CEO Matthew I. Paletz Op-Ed published in Crain’s Detroit Business

Opinion: The rental market has unfortunately become the mess we predicted

In an editorial I penned for this publication in March 2021, I predicted that COVID-related eviction moratoriums would actually end up putting people on the streets.

The rental market has gone absolutely haywire, much like the real estate market. Some people are even being forced to bid above the posted rental rate in order to find a place to live. Although this scenario on its face would look attractive to a real estate investor, this is not sustainable, nor should it be. The underlying pandemic crisis that promoted this issue has waned. Still, the fact remains the State of Michigan (among others) used COVID as a pretext for a curtailment of private property rights which has caused havoc for landlords in the local municipalities and the courts where their rental properties are located.

Let’s take a look back at what launched this rental upheaval. Without legislative oversight, the Michigan Supreme Court issued an Administrative Order in 2020 with subsequent amendments, which eviscerated the eviction process without a sunset provision. It took 60 years’ worth of well-founded landlord-tenant law and obliterated it. As a result, court dockets have exploded and courts have not been able to hire enough staff to meet the caseload.

We now have endless adjournments of hearings, exasperated by multiple housing agencies struggling with labor shortages to process the rental assistance applications through the COVID Emergency Rental Assistance (CERA) program, which is now winding down.

All this confusion in the courts, coupled with more municipal regulation, is severely impacting the rental property ownership market. The longer a non-rent producing unit remains that way, the less the property is worth, especially in Detroit, where the legal process is taking months.

We already had an affordable rental housing crisis prior to the pandemic. The backlog is crushing Detroit property owners in particular because they can’t get their units back. They are waiting an interminable time to get their day in court and also obtain the requisite licensing. In the end, this will destroy the momentum of future investment in the city.

These COVID-related measures were supposed to help low-income tenants. Still, they’ve also unwittingly assisted the more well-heeled tenants in more expensive apartments like those in Midtown to unfairly take advantage of these government programs. The result is that what the government is in fact doing is preventing more housing development in the state and especially in Detroit, where the demand will continue to outweigh the supply artificially.

The only bright spot is Michigan courts have held more than five million hours of Zoom hearings since the COVID-19 pandemic began. I’m hoping that this option remains for the sake of tenants and landlords. The Michigan Supreme Court is still debating whether to make permanent what had been temporary rules for remote hearings.

The remote hearings help tenants who will not have to leave their job in the middle of the day, try and find a ride, travel unnecessary miles and wait for their turn in court while losing wages from their employer. The bottom line is landlords don’t get paid if the tenants can’t pay their rent. So, it’s in all of our best interests to eliminate obstacles to doing that.

In the aftermath of illegal eviction moratoriums, the overloaded court docket is causing delays in obtaining repossession of the rental units. This, along with the more than $50 billion of bad debt at property owners’ doorsteps, has magnified this crisis and jeopardized many more individuals’ ability to obtain affordable rental housing. So, the lesson learned should be that the perceived benefits of government intervention in private property ownership are in reality not worth the actual toll it has taken on both landlords and tenants.

Matthew I. Paletz is the CEO of Troy-based Paletz Law. He is a leading national advocate and supporter of legislative efforts on behalf of the real estate industry. His practice
emphasis is dedicated to landlord-tenant law, the national fair housing defense of property owners, and the protection of creditors’ rights in bankruptcy.

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