National Eviction Moratorium Thrown Out By Federal Judge

Jonathan Carson, Stretto co-CEO, offers insight into the impact of lifting the eviction moratorium would have on consumer-bankruptcy filings.

Excerpted from The Wall Street Journal

A federal judge threw out a national eviction moratorium Wednesday after concluding it was legally unsupportable, upending a Covid-19 relief measure that has protected millions of tenants but created hardships for landlords.

The Centers for Disease Control and Prevention, citing public health grounds, had extended the moratorium through June for tenants who have fallen behind on their rent during the pandemic. But a series of conflicting lower-court rulings had previously called into question the measure’s legality, and Wednesday’s decision is perhaps the biggest blow to Washington’s efforts to provide eviction protections. The moratorium originated from an executive order signed by then-President Donald Trump in September.

Judge Dabney Friedrich of the U.S. District Court for the District of Columbia said that while it was the role of the political branches of government to address the pandemic, current federal law on public health didn’t give the CDC broad authority to impose the moratorium.

“Because the plain language of the Public Health Service Act unambiguously forecloses the nationwide eviction moratorium, the court must set aside the CDC order,” Judge Friedrich wrote.

The judge, a Trump appointee, set aside the moratorium on a nationwide basis, rejecting a Justice Department request that any adverse ruling apply only to the housing providers and Realtors associations who brought the case.

The ruling could make it easier for landlords to evict tenants who are in arrears. It is also a setback to Biden administration efforts to synchronize the moratorium’s planned expiration at the end of June with the distribution of nearly $50 billion in rental assistance authorized by Congress.

The ruling also may embolden more state and local court systems to stop enforcing the eviction moratorium. Last month, the Texas Court System decided not to extend its enforcement of the CDC moratorium in its eviction courts. Evictions resumed in some parts of the state as a result.

The Justice Department appealed Wednesday’s ruling hours after it was released to the U.S. Court of Appeals for the District of Columbia Circuit. The department also said it intended to seek an emergency stay of the ruling, which, if granted, would keep the moratorium in place for now.

“Scientific evidence shows that evictions exacerbate the spread of Covid-19, which has already killed more than half a million Americans, and the harm to the public that would result from unchecked evictions cannot be undone,” said Brian Boynton, the acting head of the Justice Department’s civil division.
An analysis by the Urban Institute, a Washington think tank, found that the amount of unpaid rent could exceed $52 billion. According to a Census Bureau survey conducted last month, about one in seven renters are now behind on their payments—roughly three times the typical rate.

The moratorium protects tenants who have missed monthly rent payments from being forced out of their homes if they declare financial hardship. Though originally set to expire Dec. 31, Congress extended the moratorium until late January, and the CDC twice extended the order itself, through June.

Landlords say they have been unfairly squeezed financially by the moratorium, forced to provide free services to nonpaying tenants.

Stacey Johnson-Cosby, a landlord in Kansas City, Mo., who along with her husband, manages 21 rental units, welcomed Wednesday’s ruling. While the moratorium has made it harder to get tenants to pay back rent, she said, it is now no longer needed because of the billions of dollars in available rental assistance.

“That is the right move at this time,” she said, of the ruling.

Some bankruptcy experts warned an abrupt end to the eviction moratorium could lead to a jump in bankruptcy filings, which have been kept in check by various federal policies during the pandemic, such as deferral programs on student loans and mortgages.

“If all the sudden, tenants have to pay all their back rent—six, eight, or 10 months at once—you could see a dramatic increase in consumer bankruptcy filings nationwide,” said Jonathan Carson, the CEO of Stretto, a technology provider to the bankruptcy system.

Judge Friedrich said the CDC’s powers under public-health law to prevent the spread of disease aren’t limitless. Instead, the CDC’s efforts must focus on specific sources of infection when it determines that measures taken by state and local health authorities are insufficient, she said. The moratorium exceeded those boundaries, the judge said.

A handful of other courts have reached similar conclusions, though other judges have disagreed, finding that Congress gave the CDC broad flexibility to combat disease as it saw fit.

Ethan Blevins, an attorney for plaintiffs in related cases, said that courts were increasingly less willing to defer to the government because they are seeing the harm to landlords, particularly smaller property owners, who face “foreclosure or other severe costs because they have been unable to survive as a business during the pandemic.”

He said the effects could be most pronounced in states such as Texas and Florida, which don’t have their own statewide eviction moratoriums.

Diane Yentel, president and chief executive officer of the National Low Income Housing Coalition, said the Biden administration should continue to defend and enforce the eviction ban, “at least until emergency rental assistance provided by Congress reaches the renters who need it to remain stably housed.”

Landlord lobbying and trade groups welcomed Wednesday’s ruling. But Paula Cino, a vice president at the National Multifamily Housing Council, said until the appeal was resolved the group wouldn’t advise its members to do anything that would violate the CDC order. “As of today this doesn’t change anything operationally for our members or our industry,” she said.