Congress

Ilhan Omar's Bill Would Enable the Feds To Seize Landlords' Properties for Trying To Collect Rent During Coronavirus

The Minnesota congresswoman's proposal to cancel rents and mortgages during the coronavirus pandemic is both wildly impractical and constitutionally dubious.

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The movement to cancel rent during the COVID-19 pandemic is going national. On Friday, Rep. Ilhan Omar (D–Minn.) introduced the Rent and Mortgage Cancellation Act, which does what the title suggests, and much, much more.

Omar's legislation—which is being co-sponsored by "squad" Reps. Alexandria Ocasio-Cortez (D–N.Y.), Rashida Tlaib (D–Mich.), Ayanna Pressley (D–Mass.), alongside three other progressive Democrats and a bevy of left-wing activist groups—would cancel rent and mortgage payments for the entire country "regardless of income or payment level."

The rent and mortgage suspension would only apply to primary residences and would remain in effect until a month after the end of the national emergency President Donald Trump declared on March 13. Tenants and homeowners would not have to make payments on leases or mortgages during that whole time, nor could their landlords or lenders use their failure to pay as a cause for eviction or foreclosure.

In addition, tenants and homeowners could not be charged late fees or penalties, nor could they have their credit scores downgraded. People who feel they've suffered an "adverse action" for exercising these protections could sue their landlord or mortgage lender in federal court for damages.

The attorney general would also be empowered to take civil action against property owners and mortgage lenders for violating renters' and homeowners' rights under the act. Violators could be hit with a $5,000 fine for a first offense and a $10,000 fine for the second offense. Landlords who violate the act three or more times could be fined $50,000 or could even have their property seized.

That means the government could snatch up a landlord's rental property just for reporting three tenants who didn't pay their rent to a credit reporting agency.

These are all extreme measures, which Omar argues are justified by the extreme circumstances of the COVID-19 pandemic.

"Congress has a responsibility to step in to stabilize both local communities and the housing market during this time of uncertainty and crisis," said the Minnesota congresswoman in a press release. "In 2008, we bailed out Wall Street. This time, it's time to bail out the American people who are suffering."

One common criticism of rent and mortgage forgiveness policies is that they just pass on the costs of housing to rental property owners and lenders who have their own bills to pay.

To that end, Omar's legislation would create two funds to compensate landlords and mortgage lenders for any income they lose as a result of her bill. But this money would come with a lot of strings attached.

In order to be eligible for relief funds, landlords couldn't raise rents for five years. They would also not be allowed to discriminate against tenants based on their credit score or criminal history during that same five year period. According to a summary of the bill put out by Omar's office, landlords making use of these relief funds would also have to give tenants a 10 percent equity stake in their properties.

A relief fund for mortgage lenders would also be created and would come with requirements to report detailed lending data to federal housing authorities. Both funds would be administered by the Department of Housing and Urban Development (HUD).

The bill would create a new Affordable Housing Acquisition Fund, also administered by HUD. This fund would give money to government entities and nonprofits to buy up private buildings and convert them to income-restricted affordable housing. To facilitate these purchases, property owners would have to notify HUD when they intend to sell a rental property, and then give low-income housing providers 60 days to make an offer on their building.

Anyone who did purchase a property through HUD's affordable housing fund would have to agree to provide tenants with free "wrap-around" services, including healthcare, childcare, employment and education assistance, and financial literacy education.

One might ask themselves how exactly free financial literacy classes at federally-funded public housing fits into an emergency response to the COVID-19 pandemic. The answer is it doesn't.

Rather it appears that Omar is using the pandemic, and the swell of support for rent cancellation that it's created, as a vehicle for enacting her ambitious, preexisting housing policy goals.

Much of what's included in Omar's bill appears borrowed from the $1 trillion public housing legislation that she introduced in November of last year. That bill called for creating millions of new public housing units that would come with free social services provided on-site.

Omar's latest legislation is effectively an attempt to strong-arm landlords into getting this same result.

To summarize, her bill would eliminate landlords' ability to earn income from their properties, and then attach a number of incredibly costly conditions for accessing relief funds.

Landlords who balk at the bailout conditions Omar proposes, but who can't afford to earn $0 for the duration the coronavirus emergency would be left with the option of selling their properties. When they do put their properties on the market, they'd be first required to offer them to low-income housing providers who'd be receiving generous federal aid to snap up units.

This is all incredibly coercive, not to mention constitutionally dubious. It's also wildly impractical from a fiscal perspective. The federal government is currently looking at a quadrupled $3.8 trillion budget deficit this year, according to estimates from the Committee for a Responsible Federal Budget.

In addition to this staggering amount of debt, Omar's bill would have the federal government offering to pay the nation's rent and mortgage bills, not to mention financing the purchase of an untold number of private rental buildings.

The extremity of the Minnesota congresswoman's proposal also makes it unlikely to gain much traction in Congress. That's good news for advocates for private property, even if it does speak ill of Omar's priorities as a legislator. With even some Republican members of Congress talking about rent forgiveness, there's potential that a more modest and targeted bill could actually attract significant support.

The radicalism of Omar's proposal is nevertheless evidence of just how much of an opening some progressives see in the coronavirus pandemic to enact any number of policies that would have been unthinkable in February.