A coronavirus rent strike might do more harm than good, say some. Leaders and experts across the US are grappling with the best way to help people stay in their homes as millions join the unemployment rolls during the pandemic. Foreclosure and eviction moratoriums have been called for and many municipalities and agencies have complied. They want to protect residents, but some want to protect investors.
Carol Galente, from the University of California- Berkeley, warns that the mortgages are often securitized and sold as investments. These are expected to provide regular interest payments. Galente says many of these investors are pension funds that support the working class in their retirement.
Dan Immergluck, a professor at the Urban Studies Institute, and others have pointed out that the default risk of most mortgage-backed securities is covered by Fannie Mae and Freddie Mac. Additionally, the Federal Reserve has pledged to buy hundreds of billions of dollars in mortgage-backed security bonds. Uncertainty is dangerous for the market and many in the mortgage industry worry this could ruin them.
Another challenge is that any interventions only apply to federally backed mortgages. Private owners are under no obligation to help their tenants, and legally cannot be compelled to participate in moratoriums.
Moratoriums do not forgive financial obligations. They merely pause the clock. Many of the families will not be able to make up missed wages and will likely be unable to catch up when the moratorium ends. The New York Times predicted that 40% of renters in New York City would be unable to pay rent on April 1.
Some groups are calling for a coronavirus rent strike and not just organizations on the far left. ParentsTogether, a national organization led by parents is asking for Congress to suspend rent, mortgage, and utility payments for the duration of the crisis. Co-Director of ParentsTogether, Justin Ruben says, “Families are drowning. Millions have lost income and are already facing tradeoffs about whether to pay for rent, utilities, or purchase necessities like food and diapers.”
Regardless of any official rent strike, there is likely to be a de facto one for the foreseeable future. An intervention that allows people to pay their rents and mortgages may be the best solution and provide a stabilizing impact on the economy. Direct payments could trickle up and prevent the need for giant industry bailouts later.
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