and Angie might become homeless, Jim’s parents offer to let Angie and Jim move into an apartment in their house licensed as an accessory dwelling unit and is listed on Air BNB. Valuing their privacy, Angie and Jim decline that offer.
Hearing about the eviction moratorium, Angie and Jim submit the required form to their landlord, saying they can afford to pay only $1,500 per month in rent until the Moratorium is over.
Because she received so much severance pay, Angie takes the summer off before looking for another job. Angie and Jim use the $1,500 per month they have “saved” in rent on the duplex from March through June and to rent a beach house in Cape Code for two weeks during the summer.
Because Angie and Jim aren't paying rent, Fred and Sally only receive $4,500 per month income, $500 less than the $5,000 per month mortgage payment. Fred and Sally have to withdraw $500 from their retirement savings every month to make the duplex's mortgage and real estate tax payments.
Who Qualifies for the Eviction Moratorium
As the examples above illustrate, not all tenants are eligible for the Moratorium.
To qualify, a tenant must be able to “check the box” in two categories of criteria – income and what I call “COVID-19 impact”.
To meet the income requirement for moratorium eligibility, a tenant must meet at least one of these requirements to be eligible:
The tenant expects to earn no more than $99,000 ($198,000 for a married couple) in annual income during 2020-2021;
The tenant did not have to report any income to the IRS in 2020; or
The tenant received stimulus payment under the CARES Act.
With an annual income of $42,000, Sofia meets the income requirement. So do Angie and Jim. Even though they expect income of $150,000 in 2021, they remain under the maximum $198,000 income cap.
To demonstrate COVID-19 impact, a tenant must meet all of the following additional requirements:
The tenant must have made best efforts to obtain all available government rent and housing assistance
The tenant must be unable to part or all of their rent due to substantial loss of income or work, layoff, or extraordinary out-of-pocket medical expenses
The tenant must make best efforts to make timely partial payments in as large of an amount as they can afford
Eviction would likely leave the tenant homeless or force them to move into close quarters in a congregate or shared living situation.
Sofia meets three of the “COVID-19 impact” requirements. She applied for government rent assistance, she is making timely partial payments, and she and John likely would end up homeless if they were evicted. However, Sofia can’t meet the second “COVID-19 impact" requirement because she hasn't experienced a reduction in income, layoff, or extraordinary medical expenses.
Angie and Jim meet the first COVID-19 impact requirements because they tried to obtain government rent assistance (nothing in the COVID-19 impact requirements disqualifies a tenant who can’t get rent assistance because they make too much money). Angie and Jim may also meet the second COVID-19 requirements because Angie was laid off. But it's questionable whether they are unable to pay their rent because of the layoff since Angie received a nice severance payment.
As for the third requirement, Angie and Jim are making timely partial rent payments. They probably can afford to pay more, but again, it will be difficult for the landlord to know that. And we know that another apartment awaits Angie and Jim at Jim's parents, so they definitely won't be left homeless or have to move into close quarters if they were evicted.
Loopholes or Fraud?
If a tenant meets all of the requirements, they need to provide an Eviction Protection Declaration (Declaration) to their landlord to qualify. And that Declaration must be signed "under penalty of perjury." So technically, a tenant who lies on the Declaration could be convicted of a crime.
The Moratorium doesn't prevent the eviction of tenants who don't move out at the end of their leases. So, if Sofia hadn’t signed the new lease, her landlord could have evicted her immediately for not moving out at the end of her lease.
But Sofia’s landlord found a flaw or loophole in the Moratorium. It doesn’t require a landlord to renew a tenant’s lease on reasonable terms (or at all). Opportunistic landlords can increase the rent to an outrageous level. And because the COVID-19 impact requirements focus on the loss of income rather than drastic rent increases, tenants have no recourse under the Moratorium.
Unless Sofia lives in one of the few places in the nation with rent control laws, she is out of luck. But she if she can find a new apartment with lower rent, she may qualify for government programs to help pay for moving costs.
Angie and Jim probably falsified their Declaration. Although they possibly could be charged with perjury, their false and potentially fraudulent statements may never be discovered. That’s because tenants may self-certify that they meet the requirements. And the Moratorium doesn’t require a tenant to provide the landlord with any proof they meet the requirements. Nor does the Moratorium require a tenant to demonstrate they are paying as much as they can afford.
The CDC guidance says a landlord can challenge the accuracy of a tenant’s Declaration by filing a court action (presumably for eviction). But there is little guidance on how to determine how much rent a tenant can afford to pay. Plus, the obvious way for a landlord to challenge a tenant’s Declaration is to bring an eviction action.
Landlords like Fred and Sally may not be able to afford the cost of challenging Angie’s and Jim’s Declaration. For landlords who can afford a court fight, the road is not smooth. While most courts will allow eviction cases to continue as long as the tenant is not physically evicted, some eviction cases may violate the Moratorium if it turns out the tenant didn’t lie.
Since the penalties are steep for landlords who violate the Moratorium – starting with a fine of $100,000 and up to one year in jail – landlords aren’t likely to risk an unlawful eviction filing. Plus, the Consumer Financial Protection Bureau has given notice that it will hold parties that qualify as “debt collectors” responsible under the Fair Debt Collection Practices Act if they violate the Moratorium.
Finally, this article only discusses the CDC Eviction Moratorium. Local and state governments may have their own moratoriums. And some state and local governments have rent control laws that prohibit huge rent increases like the one Sofia experienced.
When all was said and done, it took more than three years for the Carnegie Hall Corporation to evict the final tenants from the Towers even though New York City law specifically described the parties’ rights and responsibilities. Due to the vagueness of the Moratorium’s language, not requiring tenant proof of eligibility, loopholes that favor opportunistic landlords, the volume of tenants that are eligible, and court backlogs, it could also take years to unravel the consequences of the Moratorium.
© 2021 by Elizabeth A. Whitman
Although examples in this blog are loosely based upon actual situations, both the names and facts have been modified to protect the privacy of the parties.
DISCLAIMER: The content of this blog is for informational purposes only and does not provide legal advice to any person. No one should take any action regarding the information in this article without first seeking the advice of an attorney. Neither reading this blog nor communication with Whitman Legal Solutions, LLC or Elizabeth A. Whitman creates an attorney-client relationship. No attorney-client relationship will exist with Whitman Legal Solutions, LLC or any attorney affiliated with it until all parties sign a written contract.