The old adage, “No good deed goes unpunished”, is rearing its ugly head in Washington DC. Policies implemented to help struggling families avoid eviction during Covid are still impacting property owners and tenants in the city, particularly those providing and living in affordable housing. Future affordable housing projects have ground to a halt, and many existing housing complexes are on the verge of foreclosure.
Currently, 14% of residents reside in city-supported affordable housing, but leaders say much more is needed. The problem is that 25% of residents are not paying their rent, and it takes over a year to evict anybody due to the residual effect of Covid-era eviction moratoriums. Owners of affordable housing are owed $100M in back rent, and many are teetering on bankruptcy. They can’t afford to properly maintain the properties, either. Tenants are complaining about deteriorating living conditions that are not being addressed. Cash flow to business is like oil to an engine; without it, the engine will seize.
Several owners have tried to sell their properties, but there are no buyers due to the delinquency problem. The market has shut down. One big concern for the city is that if a property is foreclosed on, all the covenants related to renting as affordable housing most likely will be lost. This would reduce affordable housing stock when demand is growing. The mayor just made the decision to divert a fund set aside for future affordable housing projects to shore up the struggling properties. And now, all the funds that were going to support building over the next few years are gone, and so are the developers.
This is an example of government interfering with the free markets, resulting in unintended negative consequences for those they were trying to help. It also highlights the danger of investing in areas that are not landlord-friendly. Property owners need to collect rent, and the court system owes them and paying tenants a quick and fair resolution.
