D.C.'s COVID-Era Eviction Policies Come Back To Bite

Plus: Massachusetts NIMBYs get their day in court, Pittsburgh one-step forward, two-steps back approach to zoning reform, and a surprisingly housing-heavy VP debate.

Happy Tuesday, and welcome to another edition of Rent Free. This week, we cover:

• Massachusetts NIMBYs fighting state-mandated upzoning get their day in court.
• Pittsburgh, Pennsylvania, considers a suite of liberalizing zoning reforms that could increase housing production, plus one poison pill that could ruin it all.
• A surprisingly housing-heavy VP debate.

But first, a look at the slow-burning damage COVID-era eviction restrictions have done to the affordable housing market in Washington, D.C.

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D.C. Attempts To Dig Its Way Out of a Rent Delinquency Crisis 

This past week, the Washington, D.C. City Council unanimously passed an emergency repeal of COVID-era changes to the district's eviction process that landlords and city officials say was causing a rent delinquency crisis across the district's affordable housing properties.

The council's action repeals a rule it had enacted in 2021 that required judges to stay eviction cases while a tenant had a pending application with the city's Emergency Rental Assistance Program (ERAP).

Because ERAP applications take several months to process, tenants could file multiple applications, and tenants could self-certify that they were eligible for the program, that 2021 rule allowed people to continually delay their eviction cases for months or even years.

And since ERAP only covered five months of back rent, even successful applications could still leave tenants in the red and landlords unpaid.

"We had examples of renters who hadn't paid in three years," says Alexander Rossello, director of policy communications at the Apartment and Office Building Association of Metropolitan Washington (AOBA).

The result has been rising rental delinquency rates and a deterioration of the financial position of affordable housing owners.

"What we are seeing is, on an aggregate basis, these affordable housing providers are carrying tens of millions of dollars in uncollected rent, and that is not sustainable," said D.C. City Council Chairman Phil Mendelson, who sponsored the emergency repeal of automatic ERAP stays, at a council meeting last week.

Overdue Rent

Michael Huke's company, CIH Properties, owns over 2,000 units in Wards 7 and 8 in Washington D.C.

In 2019, the last year before the pandemic, his company suffered $700,000 in rent delinquency losses. Over the pandemic that number started to rise. To date in 2024, Huke says CIH has lost $8 million in unpaid rent.

About a quarter of CIH's tenants have unpaid rent balances of at least $1,000. When combined with rising operating costs, he says CIH Properties' net operating revenue has halved.

It's an industry-wide problem.

The city estimates that 15-20 percent of tenants in occupied affordable units are not paying rent. That's up from a 5 percent nonpayment rate before the pandemic. AOBA reports a six-fold increase in rent delinquency losses among its members between 2019 and 2024, which it says is primarily a result of a small number of nonpaying tenants accumulating many months of back rent.

These losses are concentrated at lower-rent and affordable properties where rental payment rates are usually lower.

At a press conference last week, Mayor Muriel Bowser said that the affordable housing industry is owed a collective backlog of $100 million in unpaid rent, reports BisNow. That's up from $11 million in 2020.

"There was moral hazard inflicted on the residents," says Huke. "I think they rationally thought that the District wanted no one evicted and paying rent wasn't necessarily a part of not being evicted."

Bowser said something similar at an April City Council hearing, where she defended her plan to cut funding to the ERAP program. "We haven't gotten back in the city, in the rhythm, of everyone paying their rent and utilities," she said, per WUSA9. "I believe that there are people that are using ERAP that can pay their rent."

The widespread fear among landlords and city officials is that if delinquency losses force properties into foreclosure, tenants will be forced to vacate their units. A bankruptcy can also dissolve properties' affordability covenants which hold rents at below-market rates.

Next Steps/Bigger Picture

The emergency repeal of mandatory ERAP stays is temporary. Bowser has said it's a first step toward permanent, comprehensive reform of D.C.'s affordable housing system.

The city has also diverted $80 million from its Housing Production Trust Fund from financing new projects to preventing existing publicly subsidized properties from entering foreclosure. Huke says the city will need to spend at least $100 million covering tenants' back rent.

Even before the pandemic, processing a nonpayment eviction case could take six months to a year. Today it's closer to two years, according to the city.

AOBA says that D.C.'s Superior Court is also badly understaffed. Of its 62 judgeships, 13 are vacant. "Additional capacity is desperately needed to efficiently schedule and conduct court hearings, which will help to avoid accumulated delinquencies and the massive financial judgments against tenants that result," said the association in a report.

During the pandemic, the widespread consensus—endorsed by affordable housing advocates, government officials at all levels, and wide swaths of the rental housing industry—was that evictions should be restricted (or frozen entirely) and the government should cover tenants' unpaid rent.

This seemingly moderate position has produced moral hazards and longtails. Across much of the country, nonpayment rates have spiked, eviction cases have accumulated, and housing courts are taking years to clear out the backlog.

The result is that tenants are accumulating massive rent debts and landlords are often stuck with nonpaying tenants for years.

As it turns out, it's not so easy to just hit pause during a crisis and then go back to business as usual once the crisis is over.

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Massachusetts NIMBYs Get Their Day in Court

Yesterday, the Massachusetts Supreme Court heard oral arguments in a lawsuit brought by state Attorney General Andrea Campbell earlier this year against the town of Milton for refusing to perform the upzonings required by the state's MBTA Communities Act.

That law requires that communities allow apartments to be built near rail and rapid transit stops. Most cities in the state have been complying with the law—sometimes with gritted teeth.

But not Milton. When its town government passed the MBTA-required upzonings, activists organized a ballot initiative campaign to repeal the zoning changes. Their repeal referendum passed in February. In March, Campbell sued the town to enforce the MBTA Communities Act.

Milton's argument is that while the MBTA Communities Act allows the state to strip funding from the town for being out of compliance, it can't actually force it to make zoning changes.

Campbell's lawsuit argues the state is well within its rights to force Milton to allow apartments near transit. She has asked the court to order Milton to make the required zoning changes and, if it doesn't, to block the enforcement of any zoning restrictions that are inconsistent with the MBTA Communities Act.

The Massachusetts Supreme Court is expected to make a ruling within the next five months.

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Pittsburgh's Poison Pill

Pittsburgh, Pennsylvania, Mayor Ed Gainey is preparing to introduce a suite of zoning reforms that would shrink minimum lot sizes, and allow accessory dwelling units (ADUs) in single-family areas and larger apartments near transit stops.

All in all, that's a pretty typical, comprehensive YIMBY (Yes in My Backyard) set of reforms activists across the country have advanced to get housing costs under control and expand choice for renters and homebuyers.

And yet, Pittsburgh's local YIMBY activists are alarmed at one particular plank of Gainey's reforms: the mayor's call for citywide inclusionary zoning (IZ).

Pittsburgh already has neighborhood-specific IZ policies requiring that developers of projects of 20 or more units offer 10 percent of those units at discounted, below-market rates.

The city's builders have long complained that these policies effectively act as a tax on new housing that's suppressing construction activity. (Academic research suggests they're correct.) Back in 2022, the Builders Association of Metropolitan Pittsburgh filed a (still ongoing) federal lawsuit challenging the constitutionality of the city's last IZ expansion.

Gainey is proposing to take this policy citywide, while potentially including offsets to lower the costs of the IZ mandate for builders.

"We have an extremely tight regulatory structure that makes it very hard to build," says David Vatz, an activist with Pro-Housing Pittsburgh. "Inclusionary zoning will only make that problem worse because it will make housing even more expensive in a market like Pittsburgh, that is already somewhat marginal."

Gainey's proposed reforms have yet to be formally introduced. The city council is expected to take them up toward the end of the year.

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A Surprisingly Housing-Heavy VP Debate

High and rising housing costs are an increasingly salient election-year issue. Housing policy has nevertheless gotten only a few scattered mentions during the two presidential debates we've had thus far.

Fortunately, last week's vice presidential debate made up for lost time. The Washington Post's Jeff Stein noted on the night that while past VP debates mentioned housing zero times, Sen. J.D. Vance (R–Ohio) and Minnesota Gov. Tim Walz (D) mentioned it dozens of times.

Use of the word "housing" in VP debates

2012: 0
2016: 0
2020: 0
2024: 32 (so far) https://t.co/EprS1FhhPg

— Jeff Stein (@JStein_WaPo) October 2, 2024

Regrettably, the policy solutions they offered to high housing costs were not particularly productive or appealing.

Walz briefly mentioned Minneapolis's success in boosting housing production by liberalizing its zoning code. Vance endorsed the idea of allowing more development on federal lands.

For the most part, though, the two candidates focused on squeezing the demand of disfavored groups for housing out of the market. Walz said we needed a crackdown on "speculators." Vance called for deporting millions of illegal immigrants to make housing affordable again.

Both objected to the idea of housing being a "commodity." As I wrote last week, we'd be lucky if we actually treated housing like a commodity instead of this special part of the economy that floats outside of normal supply and demand.

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Quick Links

• Environmental review for thee but not for me. A court rules that the California Capitol annex project is exempt from the California Environmental Quality Act (CEQA), a law that delays tens of thousands of privately sponsored housing units each year.
• The New York Times blames too-weak building codes for the destruction wrought by once-in-a-century storm.
• ADU construction is exploding across California, as is one individual ADU.
• California Gov. Gavin Newsom (D) makes $130 million available for clearing homeless camps.