The Questionable Constitutionality Of Eviction Moratoriums

Photo Credit: KTNV.com

In March 2020, the United States (like much of the world) went into lockdown. As fears of COVID-19 spread, schools and businesses shuttered. The unemployment rate spiked up to 14.8% in April 2020. Congress passed the CARES Act, the Paycheck Protection Program, and disbursed money to state and local governments to provide further relief.

With a massive hit to people’s income, paying rent became challenging for countless Americans. Concerned about mass displacement during a pandemic, the federal government as well as many state and local governments placed restrictions on evicting tenants.

I am an attorney by training. At one point in my legal career, I volunteered with a legal aid organization, and assisted tenants who were facing eviction.

I am also a real estate investor (focusing primarily on residential properties). Thankfully, I have not had to evict any tenants (yet), though other investors I know certainly have.

I believe placing a moratorium on the eviction of non-paying tenants might be constitutional — if landlords are compensated for rents that they would have otherwise charged the tenant. Since most eviction moratoriums weren’t structured in this way, I believe they violated the Takings Clause of the US Constitution. For this reason, it seems only fair that property owners are entitled to compensation.

Some Background On Eviction Moratoriums

When we talk about eviction moratoriums, we must consider federal, state, and local (i.e. county rules). Initially, cities and counties placed moratoriums on evictions — at least, evictions for non-payment of rent. These moratoriums typically did not forbid evictions for safety reasons, such as where a tenant was engaged in criminal activity, or otherwise posed a threat to the safety of other tenants.

Each moratorium varied in terms of what it required of tenants. In some jurisdictions, tenants had to provide a declaration detailing any hardship which left them unable to pay rent. In other instances, they were required to pay a portion of rent owed, in order to avoid possibly being evicted. In some cases, tenants might be required to show that they applied for rental aid.

Under the CARES Act, Congress banned evictions for federally owned properties, or those acquired with federal financial backing (i.e. Fannie Mae or Freddie Mac loans). Researchers believe that around 28% to 46% of rental units nationally were covered. This ban lasted through late July 2020.

The federal government followed in September 2020, with President Trump issuing an executive order that directed the CDC to explore whether some evictions should be halted, to stop the spread of COVID-19. The federal restrictions applied only to those who were making under $99,000 per year or less, and otherwise facing financial distress.

This moratorium was scheduled to last through December 31, 2020, and then was extended (by Congress) through the end of January 2021, and then by the CDC through late March 2021. A version of this moratorium was again extended by the CDC through June 30, 2021, and then again through July 30, 2021.

During this time, a group of plaintiffs, including the Alabama Realtors Association, had filed suit to strike down the CDC eviction moratorium. The crux of the plaintiff’s argument was that the CDC lacked the authority, under federal law, to impose such a wide-ranging ban on evictions. This was one of several lawsuits around the nation, where property managers and owners sued to strike down the eviction moratorium.

Justices Barrett, Alito, Thomas and Gorsuch agreed with the plaintiffs, and believed that the moratorium ought to end immediately. Justices Roberts, Sotomayor, Kagan and Breyer argued in favor of upholding the CDC moratorium.

Justice Kavanaugh noted in a concurring opinion that he believed the eviction moratorium to be impermissible based on existing federal law. However, Kavanaugh argued that since the eviction moratorium was scheduled to end in just a month, it made sense to leave it in place a bit longer. This would allow state and local governments to disburse aid to tenants.

As the moratorium was set to expire, some Democratic members of the House (and progressive activists around the nation) rallied for an extension of eviction restrictions. President Biden instructed the CDC to issue a new, more limited moratorium. That was struck down by the Supreme Court just a few weeks later.

After the end of the eviction moratorium, many states resumed evictions, though the number of tenants evicted was well below expectations. Some cities and states, such as Los Angeles, retained substantial eviction protections.

Assistance For Tenants

It is worth noting that both state and federal governments made tens of billions available in rental aid for tenants who were struggling. Specifically, President Trump’s final aid package before leaving office provided for $25 billion in aid for economically renters, mostly disbursed through cities and states, which were tasked with running rent relief programs.

This was followed by another $47 billion, approved during the Biden administration. Despite the massive amount of rental aid approved, much of these funds were slow to be disbursed, in part due to unclear and often onerous application requirements.

This means that many tenants who should have received aid ultimately did not. While these programs have great intentions, they have not been well executed.

In some cases, assistance for landlords was conditioned on forgiving a portion of tenant’s unpaid rent or agreeing not to pursue an eviction or other judgment in the future. Most aid has income requirements, so that lower income tenants receive the greatest benefit.

The Takings Clause Of The US Constitution Restricts Seizure Of One’s Property Without Proper Compensation

The Fifth Amendment of the United States Constitution states the following:

No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury, except in cases arising in the land or naval forces, or in the Militia, when in actual service in time of War or public danger; nor shall any person be subject for the same offence to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.”

Let’s focus on the very last part of the Fifth Amendment. This provision states that private property cannot be seized for public use unless fair compensation is provided.

This is known as the “Takings Clause” of the Constitution. The Takings Clause has been applied to the actions of not only the federal government, but also state and local governments (through the Due Process Clause of the Fourteenth Amendment).

There has been considerable litigation around the question of what constitutes just compensation for the taking of a property. In most cases, the fair market value of the property taken is considered sufficient compensation in the event of a lawful taking.

Traditionally, takings of private property were carried out by a governmental body, so that a project of public interest (such as a road or school) might be constructed. However, takings for uses by private parties have long existed.

In the landmark Supreme Court case of Kelo v. City of New London, decided more than a decade ago, the Court once again clarified that a government could even seize a property for use in a private project — assuming the project offered some plausible public economic benefit. This ruling was hotly contested by Justice Clarence Thomas and others. Yet, as of today, it’s the law.

Here’s the issue: In most prior cases, the courts were reviewing the deliberate taking of property rights, for some sort of public or private development project. There was little disagreement between plaintiffs and defendants, on the question of whether the plaintiff would still access to their property (or a specific property right, like air rights), after the taking was complete.

Both sides agreed this was a taking. The question was whether it was permissible — and if so, what was fair compensation?

Eviction Moratoriums Deny Property Owners The Right To Earn Income From Their Properties

Eviction moratoriums appear to be a somewhat different situation. How should we think about eviction moratoriums, from a Takings Clause standpoint?

Prior to the eviction moratoriums, the owner of a rental property could earn income, by finding tenant(s) who paid rent each month. In some cities and states, the amount a landlord could increase rents each year was restricted, through rent control laws.

However, the property owner’s basic right to earn rental income, as part of a voluntary agreement between a tenant and landlord, remained intact. If a tenant failed to pay rent, the landlord could file for eviction.

Once the eviction process was completed, the landlord could perform any needed repairs, and lease the unit to another tenant. The process of removing a tenant could take a while, especially in cities and states which were friendlier to tenants.

Yet, in the end, property owners regained possession of their rental unit(s). They could put their property to its financially intended use (providing housing in exchange for payment). They were able to enforce the contract they signed with the tenant.

When eviction moratoriums took effect, there was nothing preventing a property owner from leasing a vacant unit to a new tenant. Yet, what were their options when it came to an occupied unit, where the tenant was not paying rent?

Simply put, a property owner could not put his or her property to it’s intended use (offering housing in exchange for compensation). His or her right to earn an income from a rental unit was effectively extinguished, due to governmental action. Why does this matter?

Denying A Rental Property Owner The Right To Earn Income From Their Property Eliminates Economic Use Of The Property

In real estate, each type of rental property has a specific use. A single-family home is intended for living, whether by the owner of the property, or a renter who pays the owner to occupy the home for some period. A strip mall provides businesses a location from which to operate, and each business pays the owner of the mall. An apartment complex is designed to provide housing, in exchange for monetary compensation, i.e. monthly rent payments.

If an owner’s usage of their property for intended purposes is meaningfully impaired, due to actions by the government, then there is a strong argument that the property has been taken. Since the 1970’s, the Supreme Court has focused quite a bit on “regulatory takings” i.e. where government regulations interfere in a property owner’s right to use their property.

The 1992 Supreme Court case of Lucas v. South Carolina Coastal Council is quite relevant here. In that matter, a real estate investor named David Lucas purchased two vacant lots on an island in South Carolina. Lucas planned to build single family homes on the lots — and most of the land parcels surrounding the lots consisted of such homes.

About 2 years after Lucas purchased the lots, South Carolina’s legislature passed a law which banned the development of permanent structures on beachfront properties. The legislature enacted this law for the purpose of environmental protection.

This meant that Lucas could no longer use his land for it’s intended purpose. Lucas sued the relevant state regulatory agency, arguing that this new law was a taking of his property, since it denied him all “economically viable use.”

The case made its way up to the Supreme Court, which ruled in favor of Lucas. In it’s ruling, the Court noted that in the earlier days of Takings Clause rulings, the Court typically looked only at whether a taking was a direct appropriation of an owner’s property.

However, the Court noted, if physical appropriation of property was to be property enforced, then the government’s power to “redefine the range of interests” that came with owning a property, also had to be restrained. In other words, protection of property rights extended beyond just governmental actions which took physical possession of a property.

The court further noted that any governmental action which “denies an owner economically viable use of his land” is considered a taking and entitles and owner to compensation. In such situations, there is no consideration of whether the action should be balanced against a compelling governmental interest. The action must be considered a taking, and thus subject to compensation.

Of particular importance in this discussion is another statement the court made in it’s ruling:

“….Perhaps it is simply, as Justice Brennan suggested, that total deprivation of beneficial use is, from the landowner’s point of view, the equivalent of a physical appropriation….Surely, at least, in the extraordinary circumstance when no productive or economically beneficial use of land is permitted, it is less realistic to indulge our usual assumption that the legislature is simply “adjusting the benefits and burdens of economic life….On the other side of the balance, affirmatively supporting a compensation requirement, is the fact that regulations that leave the owner of land without economically beneficial or productive options for its use — typically, as here, by requiring land to be left substantially in its natural state — carry with them a heightened risk that private property is being pressed into some form of public service under the guise of mitigating serious public harm.”

Let’s think about the eviction moratoriums, in the context of a single-family rental home. Let’s consider a 3-bedroom house, where each room is occupied by a resident of the household. Let’s also assume the home is zoned solely for single family home construction.

Due to economic difficulties, the tenants have stopped paying rent. The property owner is legally barred from evicting the tenant.

This means that the property owner cannot move in another tenant on a long-term lease or list the house as a short-term rental. Nor can the property owner relocate his or her family into the home. The owner also cannot tear down the property and build a new single-family home.

The owner might be able to sell the home to an investor, at a substantially discounted price. However, even this is a tough undertaking.

Banks will normally refuse to finance properties where tenants are not paying rent. Also, most investors will also hesitate to acquire such a property, until there’s clarity as to when a non-paying tenant can be evicted. There is a good chance that if the home sells, it will be at a loss.

Clearly, there is little “economically viable” use of this property, if a non-paying tenant remains in place, and eviction is impossible. The loss of such value is directly attributable to governmental action. Therefore, this is a taking, and should be compensated.

Allowing Takings Without Compensation Will Lead To More Unfair Takings By Government

We should also consider another argument, raised in Lucas, of a rental property being “pressed into some form of public service under the guise of mitigating serious public harm.” Several years prior to the COVID-19 pandemic, housing affordability was a hot topic of political discussion.

California and Oregon passed statewide rent control laws. Representative Alexandria Ocasio-Cortez floated a nationwide rent control proposal, while Bernie Sanders proposed a sweeping agenda of rent control, community land trusts, and other housing assistance. Most other candidates in the Democratic presidential primaries also had detailed housing proposals.

In previous decades, housing affordability was rarely a topic of massive importance in political campaigns. In recent years, it has been. This is hardly surprising, given that rents nationally increased by 36% from 2009 to 2019, with much larger spikes in some major markets. As a result, there is greater political pressure to control housing costs.

State and federal governments can allocate more funding to affordable housing, or provide tax benefits for those building affordable housing. This isn’t cheap.

They may also implement rent regulations or restrict eviction of existing tenants (as we see today). The latter approach (more regulations) is less costly for governments. After all, the cost is being shifted to property owners.

In the case of eviction moratoriums, it is easy for the government to argue that this policy is implemented to prevent further harm. If eviction moratoriums are not treated as a taking, what is to stop a governmental body from once again restricting evictions, with no consequences?

What is in the way of California’s legislature from deciding, post COVID-19, that evictions will aggravate homelessness, harming the public, and should thus be forbidden? After all, homelessness is a public health crisis as well. This is a very slippery slope.

It is very easy for the government to commandeer the property of private housing providers, to solve public ills. In effect, the government will force private losses to solve a public problem.

By not treating property owners impacted by the eviction moratorium as having suffered a taking, courts are freeing the government to engage in similar actions in the future — at no cost. In the long run, the rights of property owners will continually erode.

Forcing the government to provide compensation will raise the cost of such actions. This can help make them less common, and more costly.

To be clear, I believe that we need to do more to build affordable housing — and government has a role to play in that process. However, allowing the government to take control of private property, in furtherance of this goal, is incredibly problematic.

How Property Owners Should Be Compensated For Unlawful Takings Of Property Due To Eviction Moratoriums

I believe that this question of the unlawful taking of property, due to eviction moratoriums, must be addressed by the United States Supreme Court. If the Court finds a taking here, then the question becomes how private property owners should be compensated.

From a legal perspective, the major goal of compensatory damages is to make the plaintiffs whole. In this situation, that involves paying property owners for the rent they were owed each month, when they could not evict a non-paying tenant.

Who should pay such compensation? In most cases, I’d argue the federal government is responsible. After all, in many states, but for the actions of federal authorities, there would have been no restrictions on evicting tenants.

However, in states like California, and cities like Los Angeles, local and state eviction moratoriums were in place well ahead of any federal rules. They also remained in place after the Supreme Court struck down the CDC rule.

Therefore, landlords in these localities should be compensated partially or entirely through state and local governments. Of course, if state and local governments are unable to compensate landlords, then federal funds might be required. Ultimately, property owners should be made whole.

Why Eviction Moratoriums Are Not An (Entirely) Bad Idea

In reading this piece, one might assume that I am reflexively against all COVID-related eviction moratoriums. This isn’t the case.

When the pandemic first really hit the United States, there was a great deal of uncertainty. Unemployment rose to a record 14.7%. Despite the CARES Act and other government assistance, tens of millions of Americans were facing severe financial distress.

We also knew very little about how COVID-19 spreads, and what the long-term impact of contracting COVID was. In the middle of this chaos, allowing tenants facing hardship to be evicted was an indefensible policy, both morally and politically.

This is where governments (whether state or federal) could have stepped in and offered to directly pay the full rent for tenants who fell into financial distress due to the pandemic. In exchange for such compensation, any governmental body could have lawfully ordered a halt to evictions based on non-payment of rent.

If tenants were unable to prove financial distress, and simply chose to stop paying rent to take advantage of the law, then they should have been denied protection under the eviction ban and could have been lawfully evicted.

To give government agencies sufficient time to process cases, rental payments could be staggered by a few months. For example, if a tenant owed rent for May and June, a state housing agency might verify a tenant’s need, and offer compensation in August.

This would also mean that a landlord’s right to file eviction would be delayed until a government agency had time to review a case and see whether rental assistance was warranted. It’s true that during this time, a landlord would not receive rent, with no certainty as to whether the government would in fact pay him or her.

However, this seems like a fair balancing of a landlord’s right, with the tremendous demands placed on governmental services during a pandemic. At a basic level, some sort of eviction moratorium seems proper.

What is patently unfair is a moratorium through which landlords are stripped of the economic use of a rental unit, without any compensation. It’s not eviction moratoriums per se that are the problem. Rather, it is the lack of compensation.

The Final Word

The COVID-19 pandemic altered every aspect of our lives. From work to school to travel, the world around us operated in a massively different way. Some of these changes are likely to be temporary, but others may well be permanent. During the pandemic, some sort of eviction moratorium, where landlords were paid rent for non-paying tenants, would have been proper.

However, our nation also has a constitution, and its provisions must be followed. Forcing a private property owner to house non-paying tenants, without compensation, violates both the letter and spirit of the law, as well as prior Supreme Court precedent.

Compensating property owners who were not allowed to evict tenants is a fair solution. Hopefully, state local and federal governments alike treat this as a learning opportunity, and don’t engage in such overly broad actions in the future.

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Shiva Bhaskar

Enjoy reading and writing about technology, law, business, politics and more. An attorney by training, I’m a native of Los Angeles, and a former New Yorker.