Two Clear Signals the Housing Crisis Could Destroy America

In 2008, a housing crisis brought down the economy.

In 2020, it could bring down capitalism.

The idea is simple. As we write, 1 out of 3 renters is behind on their payments.

Two clear signals show this is a disaster in the making.

We’ll start with the financial fallout. It’s quite clear.

If folks don’t pay their rent, they lose the roof over their head. The effects of an eviction can span generations.

Of course, if renters don’t pay, landlords are in trouble too. Many landlords – even the big ones so many folks love to hate – collect the rent check with one hand and write a mortgage check with the other.

With 30% of those checks not flowing, the pain is obvious.

It will ripple throughout the economy.

“Entirely Preventable”

But there’s another nasty side effect of all this. It’s one we fear is overlooked.

When we discussed the notion recently with a relative, her reaction was the same as countless Americans’.

“The government won’t let it happen,” she said. “They’ll never let millions of Americans get evicted.”

She’s right.

And that’s the idea that puts the whole system at risk – as in the whole American economic system.
[mw-adbox]

We turn to an editorial we read yesterday. It said there’s an easy fix… Just stop kicking folks out of their homes.

The writer quoted Diane Yental, the CEO of the National Low Income Housing Coalition.

The looming eviction crisis is both “completely predictable and entirely preventable,” she said.

She added, “If the federal eviction moratorium is not extended, if the state and local eviction moratoriums that are scheduled to expire in the coming weeks do, and if no emergency rental assistance is provided, then from the end of August through fall, millions of Americans will be evicted from their homes.”

In other words, her definition of “preventable” means allowing folks not to pay their rent.

It’s a notion that threatens the core of our nation and its economic system.

The Inevitable

So far, the federal moratorium on evictions (which expired last week) only pushes the inevitable into the future. Renters didn’t have to cut a check in May, June and July.

But their debt wasn’t canceled. They still owe that money.

The same is true for most of the state-level eviction moratoriums.

The bills are piling up, with many out-of-work folks now three months behind. Worse yet, there are few signs renters are saving much of anything for the day when those months of rent suddenly come due.

That’s the idea that’s leading to the inevitable… like canceling rent.

It’s on the table in Ithaca, New York.

The city council recently passed a bill that will allow the mayor to “cancel all residential and small-business rent payments and additional fees that were due between April and June.”

It’s the equivalent of the city telling a body shop that customers don’t have to pay for their dinged-up fender. Or a butcher being told not to send a bill for that side of beef.

But here’s the worst part…

The city has no idea how the program will work. It doesn’t know who will still need to pay and who will get free housing.

It simply said if folks can still pay their rent, they must do so.

There’s no mention of whether the folks who can’t pay will be first forced to cancel Netflix, sell their new iPhone or turn in the lease on their new car.

There’s no mention, either, of how landlords will get paid. The city certainly won’t be footing the bill.

It’s broke too.

But, oddly enough, there’s no mention of cutting landlords a break on their property taxes – despite the fact that a lack of rent clearly depresses the value of their real estate.

The city council plans to figure all those sorts of details out once it gets permission from the governor to move ahead with the plan.

We pray it never happens.

Falling Fast

Folks, this is the “slippery slope” that we and so many others have warned about.

Ideas like these – as imperative as they feel today – are flat-out destructive to the nation and its financial well-being.

They create massive disincentives to save and make prudent financial decisions. They force reliance on the government and feed its lust to take from one and give to another.

This has now gone beyond wealth redistribution.

That’s what’s so dangerous.

We’re now reliant on a system that doesn’t use tax revenues to prop up its economy. It uses fake money that was printed on a whim.

Sure, we can cancel rent for the next 90 days.

But we might as well cancel America’s economic dominance while we’re at it.

Nothing is free.

Should the government step in again to cancel rent? Let us know your thoughts at [email protected].

The post Two Clear Signals the Housing Crisis Could Destroy America appeared first on Investment U.

Founded in 1999, the goal of Investment U is to give you impartial, no-nonsense investment advice and investment research on how to build long-lasting wealth.

Source: https://investmentu.com/eviction-crisis-economic-system-collapsing/