As landlords find loopholes to evict tenants, a concurrent push for gentrification in communities of color

The state and federal eviction moratoria expire June 30. Experts predict a flood of evictions will ensue

[Editor’s note: This is the third in a series of stories about renters who face eviction even though a state and federal moratorium are in effect. Read the first story here and the second story here.  Listen to Yanqi Xu’s radio interview on the eviction crisis.]

The red Honda parked on Debee Anderson’s lawn saved her and her daughter’s life when they fled Hurricane Florence in September 2018. Anderson was picking up medication for her daughter and about to return to her Spring Lake home when a state trooper told her she couldn’t, because of river flooding. 

She took a deep breath, looked at her six-year-old daughter in the back seat and sped 100 miles as fast as she could to the home of a friend who provided temporary refuge. When the Andersons returned to their flooded home a week later, it was in shambles. 

In October 2018, with Continued Temporary Housing Assistance funding from FEMA, Anderson found a new place in Fayetteville owned by an out-of-town couple who rented out several properties nearby. Despite knowing that they had evicted the previous tenant three weeks ago, Anderson signed a lease with their company, Taft Holdings.

At first, the Tafts lowered the rent from $850 to $750. Anderson was worried about the delay of FEMA assistance, but the Tafts reassured her that they understood. Anderson said the house gave her “a breath of fresh air.”

When COVID hit in March 2020, however, her 18-month FEMA rental assistance had just run out. Meanwhile, she was furloughed from her job while attending to her daughter, then 8, who was enrolled in virtual school.

Bad timing, Anderson thought. She did not have enough to pay all the rent, but she tried. She was relying on unemployment and stimulus checks. “I ran to the bank to give her [property owner Jennifer Taft] money, every time it came in,” Anderson said. 

In a text to Anderson dated Sept. 2, 2020, Jennifer Taft wrote: “The total you still owe in unpaid rent is $5,860. I see no reasonable way for you to pay this. Therefore, you have 30 days to move out. This will spare you from eviction.” 

The Centers for Disease Control and Prevention issued an eviction moratorium that same month seeking to protect certain tenants from eviction. Days after the order went into effect, Anderson signed the CDC declaration, which bought her time. 

But then her lease expired at the end of October and the Tafts filed for eviction. 

An ACLU analysis of eviction data found Black women were evicted at twice the rate of white renters in 17 of the 36 states studied between 2012 and 2016. The Eviction Lab analyzed filings during the pandemic and concluded that “while fewer cases than normal have been filed over this period, the populations at risk of eviction have not substantially changed.”

Anderson, a single mom who is Black, said she was terrified when her landlords, their lawyer and the magistrate, all whites, reached a judgment in a matter of just minutes. She lost. 

Anderson is scheduled to appeal April 20. 

“Mom, you don’t give up. You don’t give in,” her daughter, now 9, told her.

[perfectpullquote align=”left” bordertop=”false” cite=”” link=”” color=”” class=”” size=””] Until we deal with the actual underlying issue of housing security in America, I think, everything is triage [/perfectpullquote]

When tenants fail to pay rent, judges overseeing evictions often continue the cases beyond the CDC eviction moratorium expiration date, which is now June. However, the eviction moratorium fails to protect tenants when their lease runs out. 

Some landlords are using the expiration of a lease as an excuse to claim there was a violation, a permissible reason for eviction. Isaac Sturgill, the head of housing practice group at Legal Aid of North Carolina, said he has seen a higher rate of eviction claims against “holdover cases” — in which tenants remain in the property after their lease expires.

Sturgill said some generic leases have language that after one year, automatically converts the contract to month-to-month. This puts some tenants at risk for eviction, even though they have lived in the same properties for years. 

For month-to-month leases, the state requires only a seven-day notice for landlords to file for eviction, and they don’t have to provide a reason for taking action.

Other landlords, such as the Tafts, decline to accept relief funds from government financial assistance programs to cover the rent payments. Under the terms of these programs, landlords can’t pursue evictions for a certain period of time. 

Anderson negotiated for several months with the Tafts before and after her lease expired in late October 2020. After rounds of communication between Legal Aid and FEMA administrators, the Tafts refused to accept the state’s rental assistance program, or Housing Opportunities and Prevention of Evictions (HOPE) funding that Anderson successfully applied for, which would cover up to six months’ of rent. 

Instead, Taft claimed that Anderson owed over a year of rent, more than $11,000. Anderson denied owing that amount. 

Jennifer Taft declined to comment; her lawyer did not respond to a request from Policy Watch for an interview.

Anderson said she acknowledges her landlord’s right to file for eviction. “I understand, but I need more time.”

CDC moratorium: an imperfect solution

The CDC enacted the eviction moratorium to lower public health risks. Tenants who are evicted often wind up living with family in crowded conditions, or in shelters, both of which can increase the chances of becoming infected with COVID-19. 

Duke researchers analyzed COVID infection and death rates in different jurisdictions across the country from March to November of last year. They found jurisdictions with local eviction and utility moratoria, in general, reduce infections by 3.8% and reduce deaths by 11%, according to a working paper. 

Nonetheless, judges still grant evictions. Gov. Roy Cooper’s order mandating a state eviction moratorium includes tenants who are late on the rent, but it also has a big loophole: it permits the eviction of tenants whose leases expire — the holdover cases. Cases like Anderson’s.

Sturgill said many advocates have petitioned the CDC to clarify tenants’ rights in these holdover cases. Sturgill said Gov. Cooper could have also closed that loophole, but so far, has not.

Kathryn Sabbeth, a law professor leading the Civil Legal Assistance Clinic at UNC-Chapel Hill offered a different interpretation of the CDC moratorium. She said the language should protect holdover evictions as well. She pointed out that the CDC order allowed five types of evictions, mostly involving criminal activities and zoning violations, but none referenced holdover tenants.

Sabbeth said the CDC moratorium does not compel landlords to renew their contracts, but rather halts evictions despite the contract, such as in Anderson’s case.

Jesse McCoy, supervising attorney at Duke University’s Civil Justice Clinic said the CDC order was designed by medical professionals and wasn’t written to help tenants stay in their homes. “That’s a spillover benefit, but the law was raised to reduce the number of new COVID transmissions,” he said.

The National Apartment Association has petitioned Congress to end the CDC moratorium. “As COVID cases decrease, vaccines are widely available and the economy reopens lifting the moratorium and distributing rental assistance is the next step to returning to normalcy,” said Janae Moore, director of government affairs for the Apartment Association of North Carolina.

“We’re talking about a year of operating at reduced margins,” Moore said, “and the question is, how long are housing providers going to be able to operate at that level?” 

Rental assistance is not a safety net

The HOPE program received $160 million from Coronavirus Relief Fund appropriated by North Carolina lawmakers and federal HUD funding to help prevent evictions. The funds cover tenants’ rent and utilities for up to six months.

Laura Hogshead, the chief operating officer at the North Carolina Office of Recovery and Resiliency, which administers the HOPE program, told Policy Watch that about 45,000 applications were submitted statewide in three weeks.

Hogshead said the first round of funding is almost exhausted, with $135 million going to 36,937 recipients, as of April 12.

Households earning less than 80% of local median income can qualify for the HOPE program, Hogshead said, but 92% of recipients earn below 50% of their area median income. “Our population was far poorer and far more vulnerable,” Hogshead said.

To receive the payment, tenants must testify that they have lost income because of COVID and that they can’t pay rent. An audit team monitors compliance with the HOPE program.

Another $546 million, available through the Emergency Rental Assistance Program, will fund the second round of the HOPE program in North Carolina. Money has already been distributed to 18 cities and counties with populations of more than 200,000. More money is on the way from the American Rescue Plan, which Congress passed in March.

ERAP, a specialized rental assistance program since the start of COVID, is the first to receive designated COVID relief funds from the federal government. It covers up to 12 months’ of back rent and three months of future payments. Anderson planned to use HOPE funding to pay her back rent, but under the terms of the program, she can’t use the money to apply for new housing. 

There’s no requirement that landlords accept government-backed money. 7% of landlords refused to participate in the program after renters successfully applied. In those cases, Hogshead said her office will develop a way to pay the tenants directly when landlords, such as the Tafts, do not wish to accept the money and terms of the program. It’s the first time direct payment to tenants has been allowed through the ERAP program.

Eric Dunn is director of litigation at the National Housing Law Project, a network providing legal services to tenants. He said he suspects some landlords don’t accept the funds because the programs normally do not cover late fees and other charges.   

Moore of the Apartment Association of North Carolina supports the rental assistance programs. “We were overjoyed when rental assistance came to the state of North Carolina,” Moore said. 

However, she said “stringent requirements” made it hard for landlords to cooperate in the initial rollout. For instance, if landlords accepted HOPE funding, they couldn’t evict tenants for the duration of the lease. Moore said the Apartment Association of North Carolina worked with other advocacy groups and persuaded the HOPE program in December to shorten the non-eviction period to 90 days. State officials made further adjustment to the HOPE program, and it now covers up to 60 days beyond the program funding’s rent coverage period, Hogshead said.

Road to recovery: gentrification

More than 200,000 renter households in North Carolina, or 11% of all renters, were estimated to have fallen behind on their rent, according to end-of-March data from Census Bureau’s Household Pulse Survey. Among these 200,000 households, 38% are likely going to be evicted in the next two months, the data show.

The CDC and state moratoria are set to expire June 30, which will likely open a floodgate of evictions. Some landlords participating in the HOPE program nonetheless have filed eviction cases, which will be heard after the CDC moratorium expires.  

“[The moratorium] is all Band-aids in an attempt to stop the spread of COVID,” said McCoy of Duke University’s Civil Justice Clinic. “Until we deal with the actual underlying issue of housing security in America, I think, everything is triage.”

After the pandemic, a two-tiered housing market could emerge, Dunn of the National Housing Law Project said. The top-tier market, those with high-paying jobs who made it out of the pandemic unscathed, will have access to quality housing. A second-class market will unfairly penalize low-wealth households — “people that acquired eviction records just because they worked tenuous jobs that couldn’t survive the economic conditions.”

The result could be “massive evictions concentrated in communities of color, especially African-American urban neighborhoods,” Dunn said.  

These neighborhoods could then gentrify. Higher rents would oust working-class residents and replace them with wealthier — and white — residents. Or property owners could flip their houses, reselling them for prices out of reach for their former tenants.

The Tafts are selling the house in north Fayetteville, where Anderson lives, for $119,000. This is nearly twice the amount they paid for it in September 2017. According to Zillow and other real estate websites, the Tafts bought the house for $61,000. 

Evictions are already sparking gentrification in Winston-Salem. DeRosa Group, a New Jersey company, entered the Winston-Salem rental market in October 2020. It bought an apartment complex, Diamond Ridge, which offers below-market rent and accepts housing vouchers.          

[perfectpullquote align=”left” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]A second-class market will unfairly penalize low-wealth households — “people that acquired eviction records just because they worked tenuous jobs that couldn’t survive the economic conditions.”[/perfectpullquote]                                                                                                                                                                                                                                              Justin Fraser, a member of the Diamond Ridge’s business team, on his YouTube show True Multifamily described the intent of the investment — gentrification. “We need to shift the base of the tenants who’re there, who are paying way less than market, and who probably are not what we consider a desirable tenant, so we have to shift the tenants out of there,” Fraser said. “We have to change the perception of the property so that new tenants that want to pay 200 [dollars] more … on that two-bedroom unit want to live there.”

Fraser did not respond to multiple emails from Policy Watch seeking comment. 

“I am aware that gentrification is a growing concern,” Moore said. “However, gentrification rising as a result of the pandemic, specifically in the multifamily industry has not been substantiated.”

Sabbeth and Dunn offered alternative solutions to the current moratorium and rental assistance programs. Dunn said the federal and state governments should institute a policy prohibiting landlords from evicting renters who can pay current rent, and provide assistance for back rent. This could help tenants rebuild their finances and credit.

Sabbeth, on the other hand, suggests that rental assistance programs directly assist landlords based on their need. She said the current program should be replaced with rent cancellation, coupled with a direct relief program for landlords. Only landlords who need money the most would receive funding.

“[Among] all the things that we need to take care of during the pandemic, why do we need to make sure that these companies are still maxing out their profits?” Sabbeth said. 

If no further action is taken to secure safe and quality housing for those who bore the brunt of the COVID pandemic, more families with historical disadvantages will be priced out of the market as housing prices increase. 

For Anderson, finding her next home has been nothing short of a Herculean task. Fayetteville now ranks among the top cities with the most housing demand, according to a report by the National Association of Realtors, which has made it impossible for Anderson to find housing there. For example, she said a landlord asked $800 for a two-bedroom apartment that normally would cost $575–$650.

After a futile attempt to persuade the Tafts to renew the lease, a FEMA administrator told Anderson to find a shelter, a future she dreads for the safety of her daughter and herself who already have underlying health conditions. “It’s just devastation after devastation,” Anderson said.