The Impact of the Moratorium on Arizona’s Rental Industry
October 1, 2021
From March 2020 through August 26, 2021, Arizona’s rental industry has been subject to an eviction moratorium of some kind. Through various Governor’s Executive Orders, the CARES ACT, the CDC’s Agency Orders, and the Arizona Supreme Court’s Administrative Orders, our government “temporarily suspended” the property rights of a select group of its citizens for “the greater good”. The rental industry, both corporate and individual owners, were forced to carry the burden of millions of people, and billions of dollars, without relief or redress. While eventual relief was promised, it was promised only to the tenants. Most of the rental assistance programs require the tenant’s participation before any funds are provided to the Landlord. While homelessness is a problem in our society, the debate over where individual responsibility ends and societal responsibility begins is a different discussion.
In its 6-3 decision in Alabama Association of Realtors, et al. v. Department of Health and Human Services, et al. On Application to Vacate Stay [August 26, 2021], 594 U. S. ____ (2021) , the U.S. Supreme Court finally stated what should have been obvious from the beginning,
“The moratorium has put the applicants, along with millions of landlords across the country, at risk of irreparable harm by depriving them of rent payments with no guarantee of eventual recovery. Despite the CDC’s determination that landlords should bear a significant financial cost of the pandemic, many landlords have modest means. And preventing [Landlords] from evicting tenants who breach their leases intrudes on one of the most fundamental elements of property ownership—the right to exclude. See Loretto v. Teleprompter Manhattan CATV Corp., 458 U. S. 419, 435 (1982).”
Throughout the pandemic, many industries were forced to shut down and could not provide their goods or services due to a governmental order. The rental industry, however, was forced to provide housing and services without regard to payment for those goods and services. While tenants could not be evicted for non-payment of rent, Landlords were not relieved of the obligation to perform repairs and provide other required services per the lease contract and Arizona law.
To put this in perspective, imagine the CDC, or any other government agency, decides bread is essential to the health, safety, and welfare of the citizenry without regard to the ability to pay. The local baker is now tasked with providing bread to anyone within the geographic area. The customer is told by the government that he doesn’t have to pay for the bread now, but still owes the baker and is required to promise they will pay sometime in the future. About 20% of the baker’s customers take advantage of this new governmental order. The Baker must still purchase the ingredients for bread, pay for the utilities and cost of labor to make bread, and keep the storefront open so people can get the bread. The Baker’s cost has not decreased even though 20% of revenue is now gone and replaced with a promise akin to “I will gladly pay you Tuesday for a hamburger today” (if your baloney doesn’t have a first name, you may not recognize that quote, but you get the idea). The cost of that bread will now necessarily increase for the 80% that are paying for it at the time they leave the store. The increase in rental rates around the country are like that bread.
Rental rates have increased because the government “temporarily suspended” (for 18 months) an Owner’s right to determine the use of private property. The Landlord must spread the loss of revenue across the entire market or leave the rental industry. Because of this, calls for “rent stabilization” or “rent control” are beginning to echo across the country. Those voices seek to force property owners to carry the burden of providing housing at a cost the government deems acceptable. If property Owners leave the housing industry, causing a drastic decrease in available rental properties, a drastic increase in the homeless population is likely to follow.
The citizenry as a whole, regardless of political ideology, should be very concerned when their government desires to suspend private property rights and control rent. It stands to reason that very same government would then be able to set the price for our homes, our cars and yes…. the very bread we eat.
Co-authored by Denise and Kevin Holliday, partners at Hull, Holliday & Holliday, PLC. www.h3landlordlaw.com