As the housing market collapsed in 2008 and 2009, millions of people stopped paying their mortgages. The ensuing disaster — the secondary mortgage market imploded — is something no rational person should want to repeat.
It is thus astonishing that some members of Congress want a reprise. In their ignorance of how the world works and their desire to pander to voters, they advocate compounding the economic disaster brought on by the global COVID-19 pandemic.
This began when Rep. Ilhan Omar, in her typically short-sighted and economically illiterate way, called for “canceling” rent payments during the plague. This would be as disastrous now as it was a decade ago.
It should be enough that the federal government is already paying trillions of dollars so tenants can keep making the rent. For any responsible tenant, rent and groceries take precedence over the cable or phone bill. If federal relief and unemployment money aren’t paying rent, then why is it even being doled out?
Aside from that, rent payment is an economic and moral requirement. Landlords, especially small, independent landlords, but even the larger, corporate ones, have carrying costs on their properties that cannot just be “canceled.” Every landlord faces monthly expenses. Insurance premiums must be paid, as must the principal and interest on the landlord’s mortgage.
There is also maintenance, which keeps properties safe and livable and must be paid for. This is especially necessary amid a pandemic, when most people remain at home and buildings need more regular disinfection. Plumbers or handymen cannot be expected to work on rental units for free. Yet, this is where ignorant socialist ideas would lead within days of implementation.
Landlords deserve payments agreed upon for the use of their housing, just as laborers deserve agreed wages; landlords increase the housing stock and keep overall rents down. As the consistent failure of “affordable” housing programs demonstrates, it is not government intervention that prevents housing shortages, but rather the presence of a sufficient number of landlords seeking profit.
Landlords should be reasonable and show leniency in hard times. In hard cases, this might mean forestalling evictions temporarily. But a universal rent holiday to curry favor with voters is a despicably irresponsible act for any public official. It would spread panic in the rental market not seen in decades and would produce the sort of urban decay from which many of this nation’s great cities are only now recovering, 50 and 60 years later.
Sen. Bernie Sanders, always ready to take bad ideas and make them worse, now wants to “cancel rent and cancel mortgages for the duration of this crisis.” Perhaps he was busy rewatching Fidel Castro’s speeches and missed the last financial crisis, but the mass nonpayment of mortgages would lead to another such crisis.
It is one thing for those who have fallen on hard times to go to their banks and request forbearance — many homeowners are now doing this, and banks and mortgage servicers have every incentive to allow it — but it is quite another simply to stop payments, which would produce a full-blown systemic crisis. It would threaten the stability of banks and of the secondary mortgage market and make it impossible for anyone but the superrich to buy homes, maybe for years to come.
This is a free country and a democracy. Voters can and do elect ignorant men and women as officials always ready to reach for simplistic, crowd-pleasing, but ultimately harmful proposals. But such proposals should be resisted forcefully.
