With all eyes on Washington in the lead up to the 2020 election, and the agony of slowly waiting for the results to come in, it feels like the last month has flown by. Also, regardless of whether you lean left or right, I think everyone can rejoice in being glad it’s finally over.
- October Jobs Report - According to the Bureau of Labor Statistics, the U.S. Economy added 638,000 jobs in October and the unemployment rate fell to 6.9%. For perspective, we added 661,000 jobs in September and the unemployment rate was a full point higher at 7.9%, but we are still down approximately 10 million jobs since February. Locally, however, Utah’s economy is recovering faster than elsewhere in the country so we should feel extremely fortunate. Ultimately, fixing the employment crisis should be among the top priorities of the incoming administration.
- Jobless Claims Data - The labor market continues to improve, albeit at a snail’s pace. Initial jobless claims came in at 709,000 for the week ending November 7th with the 4-week moving average 755,250. Last month, we saw claims in the 850,000 range so things are trending in the right direction. Continuing claims, or those receiving benefits for two or more weeks, came in at 6.8 million, which is significantly lower than the 11 million that we reported last month.
- COVID-19 Cases Explode Nationwide - A fresh wave of COVID-19 cases in the fall of 2020 has been predicted by experts for months, and everyone’s least favorite virus doesn’t look to disappoint. On Saturday, as the president-elect gave his acceptance speech, the U.S. posted it’s 4th consecutive day of record case numbers - currently over 127,000. Locally, Utah has been a virus hotspot. As of last Sunday, daily coronavirus cases reached a new high for the fifth consecutive day, growing by nearly 40 percent in the past week, and local hospitals hit 74.7% of ICU capacity. This prompted Governor Herbert to take his most decisive action yet and implement a statewide mask mandate and restrict gatherings of individuals outside the same household until November 23rd. We can’t reasonably expect to address the employment crisis until we get the virus under control, so let’s hope this helps.
Impact of the Election Results on Housing
By now, you’ve surely heard that the results of the 2020 election show Joe Biden being elected as the 46th President of the United States. As of this writing, President Donald Trump has not conceded and has mounted a series of legal challenges, including an appeal to the Supreme Court, in hopes of changing the outcome. Legal experts aren’t optimistic about his chances of success, so we will proceed under the assumption that Washington will see a transition of power come January 20th.
In regard to housing policy or rent regulation, there are many questions about what a new administration will do, and unfortunately, we are not in a position to make any conclusions at this time. However, we can make some reasonable assumptions based on what we do know. In other words, we are going to speculate and make a few educated guesses, but please understand that what follows falls exclusively in the opinion category.
Will we see an explosion of Democratic housing policies?
We have seen some unsettling signs for landlords coming out of Democratic controlled areas. Proposals like long extensions of eviction moratoriums in Colorado and legislators suggesting that landlords be forced to pay tenant relocation costs in Portland would have an astoundingly negative impact, but similar policies at the federal level seem highly unlikely following the results of the 2020 election. While Joe Biden will be president, Republicans made considerable gains in the House of Representatives and held control of the Senate (pending runoff elections in Georgia). This means we will see a balance of power in the government as opposed to the “blue wave” some pollsters predicted. This balance means that legislative gridlock appears much more likely than a massive shift in housing policy.
At the state level, Utah election results showed that, not surprisingly, Republicans will remain in power. Spencer Cox won a one sided race for Governor, and Republican candidates easily carried the 1st, 2nd and 3rd Congressional districts. As of this writing, the 4th district race between Republican Burgess Owens and Democrat Ben McAdams is too close to call. Either way, the results do not appear to threaten Utah’s long standing reputation as a landlord friendly state.
Will we see a new stimulus bill?
Honestly, we have been expecting a new round of stimulus for months and it hasn’t happened yet so maybe you shouldn’t ask us. All jokes aside, economic activity remains “well below” pre-pandemic levels and the latest jobs report (October Data) indicates that unemployment remains near 7% and 10 million jobs have disappeared since March. This means that millions of Americans are relying on government benefits to make ends meet so the need for additional stimulus is clear. Additionally, the Fed has left interest rates near zero for months and it’s leaders have been vocal about the continuing need for fiscal and potentially monetary support. Add all of that up and it seems more like “when” than “if”.
It’s also no secret that House Democrats have been calling for a large stimulus package (See HEROES Act), and Senate Republicans prefer a more modest proposal (See HEALS Act). What remains unclear is how a change of leadership in the executive branch will play into this. Will the Senate be more willing to strike a deal in the absence of President Trump or will we see the same propensity to block most measures proposed by their counterparts like we saw under the Obama administration? Only time will tell.
Will we see an extension of the eviction moratorium?
Rental property operators have long opposed any eviction moratorium, but so far, such policies appear to have bipartisan support. Beginning with the CARES Act and continuing by CDC declaration, restrictions on residential evictions have been in place since March 27th and will continue until the end of the year. This could mean that, with a new Democratic administration coming in, we could see more restrictions put in place at the federal level. While that remains possible, it’s important to point out two key facts: 1) Neither Republicans nor Democrats wanted to be held responsible for failing to protect millions of voters from eviction and homelessness ahead of a pivotal election. 2) The restrictions weakened as they evolved. Under the CDC version, landlords were allowed to charge fees and the tenant had to meet certain eligibility criteria. Both were key improvements over the previous iteration and moved the needle in a landlord friendly direction.
Make no mistake, many experts fear a tidal wave of new eviction cases and another housing crisis once these restrictions end in December and that would provide poor optics for an incoming administration. Additionally, a full year extension of the moratorium was included in the HEROES Act, so we can safely assume that protecting renters from eviction projects as a Democratic priority. As such, the real question becomes: In the absence of election pressure, how much will Senate Republicans support such a measure?
Prediction: Possible, but any extension may be more landlord friendly.
Utah Real Estate Market
The real estate market across the Wasatch Front (Salt Lake, Utah and Davis counties) remains strong as we move toward winter (see attached graphs). The median sold price increased month over month, but the number of homes sold and the average number of active listings per day both dropped. The decline in number of sales and listings is typical as we enter the slower, winter selling season.
Median Sold Price
% Change: Up 1.2%
% Change: Down 6.9%
Average Number of Active Listings
% Change: Down 18.5%
* numbers are approximate
- Landlords Denied Injunction - U.S. District Judge J.P. Boulee denied a motion for a preliminary injunction seeking to block the CDC eviction moratorium. The motion, filed on behalf of a Virginia landlord and backed by the National Apartment Association, was rejected because the judge determined that the economic interests of the landlord were outweighed by the public health interests of controlling the spread of COVID-19. We agree that health concerns should outweigh economic ones, but can’t we accomplish both objectives via a comprehensive rental assistance program that helps those in need avoid eviction without asking landlords to exclusively pick up the tab?
- NARPM Takes Legal Action - The National Association of Residential Property Managers, or NARPM, has also sued to block the CDC eviction moratorium. If you read the article above, it may not amount to much, but we give them credit for trying. Let’s hope their efforts to protect landlords from being asked to shoulder more than their share of the COVID-19 burden are rewarded.