First off if you don't get the reference, "Directive 10-289" is the Socialist directive given by the President of the United States of America, in the Movie "Atlas Shrugged III" (book by Ayn Rand). You see at some point in the future, energy will become so expensive that the government will start socializing companies and industries. These companies weighted down by these new rules and government ties slowly start losing money which in turn calls from more socialization and more government ownership of the companies, until one day the government enacts "Directive 10-289" where government now will assume ownership of remaining independent companies and there IP, requiring that companies: cannot hire or fire employees, nore can employees quit, companies cannot change wages or prices. Sounds to me like a second rate story that's trying to tell complex moral about the free markets. Also kinda of sounds like a landlords future.Currently if you are a landlord you cannot evict a tenant, even if they don't pay rent. The tenant now can take your property from you, indefinitely (as of writing this). You have no rights to your property. Please stop right now and google this subject: at the time or writing this you will find mainly articles about a tenants rights and some articles about calls for rent strikes. If your renting out your primary residence your in luck because you might qualify for mortgage forbearance for 3 months. It depends on your type of loan and what bank you use but at least you might qualify. If your rental property is not your primary residence, it is still possible (but only under specific conditions) depending on what type of mortgage you have but remember to call you bank to see if you can. But if you get a forbanence remember that at the end of the 3 months you will be required to bring you account current.
- Government enforced forfeiture of your property to another person
- You cannot evict, for any reason (Your tenant holds all rights to it, not you)
- You must pay your loan, or it will result in the bank foreclosing and taking your property
- You must pay your taxes, or it will result in the government foreclosing and taking your property
- You must pay your insurance, or it will result in the bank foreclosing and taking your property
- You must maintain clean safe housing or you will be fined by the government
- Current General culture
- Right now there are no protests for landlords rights, there are calls for rent strikes
- No calls to make landlords whole after this is over
- The Stimulus plan doesn't pay mortgage, taxes and insurance for a rental where the tenants choses to stay without paying rent
- Right now no court house will write an eviction judgement forcing a tenant to surrender the property and make restitution for lost rent
- There is a belief that there is a growing class divide between the rich and the poor.
- Most people think of landlords as rich, and don't think/consider them as normal people
- Where this all ends:
- Short Term
- FACT: many people will fall on financial hardship and some will go bankrupt
- FACT: many small business will fall on financial hardship and some will go bankrupt
- FACT: many large corporations will get bailouts (even ones with no financial hardship)
- FACT: If you have a tenant that didn't pay, you probably won't get you money back (getting back owed rent after an eviction is always an expensive process, can actually cost you money).
- FACT: many landlords will fall on financial hardship and some will go bankrupt
- Long Term
- FACT: The Majority of people will pay more in taxes
- Business Taxes for Landlords will likely go up to make up for the local government shortfalls
- Property Taxes will be increased and used to make up for the local government shortfalls
- Income and Sales Taxes will be increased and used to for the government stimulus programs during the crisis
- Other Tax sources like Business, Capital Gain, Inheritance, etc, etc will likely be increased to make up for short falls
- A new systemic risk is introduced into owning rentals future "Government enforced forfeiture of your property" (this is no longer unprecedented)
- Some reasons people invest in rentals (That may not be true anymore)
- To build value by having in a renter pay off a property
- If there are no rents you will be forced to make those payments
- To provide steady reliable income
- If there are no rents there is no income
- To hedge against other investments
- If there is another economic crisis, rents could be suspended again (no longer hedge against market crashes) hello Moral Hazard!
Hypothetical
- Here is Tim, a person hit hard by this Covid crisis:
- 27 year old man, making over $75 last year (total income, including side hustle)
- he won't qualify for the stimulus money because last year he made $75k
- Lives/Rents in California Bay area
- General cost of living very high
- His rent alone is $2,700 month (that cheep so probably a lot of crime and homeless in that area)
- Laid off, and his company will be going bankrupt, Side hustle dries up too
- qualifies for $1,050 a week in unemployment
- Also get $600 a month CARES act
- But this won't even come close to paying all the bills
Because of this moratorium on evictions he can just chose not to pay his rent and stay at his apartment (indefinitely at the time of writing this).
But what if I told you Tim was renting form a landlord in the exact same situation as him named Becky. Tim will be putting all of his problems on Becky. Becky will end up losing her only asset in the world to the bank, and eventually be homeless. Because she wasn't allowed to evict Tim and bring in a paying tenant.
Long live Tim, fuck you Becky!
