The far left wing of the US Congress is taking up the cause of #CancelRent. Ilhan Omar introduced the Rent and Mortgage Cancellation Act, which would relieve tenants of their obligation to pay rent, transfer mortgages to the federal government, and allow landlords to recoup their rent costs — but only if they agree to a vast new regulatory program that includes a rent freeze and the inability to collect back payments.
What would the program look like?
No tenants will have to pay rent for the duration of the COVID 19 suspension period, which is defined as beginning April 1, 2020 and ending 30 days after the termination of the FEMA state of emergency. During this period, the landlord cannot:
- charge the tenant penalties for late or nonpayment of rent
- NEVER force the tenant to repay any money owed to the landlord.
- report the tenant’s nonpayment to any credit reporting agency.
The same would apply to banks and mortgages.
A landlord who violates this can be sued by the tenant up to two years later, plus $5,000 for the first violation, $10,000 for the second, and for $50,000 to forfeiture of the property for the third violation.
Believe it or not, that is not the worst part of the bill. Now we get to the good part:
Landlords and mortgage holders can apply to the Feds to be reimbursed for the loss of income. In order to apply, the applicant must sign an agreement stating that, for the next five years:
- Rent cannot be increased (if interest rates, taxes, or other costs increase, the landlord eats it)
- Tenants can only be evicted for cause with written advanced notice
- Tenants cannot be denied because of the source of their income, sexual orientation, gender identity, criminal record, credit history, or immigration status.
- If the rental unit is vacant, the landlord must make the unit available for rental to people receiving public assistance.
- If, at the end of the 5 year period, a tenant owes the landlord money, the landlord is not permitted to collect that money. (if they trash the place, the landlord eats the cost of repairs)
- Landlords may not retaliate in any way against a tenant for any reason, including reporting to credit reporting agencies or fines.
- HUD must be notified 60 days before you sell the property, and gets first right of refusal AND even if HUD decides not to purchase the property, HUD will notify eligible purchasers in the area that the property is for sale, and still gets to decide who is eligible to buy the property and the amount that it will sell for.
Even after signing the agreement, there is no guarantee that a landlord will be reimbursed. The fund has a fixed amount of money available, and priority of payment is to nonprofit organizations. If you do get reimbursed and are found to have violated any of the above conditions, you must return 100% of the assistance you received, and are still subject to being sued.
Make no mistake, this will DESTROY real estate in this country. Without credit checks or credit reporting, there is no way to ensure that you are renting to a person who will pay. If they don’t pay or destroy the place by setting up a meth lab, the landlord has no recourse.
Since banks could not discriminate by using credit or criminal history, the risks would simply be too high, and mortgage lending would come to a halt. Combined with the fact that HUD would get to decide who buys every house and for how much, there is no way for anyone to sell property. Housing values would plummet.
Most mom and pop landlords would be ruined. We bought our rentals by personally guaranteeing the loans. With no way to collect rent, no way to sell, and no escape from bankruptcy, anyone invested in real estate would be ruined.