More than 1,500 property owners, including small landlords who say they were driven to the brink of bankruptcy, are in settlement talks with the Justice Department in a lawsuit that seeks compensation for the federal pandemic eviction moratorium, a case that could establish whether the government must pay when public health orders strip landlords of their ability to collect rent.
The lawsuit, originally filed in the Court of Federal Claims, argues that the CDC’s eviction ban — which lasted from September 2020 through July 2021 — violated the Fifth Amendment by taking private property without just compensation. After an initial loss in 2022, the plaintiffs won on appeal and are now negotiating a potential payout of as much as $1.5 billion, a fraction of what the industry says it lost.
Matthew Haines, a 57-year-old landlord who owns three rental communities with 240 units in Arlington and Irving, Texas, said the moratorium cost him and his investors more than $1 million.
“It was terrifying,” Haines said. “We knew almost immediately that we were going to a massive deficit in cash flow that we probably weren’t going to be able to cover.”
Liz Leone, who owns 52 apartments in Las Vegas and is part of the lawsuit, lost over $250,000 and borrowed $60,000 from the federal Small Business Administration to stay afloat. She is still repaying the loan.
“I was definitely questioning whether I would survive,” Leone said. “You delay all the expenses you can, but we still had to pay our property taxes. We still have to pay our utilities.”
The lawsuit, which consolidates claims from landlords across the country, asserts that the moratorium and the resulting backlog of eviction cases cost property owners $57 billion. More than 10 million renters were delinquent in just the first four months of the ban, according to the complaint. A survey by the National Rental Home Council, a trade association, found that half of small landlords had tenants who missed rent and a third sold or planned to sell properties.
Housing advocates counter that the moratorium was a public health necessity that kept millions of families housed and slowed the spread of the coronavirus. A study published in April in the medical journal JAMA Network Open found that homelessness rose 11% in a typical state in 2022, but would have increased 20% without state eviction bans.
“Eviction bans were a powerful intervention to keep people in their homes,” said Kathryn Leifheit, an assistant professor at the UCLA Fielding School of Public Health and the study’s lead author.
Dulcee Barnes, 28, and her two roommates lost their restaurant jobs in Miami during the pandemic. Two months behind on rent, they would have been evicted without the moratorium, she said.
“It gave us breathing room. It took away the fear of having to possibly pack up within 24 hours and live in somebody’s car or couch surfing,” Barnes said.
Tenant-rights groups also argue that landlords were already compensated through tens of billions of dollars in federal emergency rental assistance. The Eviction Lab at Princeton University found that the $46.5 billion in aid was largely targeted to areas where landlords had filed the most evictions before the pandemic. Eric Dunn, director of litigation at the National Housing Law Project, said landlords were able to collect rent and sell properties during the moratorium and did not suffer the catastrophic losses they claim.
Landlords, however, say the assistance was riddled with red tape and never fully covered their losses. Some states were slow to distribute funds, and Arkansas and Nebraska declined to accept all available federal money. Landlords also complain that some tenants took advantage of the ban. “They were doing things like buying cars,” Leone said. “They didn’t have to pay rent, and here I was driving a car that was 18 years old.”
Five years after the moratorium ended, landlords say its effects persist. Rick Jones, vice chairman of Management Services Corporation, which owns 4,000 apartment units in Virginia and is a plaintiff in the lawsuit, said his company lost more than $230,000 in unpaid rent. He said landlords are now more cautious, tightening screening standards and sometimes preferring to leave units vacant rather than risk accepting a tenant who cannot be evicted quickly.
“Most property owners and managers realize that it’s more important to keep that unit vacant than to put a bad resident in,” Jones said. “When you have somebody that’s bad and you can’t get them out, you’re helpless.”
Haines said he has increased tenant screenings and now turns away some low-income applicants he might have accepted before the pandemic, a shift he worries has harmed the very people the moratorium was intended to protect.
The Justice Department, responding to questions from The Associated Press, said it does not comment on ongoing litigation. The settlement talks are expected to continue in the coming months.